What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 262 added, 269 removed, 382 unchanged (58% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Residential mortgage loans - at fair value $ 1,103,773 $ 1,061,912

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

Residential mortgage loans in securitization trusts - at fair value 1,077,967 667,365

Commercial mortgage loans - at fair value 20,704 18,664

5 unchanged sentences

Principal and interest receivable 28,012 25,984

Unrealized appreciation on TBAs and interest rate futures contracts - at fair value 17,027 2,428

Other assets 3,491 2,878

2 unchanged sentences

Notes payable $ 956,165 $ 853,408

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

Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts (see Note 2) 1,031,200 616,557

Securities sold under agreements to repurchase 477,422 609,251

Unrealized depreciation on futures contracts - at fair value — 198

Unrealized depreciation on TBAs and interest rate futures contracts - at fair value — 728

Due to broker 298,654 —

Collateral due to counterparties 8,024 —

Accrued expenses 530 442

1 unchanged sentence

Interest payable 1,709 1,283

Income taxes payable — 1,600

Management fee payable to affiliate 1,857 1,845

2 unchanged sentences

STOCKHOLDERS’ EQUITY

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

Series A preferred stock, $ 0.01 par value, 12 % cumulative, non-voting, 125 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.01 par value.

As of September 30, 2021:

As of March 31, 2022:

350,000,000 shares authorized, 25,085,796 shares issued and outstanding.

2 unchanged sentences

Additional paid-in capital 463,088 476,510

Accumulated other comprehensive income (loss) 4,394 ( 1,039 )

Retained earnings 17,590 2,601

Accumulated other comprehensive (loss) income ( 9,987 ) 3,000

Retained (deficit) earnings ( 32,018 ) 11,527

Total stockholders’ equity $ 421,436 $ 491,390

4 unchanged sentences

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2022 March 31, 2021

INTEREST INCOME, NET

2 unchanged sentences

NET INTEREST INCOME 16,939 9,201

REALIZED AND UNREALIZED GAINS (LOSSES), NET

Net realized loss on derivative contracts, RMBS, CMBS, and mortgage loans ( 7,144 ) ( 3,102 ) ( 19,656 ) ( 18,717 )

Net unrealized gain (loss) on derivative contracts and mortgage loans 6,821 616 16,151 ( 4,369 )

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET ( 323 ) ( 2,486 ) ( 3,505 ) ( 23,086 )

Operating and investment expenses 3,830 347 5,293 1,957

REALIZED AND UNREALIZED (LOSSES) GAINS, NET

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS 26,416 ( 2,288 )

Net unrealized (loss) gain on mortgage loans and derivative contracts ( 80,181 ) 4,518

TOTAL REALIZED AND UNREALIZED (LOSSES) GAINS, NET ( 53,765 ) 2,230

Operating expenses 3,784 523

Operating expenses incurred with affiliate 855 439

Due diligence and transaction costs 770 64

Stock compensation 871 —

Securitization costs 2,019 —

1 unchanged sentence

Total operating expenses 10,172 1,944

NET INCOME (LOSS) $ 6,344 $ 4,242 $ 18,056 $ ( 6,266 )

INCOME BEFORE INCOME TAXES ( 46,998 ) 9,487

Income tax benefit ( 3,457 ) —

NET (LOSS) INCOME $ ( 43,541 ) $ 9,487

Preferred dividends ( 4 ) ( 4 )

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDER(S) $ 6,340 $ 4,238 $ 18,045 $ ( 6,277 )

Other comprehensive income (loss) 1,818 5,171 5,433 ( 5,054 )

TOTAL COMPREHENSIVE INCOME (LOSS) $ 8,158 $ 9,409 $ 23,478 $ ( 11,331 )

Basic earnings (loss) per common share $ 0.25 $ 0.27 $ 0.94 $ ( 0.40 )

Diluted earnings (loss) per common share $ 0.25 $ 0.27 $ 0.93 $ ( 0.40 )

NET (LOSS) INCOME ALLOCABLE TO COMMON STOCKHOLDER(S) $ ( 43,545 ) $ 9,483

Other comprehensive (loss) income ( 12,987 ) 529

TOTAL COMPREHENSIVE (LOSS) INCOME $ ( 56,532 ) $ 10,012

Basic (loss) earnings per common share $ ( 1.77 ) $ 0.60

Diluted (loss) earnings per common share $ ( 1.77 ) $ 0.60

Weighted average number of common shares outstanding:

3 unchanged sentences

Angel Oak Mortgage, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Changes in Stockholder(s)’ Equity

(in thousands)

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 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 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 September 30, 2020

For the Three Months Ended March 31, 2021

Preferred Stock Common Stock at Par Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Stockholder’s Equity

