What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 158 added, 141 removed, 619 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Residential mortgage loans - at fair value $ 284,383 $ 770,982

23 unchanged sentences

Common stock, $ 0.01 par value.

As of June 30, 2023:

As of September 30, 2023:

350,000,000 shares authorized, 24,955,566 shares issued and outstanding.

10 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

INTEREST INCOME, NET

29 unchanged sentences

(in thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

Stockholders’ equity as of March 31, 2023 $ 249 $ 475,920 $ ( 6,323 ) $ ( 225,468 ) $ 244,378

Stockholders’ equity as of June 30, 2023 $ 249 $ 476,127 $ ( 6,565 ) $ ( 237,135 ) $ 232,676

Dividends paid on common stock ($ 0.32 per share)

— — — ( 7,987 ) ( 7,987 )

Non-cash equity compensation — 207 — — 207

Stock compensation — 447 — — 447

Unrealized gain on RMBS and CMBS — — ( 1,607 ) — ( 1,607 )

Net income (loss) — — — 8,273 8,273

Stockholders’ equity as of June 30, 2023 $ 249 $ 476,127 $ ( 6,565 ) $ ( 237,135 ) $ 232,676

Three Months Ended June 30, 2022

Stockholders’ equity as of September 30, 2023

$ 249 $ 476,574 $ ( 8,172 ) $ ( 236,849 ) $ 231,802

Three Months Ended September 30, 2022

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

Stockholders’ equity as of March 31, 2022 $ 101 $ 252 $ 474,377 $ ( 9,987 ) $ ( 43,306 ) 421,437

Stockholders’ equity as of June 30, 2022

$ 101 $ 249 $ 472,356 $ 1,248 $ ( 106,670 ) 367,284

Repurchase of common stock — — ( 866 ) — — ( 866 )

Non-cash equity compensation — — 968 — — 968

Stock compensation

— — 3,340 — — 3,340

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

2 unchanged sentences

Net income (loss) — — — — ( 83,349 ) ( 83,349 )

Stockholders’ equity as of June 30, 2022 $ 101 $ 249 $ 472,356 $ 1,248 $ ( 106,670 ) $ 367,284

Stockholders’ equity as of September 30, 2022

$ 101 $ 249 $ 474,830 $ ( 8,979 ) $ ( 201,244 ) $ 264,957

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

Stockholders’ equity as of December 31, 2022 $ 249 $ 475,379 $ ( 21,127 ) $ ( 218,022 ) 236,479

Non-cash equity compensation — 748 — — 748

Stock compensation

— 1,195 — — 1,195

Unrealized gain on RMBS and CMBS — — 12,955 — 12,955

2 unchanged sentences

Net income (loss) — — — 5,115 5,115

Stockholders’ equity as of June 30, 2023 $ 249 $ 476,127 $ ( 6,565 ) $ ( 237,135 ) $ 232,676

Six Months Ended June 30, 2022

Stockholders’ equity as of September 30, 2023 $ 249 $ 476,574 $ ( 8,172 ) $ ( 236,849 ) $ 231,802

Nine Months Ended September 30, 2022

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

1 unchanged sentence

Repurchases of common stock — ( 3 ) ( 6,859 ) — — ( 6,862 )

Non-cash equity compensation — — 1,839 — — 1,839

Stock compensation

— — 5,179 — — 5,179

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

2 unchanged sentences

Net income (loss) — — — — ( 179,035 ) ( 179,035 )

Stockholders’ equity as of June 30, 2022 $ 101 $ 249 $ 472,356 $ 1,248 $ ( 106,670 ) $ 367,284

Stockholders’ equity as of September 30, 2022 $ 101 $ 249 $ 474,830 $ ( 8,979 ) $ ( 201,244 ) $ 264,957

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

2 unchanged sentences

(in thousands)

Six Months Ended

June 30, 2023 June 30, 2022

Nine Months Ended

September 30, 2023 September 30, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ 5,115 $ ( 179,035 )

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

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

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS 27,056 ( 56,423 )

4 unchanged sentences

Net amortization of premiums and discounts on mortgage loans 2,199 8,231

Non-cash equity compensation 748 1,839

Accretion of non-recourse securitized obligation discount 1,251

Stock compensation

Net change in:

9 unchanged sentences

Accrued expenses ( 528 ) 3,084

Accrued expenses payable to affiliate ( 951 ) 114

Accrued expenses - affiliate ( 1,021 ) 1,634

Interest payable ( 1,880 ) 3,169

6 unchanged sentences

(in thousands)

Nine Months Ended

September 30, 2023 September 30, 2022

CASH FLOWS FROM INVESTING ACTIVITIES

21 unchanged sentences

Net proceeds from (payments on) notes payable ( 442,073 ) 52,913

NET CASH PROVIDED BY FINANCING ACTIVITIES 54,962 102,856

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

( 171,318 ) ( 33,620 )

CHANGE IN CASH AND RESTRICTED CASH 3,101 ( 22,805 )

5 unchanged sentences

Cash paid during the period for interest $ 48,862 $ 38,535

(1) Cash, cash equivalents, and restricted cash as of June 30, 2023 included cash and cash equivalents of $ 59.1 million and restricted cash of $ 9.6 million, and as of June 30, 2022 included cash and cash equivalents of $ 16.1 million and restricted cash of $ 5.8 million.