Stockholder’s equity as of December 31, 2020

$ 101 $ — $ 246,646 $ ( 1,039 ) $ 2,601 $ 248,309

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

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

Unrealized gain on RMBS and CMBS — — — 529 — 529

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

Equity contribution from common stockholder — — 56,261 — — 56,261

Net income — — — — 9,487 9,487

Stockholders’ equity as of September 30, 2021

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

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

Angel Oak Mortgage, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

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

Stockholders’ equity as of December 31, 2019

$ 101 $ — $ 87,628 $ 3,554 $ 3,580 $ 94,863

Dividends declared - preferred — — — — ( 11 ) ( 11 )

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

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 September 30, 2020

Stockholder’s equity as of March 31, 2021

$ 101 $ — $ 302,907 $ ( 510 ) $ 12,084 $ 314,582

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

For the Three Months Ended March 31, 2022

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

Stockholders’ equity as of December 31, 2021

$ 101 $ 252 $ 476,510 $ 3,000 $ 11,527 $ 491,390

Contributions from common stockholder prior to IPO — — 56,261 — — 56,261

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

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

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

Repurchase of common stock — — ( 3,003 ) — — ( 3,003 )

Non-cash equity compensation — — 871 — — 871

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

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

Unrealized loss on RMBS and CMBS — — — ( 12,987 ) — ( 12,987 )

Dividends paid on common stock — — ( 11,290 ) — — ( 11,290 )

Net income — — — — 18,056 18,056

Stockholders’ equity as of September 30, 2021

Net loss — — — — ( 43,541 ) ( 43,541 )

Stockholders’ equity as of March 31, 2022

$ 101 $ 252 $ 463,088 $ ( 9,987 ) $ ( 32,018 ) $ 421,436

3 unchanged sentences

(in thousands)

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

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ 18,056 $ ( 6,266 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net realized loss on derivative contracts, RMBS, CMBS, and mortgage loans 19,656 18,718

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

Accretion of and amortization 438 263

Net (loss) income $ ( 43,541 ) $ 9,487

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net realized (gain) loss on mortgage loans, derivative contracts, RMBS, and CMBS ( 26,416 ) 2,288

Net unrealized loss (gain) on mortgage loans and derivative contracts 80,181 ( 4,518 )

Amortization of debt issuance costs 257 19

Net amortization of premiums and discounts on mortgage loans 3,695 27

Non-cash equity compensation 871 —

2 unchanged sentences

Purchases of residential mortgage loans from affiliates ( 347,086 ) ( 92,734 )

Sales of residential mortgage loan into affiliate’s securitization trust — 505,467

Principal payments on residential mortgage loans 18,239 5,149

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

Collateral due to counterparties 8,024 —

Margin received from interest rate futures contracts and TBAs 33,827 1,702

Principal and interest receivable ( 2,028 ) ( 2,612 )

Receivable from affiliate 14 ( 159 )

Other assets ( 2,447 ) ( 88 )

3 unchanged sentences

Interest payable 426 185

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

NET CASH USED IN OPERATING ACTIVITIES ( 606,423 ) ( 81,615 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investment securities ( 1,463,966 ) ( 1,297,135 )

Treasury securities 424,984 1,335,000

Purchases of investments in RMBS and CMBS — ( 107,789 )

Purchases of investments in U.S.

Treasury Bills ( 349,992 ) —

Maturity of U.S.

Treasury Bills 249,999 149,993

Sale of RMBS 271,995 19,570

Principal payments on RMBS 3,635 2,281

Principal payments on residential mortgage loans in securitization trusts 88,228 —

Purchases of commercial mortgage loans ( 3,180 ) —

Sale of commercial mortgage loans 640 —

Principal payments on commercial mortgage loans 38 5

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

NET CASH PROVIDED BY INVESTING ACTIVITIES 261,363 64,060

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid to common stockholders ( 11,290 ) —

Stock repurchase ( 1,653 ) —

Repurchase of common stock ( 3,003 ) —

Contributions from prior common stockholder — 56,261

Distributions to prior common stockholder — ( 76,700 )

Proceeds from private placement concurrent with IPO 40,000 —

Proceeds from IPO 136,800 —

Other ( 16,050 ) ( 153 )

Principal payments on loans held in securitization trusts ( 88,228 ) —

Cash paid for debt issuance costs ( 24 ) ( 59 )

Proceeds from securitization 520,262 —

1 unchanged sentence

Net proceeds from (payments on) notes payable 102,757 109,892

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

NET CASH PROVIDED BY FINANCING ACTIVITIES 388,644 15,599

CHANGE IN CASH AND RESTRICTED CASH 43,584 ( 1,956 )

CASH AND RESTRICTED CASH, beginning of period (1)

52,309 45,973

CASH AND RESTRICTED CASH, end of period (1)

2 unchanged sentences

Cash paid during the period for interest $ 9,744 $ 647

(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.

(1) Cash, cash equivalents, and restricted cash as of March 31, 2022 included cash and cash equivalents of $ 90.4 million and restricted cash of $ 5.4 million, and as of March 31, 2021 included cash and cash equivalents of $ 40.0 million and restricted cash of $ 4.1 million.

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

5 unchanged sentences

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 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’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 Mortgage 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.

5 unchanged sentences

On June 21, 2021, the Company completed its initial public offering (the “IPO”) of 7,200,000 shares of common stock, $ 0.01 par value per share (“common stock”), at an initial public offering price of $ 19.00 per share for total proceeds of approximately $ 136.8 million, excluding the underwriting discounts and commissions and offering expenses of the IPO, each of which was paid by Angel Oak Capital Advisors, LLC (“Angel Oak Capital”), pursuant to a registration statement on Form S-11, as amended (File No.

333-256301) (the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”).

333-256301) (the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended.

The common stock of the Company trades on the New York Stock Exchange under the ticker symbol “AOMR”.

10 unchanged sentences

Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements.

These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2020, included in the Company’s prospectus dated June 16, 2021, filed with the SEC on June 21, 2021 pursuant to Rule 424(b)(4) under the Securities Act (the “Prospectus”), which is part of the Registration Statement.

These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report on Form 10-K”).

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented.

10 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

Election of Fair Value Option for Non-Recourse Securitization Debt of Angel Oak Mortgage Trust (“AOMT”) 2022-1

The Company had previously elected the fair value option for many of its assets and liabilities as provided for under Accounting Standards Codification 825, Financial Instruments, with certain exceptions, including non-recourse securitization obligations, collateralized by residential mortgage loans.

During the three months ended March 31, 2022, the Company elected the fair value option for the portion of the non-recourse securitization obligation, collateralized by residential mortgage loans incurred with the issuance of AOMT 2022-1, which was issued during the three months ended March 31, 2022.

Debt issuance costs previously capitalized in other AOMT issuances (AOMT 2021-4 and AOMT 2021-7) continue to amortize over the related term of the liability (See Note 2 - Variable Interest Entities ).

The valuation methodology used to measure the fair value of the Company’s non-recourse securitization obligations, collateralized by residential mortgage loans, uses the prices of the underlying bonds securing the related residential mortgage loans in securitization trusts.

The Company utilizes Price Serve , Bank of America’s independent fixed income pricing service, as the primary valuation source for these bonds.

Price Serve obtains its price quotes from actual sales or quotes for sale of the same or similar securities and/or provides model‑based valuations that consider inputs derived from recent market activity including default rates, conditional prepayment rates, loss severity, expected yield to maturity, baseline DM/Yield, recovery assumptions, tranche type, collateral coupon, age and loan size and other inputs specific to each security.

These quotes are most reflective of the price that would be achieved if the bonds were sold to an independent third party on the date of the condensed consolidated financial statements.This liability is categorized as Level 2 in the fair value hierarchy.

Variable Interest Entities

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

Since its inception, the Company has utilized Variable Interest Entities (“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 the third and fourth quarters of 2021, and during the first quarter of 2022, the Company entered into securitization transactions where it was determined that the Company was the primary beneficiary, as, with respect to each securitization vehicle, it controls the class of securities with call rights, or “controlling class” of securities, the XS tranche.

The Company was the sole entity to contribute residential whole mortgage loans to each of the the securitization vehicles, AOMT 2021-4, AOMT 2021-7 and AOMT 2022-1, respectively.

During the three months ended March 31, 2022, in the AOMT 2022-1 transaction, the Company securitized and consolidated approximately $ 537.6 million unpaid principal balance of seasoned residential non-QM mortgage loans.

The retained beneficial interest in VIEs for which the Company is the primary beneficiary is the subordinated tranches of the securitization and further interests in additional interest‑only tranches.

The table below sets forth the fair values of the assets and liabilities recorded in the consolidated balance sheet related to these consolidated VIEs as of March 31, 2022 and December 31, 2021:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

March 31, 2022 December 31, 2021

(in thousands)

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

Residential mortgage loans in securitization trusts - cost $ 1,125,597 $ 665,510

Fair value adjustment ( 47,630 ) 1,855

Residential mortgage loans in securitization trusts - at fair value $ 1,077,967 $ 667,365

Accrued interest receivable 2,130 1,728

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:

Liabilities (1) :

Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, amortized cost $ 550,462 $ 619,108

debt issuance costs capitalized ( 2,303 ) ( 2,551 )

Non-recourse securitization obligations, collateralized by residential mortgage loans, amortized cost, net 548,159 616,557

Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, subject to fair value adjustment 500,462 —

Fair value adjustment ( 17,421 ) —

Non-recourse securitization obligations, collateralized by residential mortgage loans - at fair value, net 483,041 —

Total non-recourse securitization obligations, collateralized by residential mortgage loans, net $ 1,031,200 $ 616,557

(1) During the three months ended March 31, 2022, the Company elected the fair value option for the securitization obligation of AOMT 2022-1.

Thus, debt issuance costs of $ 2.0 million incurred during the first quarter of 2022 were immediately recorded to securitization expense upon electing the fair value option, and the portion of the obligation incurred during the three months ended March 31, 2022 is presented at fair value, while the portion of the obligation incurred with the issuances of AOMT 2021-7 and 2021-4 is presented at amortized cost.

Income and expense amounts related to the consolidated VIEs recorded in the consolidated statements of operations and comprehensive income (loss) for the period ended March 31, 2022 (1) is set forth as follows:

Total Consolidated VIEs

(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

Interest income $ 9,508

Interest expense, non-recourse liabilities (2)

Net interest income 4,925

Net unrealized loss on mortgage loans in securitization trusts - at fair value ( 55,174 )

Unrealized gain on mark-to-market of non-recourse securitization obligation - at fair value 17,421

Securitization expenses incurred in issuance of AOMT 2022-1 ( 2,019 )

Operating expenses ( 195 )

Net expense from consolidated VIEs $ ( 35,042 )

(1) The Company had no consolidated VIEs during the period ended March 31, 2021.

(2) Includes amortization of debt issuance costs for AOMT 2021-4 and 2021-7.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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.

In 2019 and 2020, the Company co‑sponsored and participated in the formation of various entities that were considered to be VIEs.

These VIEs 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 Company determined that it was not then and is not now the primary beneficiary of any of these entities, as no primary beneficiary was identified in the assessment of primary beneficiary determination, and thus has not consolidated the operating results or statements of financial position of any of these entities.

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 during the years 2019 and 2020 remains unchanged.

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

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 consolidated balance sheets as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021 that were retained by the Company as a result of the securitization transactions in 2020 and 2019.

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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 31 30

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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in thousands)

9 unchanged sentences

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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 9 8

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.

As of December 31, 2020, the recorded investment in this loan was $ 0.6 million with an unpaid principal balance of $ 0.8 million.

There were no commercial mortgage loans more than 90 days overdue as of March 31, 2022, and there was one commercial mortgage loan more than 90 days overdue as of December 31, 2021 which loan was also in foreclosure.

During the three months ended March 31, 2022, the commercial mortgage loan that had been more than 90 days overdue and in foreclosure as of December 31, 2021 was sold to a third party.

Investment Securities

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.

As of March 31, 2022 and December 31, 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.

As of December 31, 2020, investment securities were comprised of non‑agency RMBS, CMBS, and U.S.

Treasury securities in the condensed consolidated balance sheet.

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.

Treasury securities held by the Company as of March 31, 2022 and December 31, 2021 matured through April 12, 2022 and on January 6, 2022, respectively.

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

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

Treasury securities for each of the three months ended March 31, 2022 and March 31, 2021.

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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

The following table sets forth a summary of RMBS and CMBS at cost as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

(in thousands)

1 unchanged sentence

CMBS $ 10,841 $ 10,875

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:

The following table sets forth certain information about the Company’s investments in RMBS and CMBS as of March 31, 2022 and December 31, 2021:

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

September 30, 2021:

March 31, 2022:

(in thousands)

17 unchanged sentences

Total AOMT CMBS $ 10,055 $ — $ 10,055

(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.

(1) AOMT RMBS held as of March 31, 2022 included both retained tranches of securitizations in which the Company participated within the purview of AOMT, and additional AOMT securities purchased in secondary market transactions.

Angel Oak Mortgage, Inc.

1 unchanged sentence

December 31, 2021:

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

Real Estate Securities at Fair Value Repurchase Debt Allocated Capital

(in thousands)

6 unchanged sentences

Other Non-Agency RMBS

Senior $ 6,820 $ — $ 6,820

Subordinate $ 10,292 $ — $ 10,292

Interest Only/Excess 2,923 — 2,923

Total Other Non-Agency RMBS $ 13,215 $ — $ 13,215

$ 149,936 $ ( 28,673 ) $ 121,263

Whole Pool Agency RMBS

Fannie Mae $ 281,225 $ ( 267,286 ) $ 13,939

Freddie Mac 90,830 ( 87,495 ) 3,335

Whole Pool Total Agency RMBS $ 372,055 $ ( 354,781 ) $ 17,274

Total RMBS $ 485,634 $ ( 360,501 ) $ 125,133

Subordinate $ 7,993 $ — $ 7,993

1 unchanged sentence

Total AOMT CMBS $ 10,756 $ — $ 10,756

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

(1) AOMT RMBS held as of December 31, 2021 included both retained tranches of securitizations in which the Company participated within the purview of AOMT and additional AOMT securities purchased in secondary market transactions.

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

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

Treasury Bills as of March 31, 2022 and December 31, 2021:

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

1 unchanged sentence

($ in thousands)

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

March 31, 2022 $ 225,000 $ 8 $ 224,992 $ — $ 224,992 10.00 basis points

March 31, 2022 $ 125,000 $ — $ 125,000 $ — $ 125,000 1.00 basis point

December 31, 2021 $ 250,000 $ — $ 250,000 $ ( 1 ) $ 249,999 2.30 basis points

2 unchanged sentences

Notes Payable

The Company has the ability to finance residential and commercial whole loans, utilizing lines of credit from various counterparties, as further described below.

The Company has the ability to finance residential and commercial whole loans, utilizing lines of credit (notes payable) from various counterparties, as further described below.

Outstanding borrowings bear interest at floating rates depending on the lending counterparty, the collateral pledged, and the rate in effect for each interest period, as the same may change from time to time at the end of each interest period.

3 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 September 30, 2021 and December 31, 2020:

Line of Credit Facility Limit Base Interest Rate Interest Rate Spread September 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 March 31, 2022 and December 31, 2021:

Line of Credit Facility Limit Base Interest Rate (A)

Interest Rate Spread (A)

March 31, 2022 December 31, 2021

($ 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)

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

$ 379,333 $ 362,899

Nomura Corporate Funding Americas, LLC (2)

$ 300,000 1 month or 3 month LIBOR 1.70 % - 3.50 %

$ 20,207 103,149

Deutsche Bank, AG (3)

2 unchanged sentences

Goldman Sachs Bank USA (4)

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

$ 200,000 3 month LIBOR 2.25 % $ 193,351 109,283

Banc of California, National Association (5)

2 unchanged sentences

Veritex Community Bank (6)

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

$ 75,000 1 month LIBOR 2.30 % $ 74,662 11,258

Total $ 1,300,000 $ 956,165 $ 853,408

(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.

(A) See below for timing of applicable transitions to SOFR as base interest rate and corresponding applicable interest rate spreads.

(1) This agreement terminates on September 20, 2022.

On January 27, 2022, this repurchase facility was amended to state that interest will accrue on any outstanding balance at a rate based on Term SOFR plus a spread and increase the maximum purchase price permitted under the Master Repurchase Agreement to $ 550.0 million from $ 400.0 million, which was subject to reduction to $ 400.0 million upon the issuance of securities pursuant to a securitization of the assets underlying the Master Repurchase Agreement which occurred on February 7, 2022.

(2) This agreement terminates on August 5, 2022.

(3) On February 4, 2022, this facility was amended to extend the initial termination date of the Master Repurchase Agreement from February 11, 2022 to February 2, 2024;

remove any draw fees;

and adjust the pricing rate whereby upon the Company’s or the Subsidiary’s repurchase of a mortgage loan, the Company or the Subsidiary is required to repay Deutsche Bank the principal amount related to such mortgage loan plus accrued and unpaid interest at a rate (determined based on the type of loan) equal to the sum of (A) the greater of (i) 0.00 % and (ii) Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) and (B) a spread generally ranging from 2.20 % to 3.45 %.

(4) On March 2, 2022, the agreement was extended to terminate on March 5, 2023, unless terminated earlier pursuant to the terms of the agreement.

On January 1, 2022, the agreement was amended to replace a LIBOR-based index rate with a SOFR-based index rate plus a spread equal to 20 basis points.

(5) On March 7, 2022, the agreement was amended to terminate on March 16, 2023, unless terminated earlier pursuant to the terms of the agreement.

Additionally, the amendment increased the aggregate purchase price limit to $ 75.0 million from $ 50.0 million, and beginning March 8, 2022, provided that interest will accrue on any new transactions under the Loan Financing Line at a rate based on Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) plus an additional spread.

(6) This agreement terminates on August 16, 2023.

On February 11, 2022, the Company amended the financing facility to (1) increase the size of the financing facility to $ 75.0 million from $ 50.0 million, and (2) interest will accrue on any outstanding balance at a rate based on Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) plus a margin equal to 2.41 % per annum;

provided that the interest rate may not be less than 3.125 % per annum.

Securities Sold Under Agreements to Repurchase

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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 September 30, 2021 and December 31, 2020, respectively.

Restricted cash was substantially comprised of margin collateral for securities sold under agreements to repurchase as of each of March 31, 2022 and December 31, 2021.

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

The following table summarizes certain characteristics of the Company’s repurchase agreements as of March 31, 2022 and December 31, 2021:

March 31, 2022

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

($ in thousands)

Treasury Bills $ 348,867 0.32 % 9

RMBS 128,555 0.56 % 15

11 unchanged sentences

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 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.

Derivative instruments as of March 31, 2022 and December 31, 2021 included both “To be Announced” forward-settling of mortgage-backed securities trades (“TBAs”) and interest rate futures contracts.

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

5 unchanged sentences

Changes in the value of derivatives designed to protect against mortgage-backed securities fair value fluctuations, or economic hedging gains and losses, are reflected in the tables below.

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.

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

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

1 unchanged sentence

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:

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of March 31, 2022 and December 31, 2021:

Notional Amounts

1 unchanged sentence

($ in thousands)

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 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:

March 31, 2022 Interest rate futures 11,139 $ 13,279 $ — $ — $ 1,113,900

March 31, 2022 TBAs N/A $ 3,748 $ — $ — $ 445,019

December 31, 2021 Interest rate futures 10,438 $ — $ ( 728 ) $ — $ 1,043,800

December 31, 2021 TBAs N/A $ 2,428 $ — $ — $ 523,938

The gains and losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022 and March 31, 2021 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 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 September 30, 2020

Futures contracts $ ( 88 ) $ 101

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

Three Months Ended March 31, 2022 Interest rate futures $ 19,684 $ 14,007

Three Months Ended March 31, 2022 TBAs $ 14,413 $ 1,319

Three Months Ended March 31, 2021 Interest rate futures $ 1,702 $ 1,677

Three Months Ended March 31, 2021 TBAs $ ( 373 ) $ ( 67 )

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 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.

As of March 31, 2022, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2021 included in the Annual Report on Form 10-K, with the exception of electing the fair value option for non-recourse securitization obligations, collateralized by residential mortgage loans, as described in Note 1.

Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2021 is a detailed description of our other 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) :

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of March 31, 2022:

Level 1 Level 2 Level 3 Total

11 unchanged sentences

Unrealized appreciation on futures contracts 13,279 — — 13,279

2,421 — — 2,421

Unrealized appreciation on TBAs 3,748 — — 3,748

1,120 — — 1,120

Total assets at fair value $ 367,019 $ 2,695,854 $ 7,933 $ 3,070,806

(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.

Liabilities, at fair value

Non-recourse securitization obligation, collateralized by residential mortgage loans (2)

$ — $ 483,041 $ — $ 483,041

Total liabilities at fair value $ — $ 483,041 $ — $ 483,041

(1) Non‑Agency RMBS held as of March 31, 2022 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 March 31, 2022 were comprised of retained tranches of AOMT securitizations.

(2) Only the portion subject to fair value measurement, as adjusted for fair value, is presented above.

See below for the disclosure of the full debt at fair value.

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.

1 unchanged sentence

These transfers were not material.

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

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

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 September 30, 2021:

The following table sets forth information regarding the Company’s significant Level 3 inputs as of March 31, 2022:

Angel Oak Mortgage, Inc.

1 unchanged sentence

Asset Fair Value Unobservable Input Range Average

($ in thousands)

Residential mortgage loans, at fair value $ 6,498 Prepayment rate (annual CPR) — % - 19.84 %

6 unchanged sentences

Expected remaining life 0.70 - 2.77 years

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

Sale or Liquidation timeline 42 - 53 months

42 - 53 months

Fair Value Disclosure - Non-Recourse Securitization Obligations, Collateralized by Residential Mortgage Loans - Fair Value for Disclosure Purposes Only

To determine the fair value of the Company’s non-recourse securitization obligations, collateralized by residential mortgage loans, net, in full, the Company used the prices of the underlying bonds securing the related residential mortgage loans in securitization trusts.

The Company utilizes Price Serve , Bank of America’s independent fixed income pricing service, as the primary valuation source for these bonds.

These quotes are most reflective of the price that would be achieved if the bonds were sold to an independent third party on the date of the condensed consolidated financial statements.

This liability is categorized as Level 2 in the fair value hierarchy, as the valuation model has inputs that are observable for substantially the full term of the liability.

As of March 31, 2022, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.05 billion and $ 1.01 billion, respectively, a difference of approximately $ 40.2 million (which includes AOMT 2022-1, which is marked to fair value;

and AOMT 2021-7, and AOMT 2021-4, which are carried at amortized cost, as further described).

The difference between the amortized cost and fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 22.7 million.

The difference between the amortized cost basis value and the fair value is derived from the difference between the period-end market pricing of the underlying bonds, as referred to above, and the amortized cost of the obligation.

The fair value of the non-recourse securitization debt is not indicative of the amounts at which we could settle this debt.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2021:

Level 1 Level 2 Level 3 Total

Assets, at fair value (in thousands)

(in thousands)

Assets, at fair value

Residential mortgage loans $ — $ 1,056,875 $ 5,037 $ 1,061,912

Residential mortgage loans in securitization trusts — 665,802 1,563 667,365

Commercial mortgage loans — 18,145 519 18,664

2 unchanged sentences

— 113,579 — 113,579

Agency whole pool loan securities — 372,055 — 372,055

AOMT CMBS (1)

1 unchanged sentence

Treasury Bills 249,999 — — 249,999

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

Unrealized appreciation on TBAs 2,428 — — 2,428

Total assets $ 252,427 $ 2,237,212 $ 7,119 $ 2,496,758

Liabilities, at fair value

Unrealized depreciation on futures contracts $ 728 $ — $ — $ 728

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

Total liabilities $ 728 $ — $ — $ 728

(1) Non‑Agency RMBS held as of December 31, 2021 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.

3 unchanged sentences

These transfers were not material.

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

All unrealized gains and losses arising from valuation changes in residential and commercial mortgage loans, TBAs, and futures contracts 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.

3 unchanged sentences

The following table sets forth information regarding the Company’s significant Level 3 inputs as of December 31, 2021:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Asset Fair Value Unobservable Input Range Average

($ in thousands)

Residential mortgage loans, at fair value $ 5,037 Prepayment rate (annual CPR) — % - 20.85 %

2 unchanged sentences

Expected remaining life 0.04 - 2.75 years

Residential mortgage loans in securitization trust, at fair value $ 1,563 Prepayment rate (annual CPR) — % - 20.85 %

Default rate — % - 37.32 %

Loss severity ( 20.31 )% - 36.35 %

Expected remaining life 0.04 - 2.75 years

Commercial mortgage loans, at fair value $ 519 Loss severity ( 25.00 )% ( 25.00 )%

3 unchanged sentences

Residential Mortgage Loan Purchases

On October 1, 2018, the Company entered into separate Mortgage Loan Purchase and Servicing Agreements with each of Angel Oak Home Loans, LLC, Angel Oak Prime Bridge, LLC, and Angel Oak Mortgage Solutions, LLC (together the “Mortgage Companies”), all of which are affiliated with the Manager.

These agreements provide the framework pursuant to which the Company has agreed to purchase from the Mortgage Companies certain fixed and adjustable‑rate residential, first and second lien mortgage loans, all of which are underwritten to predetermined guidelines.

The Company purchases residential mortgage loans under loan purchase agreements with various affiliates of the Company.

The purchase price of the loans is generally equal to the outstanding principal of the mortgage, adjusted by a premium or discount, depending on market conditions.

As part of each agreement, the Company purchases the mortgage loans on a servicing released basis.

The Company also has an agreement with Angel Oak Prime Bridge, LLC whereby the Company purchases the mortgage loans on a servicing retained basis.

In accordance with the Manager’s Inter‑Affiliate Transaction Policy, various functional areas within the Manager, including a valuation sub‑committee, risk management, legal, and the independent members of the Board of Directors of the Company, regularly review the loan purchase activities between the Company and the Mortgage Companies.

The residential mortgage loans are loans on residences located in various states with a concentration in California, Florida, Georgia, and Texas.

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:

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

The Company purchases the mortgage loans on a servicing retained basis.

The residential mortgage loans are mortgage loans on residences located in various states with a concentration in California and Florida.

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the period and year ended and as of March 31, 2022 and December 31, 2021:

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:

($ in thousands)

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

March 31, 2022 $ 347,086 685 930

December 31, 2021 $ 909,442 1,959 754

Commercial Mortgage Loan Purchases

The Company entered into separate Loan Purchase Agreements with each of Cherrywood Mortgage, LLC and Angel Oak Commercial Bridge, LLC, each of which is affiliated with the Manager.

The agreements provide the framework pursuant to which the Company agrees to purchase from Cherrywood Mortgage, LLC and Angel Oak Commercial Bridge, LLC certain commercial mortgage loans which are underwritten to predetermined guidelines.

The purchase price of the loans is generally equal to the outstanding principal of the mortgage, adjusted by a premium or discount, depending on market conditions.

In accordance with the Manager’s Inter‑Affiliate Transaction Policy, various functional areas within the Manager, including a valuation sub‑committee, risk management, legal and the independent members of the Board of Directors of the Company, regularly review the loan purchase activities between the Company and Cherrywood Mortgage, LLC and Angel Oak Commercial Bridge, LLC.

Commercial mortgage loans are loans on commercial properties which are substantially comprised of an educational facility and retail properties, located in various states with a concentration in Georgia and Montana.

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:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Commercial Mortgage Loan Purchases

The Company purchases commercial mortgage loans under loan purchase agreements with various affiliates of the Company.

The purchase price of the loans is generally equal to the outstanding principal of the mortgage, adjusted by a premium or discount, depending on market conditions.

The commercial mortgage loans are mortgage loans on commercial properties, primarily multifamily and retail properties, located in various states with concentrations in California and Maine.

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

1 unchanged sentence

($ in thousands)

September 30, 2021 $ — — 7

March 31, 2022 $ — — 4

December 31, 2021 $ — — 5

5 unchanged sentences

On and after June 21, 2021, the post-IPO management agreement (the “Management Agreement”) took effect among the Company, the Operating Partnership, and the Manager.

Per the Management Agreement, on a quarterly basis in arrears, the Company shall pay the Manager an aggregate, fixed management fee equal to 1.5 % per annum of the Company’s Equity (as defined in the Management Agreement).

The Management Agreement was effective for the last 10 days of June 2021, and the additional management fee incurred during the 10 days following the completion of the IPO was de minimis.

Per the Management Agreement, on a quarterly basis in arrears, after the IPO, the Company paid the Manager an aggregate, fixed management fee equal to 1.5 % per annum of the Company’s Equity (as defined in the Management Agreement).

Operating Expense Reimbursements

1 unchanged sentence

Accrued expenses payable to affiliate and operating expenses incurred with affiliate are substantially comprised of payroll reimbursements to an affiliate of the Manager.

Transactions by Affiliates Regarding the Company’s IPO

The Company’s IPO was completed on June 21, 2021.

The Company’s Manager purchased $ 6.0 million in stock at the IPO price of $ 19.00 per share, which was delivered on June 21, 2021.

Angel Oak Capital Advisors, LLC, an affiliate of the Company’s Manager, agreed to pay the underwriting discounts and commissions in connection with the IPO.

Such underwriting discounts and commissions were $ 8.2 million.

Angel Oak Capital Advisors, LLC also agreed to pay all of the Company’s expenses incurred in connection with the IPO.

Such expenses were $ 4.4 million.

Commitments and Contingencies

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

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.

As of March 31, 2022, the Company was not aware of any legal claims that could materially impact its financial condition.

As of March 31, 2022, 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 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 nine months ended September 30, 2021, no outstanding equity awards were antidilutive.

Basic and Diluted EPS for the three months ended March 31, 2022

Basic and diluted earnings per share are equivalent for the three months ended March 31, 2022, due to net losses for the period.

Shares of unvested restricted stock totaling 507,900 shares are anti-dilutive and are not included in the calculation of diluted earnings per share.

Basic and Diluted EPS for the three months ended March 31, 2021

For the three months ended March 31, 2021, basic and diluted earnings per share were equivalent as there were no potentially dilutive securities outstanding.

For the three months ended March 31, 2021, 1,000 shares of common stock were outstanding (both outstanding and weighted average outstanding), all of which were held by Angel Oak Mortgage Fund, the Company’s sole common stockholder prior to the IPO.

These shares have been retroactively restated accordingly for the calculations of earnings per share for the three months ended March 31, 2021 as described below.

In conjunction with its IPO, the Company declared a stock dividend that resulted in the issuance, immediately prior to the completion of the IPO, of 15,723,050 shares of common stock to the Company’s then-sole common stockholder, Angel Oak Mortgage Fund, who then immediately distributed all of its stock in the Company (representing 15,724,050 shares) to its investors.

As a result of the stock dividend, 15,724,050 shares of common stock were outstanding as of June 21, 2021 (both outstanding and weighted average outstanding)

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 nine months ended September 30, 2021:

Three Months Ended

September 30, 2021 Nine Months Ended

September 30, 2021

(in thousands, except share data)

Basic Earnings per Common Share:

Net income allocable to common stockholders $ 6,340 $ 18,045

Basic weighted average common shares outstanding 24,999,891 19,190,827

Basic earnings per common share $ 0.25 $ 0.94

Diluted Earnings per Common Share:

Net income allocable to common stockholders $ 6,340 $ 18,045

Net effect of dilutive equity awards 470,335 175,852

Diluted weighted average common shares outstanding 25,470,226 19,366,679

Diluted earnings per common share $ 0.25 $ 0.93

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 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 $ 8.1 million as of September 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 nine months ended September 30, 2020.

immediately prior to the completion of the IPO, 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 for the three months ended March 31, 2021.

Subsequent Events

Dividend Declared

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.

Subsequent events of significance for disclosure purposes only (i.e., subsequent events that are not recognized in the financial statements as of and for the three months ended March 31, 2022) are as follows:

On April 13, 2022, the Company entered into a $ 340.0 million repurchase facility with Royal Bank of Canada (“RBC”) through the execution of a Master Repurchase Agreement (the “Master Repurchase Agreement”) between the Company as guarantor, and two of its subsidiaries, as sellers, and RBC as buyer.

Pursuant to the Master Repurchase Agreement, the Company’s subsidiaries may sell certain whole loan assets to RBC and later repurchase such whole loan assets from RBC.

The Master Repurchase Agreement terminates on October 13, 2022, unless such term is extended or terminated earlier pursuant to the terms of the Master Repurchase Agreement.

The amount expected to be advanced by RBC is generally in line with other similar agreements that the Company or one or more of its subsidiaries has entered into, which is a percentage of the unpaid principal balance or market value of the whole loan asset depending on the delinquency of the underlying whole loan asset.

Similarly, the interest rate on any outstanding balance under the Master Repurchase Agreement that the applicable Subsidiary is required to pay RBC is generally in line with other similar agreements that the Company or one or more of its subsidiaries has entered into, where the interest rate is equal to the sum of (1) a pricing spread and (2) the average SOFR for each U.S.

Government Securities Business Day (as defined in the Master Repurchase Agreement) beginning on April 11, 2022 and ending on the day that is two U.S.

Government Securities Business Days prior to the date the whole loan asset is repurchased by the applicable subsidiary.

Additionally, RBC is under no obligation to purchase the whole loan assets we offer to sell to them.

On May 12, 2022, the Company declared a dividend of 45 cents per share of common stock, to be paid on May 31, 2022 to common stockholders of record as of May 23, 2022.

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