(1) Cash, cash equivalents, and restricted cash as of September 30, 2023 included cash and cash equivalents of $ 41.9 million and restricted cash of $ 1.1 million, and as of September 30, 2022 included cash and cash equivalents of $ 29.3 million and restricted cash of $ 10.6 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 credit-sensitive investments primarily in newly-originated 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 currently operates primarily through a wholesale channel operated by Angel Oak Mortgage Solutions, LLC and has a national origination footprint.

The Company’s strategy is to make credit-sensitive investments primarily in newly-originated 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 its affiliate, Angel Oak Mortgage Solutions LLC (together with other non-operational affiliated originators, “Angel Oak Mortgage Lending”), which currently operates primarily through a wholesale channel 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.

25 unchanged sentences

New Accounting Standards and Interpretations

As of June 30, 2023, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its condensed consolidated financial statements.

As of September 30, 2023, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its condensed consolidated financial statements.

Reclassifications

Certain amounts reported in prior periods in the financial statements have been reclassified to conform to the current year’s presentation.

Certain amounts reported in prior periods in the condensed consolidated financial statements have been reclassified to conform to the current year’s presentation.

For comparative purposes, and to simplify the presentation of the Company’s condensed consolidated balance sheet, the deferred tax asset has been reclassified to “other assets” on the condensed consolidated balance sheet as of December 31, 2022.

2 unchanged sentences

These reclassifications had no effect on the reported results of operations.

An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the six months-ended June 30, 2022, to identify amortization of debt issuance costs, net amortization of premiums and discounts of mortgage loans, and principal payments on residential mortgage loans in securitization trusts.

An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the nine months-ended September 30, 2022, to identify amortization of debt issuance costs, net amortization of premiums and discounts of mortgage loans, and principal payments on residential mortgage loans in securitization trusts.

Summary of Significant Accounting Policies

The Company’s summary of significant accounting policies as set forth in its Annual Report on Form 10-K remain unchanged.

During the six months ended June 30, 2023, the Company elected a new accounting classification regarding certain of its investments in debt securities, as further described below, as the Company classifies securities on a trade-by-trade basis upon purchase.

During the nine months ended September 30, 2023, the Company elected a new accounting classification regarding certain of its investments in debt securities, as further described below, as the Company classifies securities on a trade-by-trade basis upon purchase.

The Company did not transfer any securities between classifications.

8 unchanged sentences

VIEs for Which the Company is the Primary Beneficiary

In 2021, 2022 and 2023, 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 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 these securitization vehicles.

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 condensed consolidated balance sheets related to these consolidated VIEs as of June 30, 2023 and December 31, 2022:

The table below sets forth the fair values of the assets and liabilities recorded in the condensed consolidated balance sheets related to these consolidated VIEs as of September 30, 2023 and December 31, 2022:

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in thousands)

2 unchanged sentences

Residential mortgage loans in securitization trusts - at fair value $ 1,194,119 $ 1,027,442

Accrued interest receivable $ 1,745 $ 1,995

Liabilities (1) :

2 unchanged sentences

Non-recourse securitization obligations, collateralized by residential mortgage loans, amortized cost, net $ 434,122 $ 472,925

Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, subject to fair value adjustment $ 851,103 $ 611,114

Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, net of discount, subject to fair value adjustment

$ 836,130 $ 611,114

Fair value adjustment ( 108,956 ) ( 80,554 )

3 unchanged sentences

Debt issuance costs incurred with the issuances of non-recourse securitization obligations for which the fair value option was not elected are presented at amortized cost.

Income and expense amounts related to the consolidated VIEs recorded in the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022 is set forth as follows:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Income and expense amounts related to the consolidated VIEs recorded in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022 is set forth as follows:

Three Months Ended September 30, 2023

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

(in thousands)

5 unchanged sentences

Unrealized gain (loss) on mark-to-market of non-recourse securitization obligation - at fair value 22,183 34,357 3,620 67,030

Securitization expenses — — — ( 2,019 )

Securitization costs

( 416 ) ( 1,115 ) ( 2,326 ) ( 3,405 )

Realized losses and operating expenses ( 967 ) ( 247 ) ( 2,163 ) ( 695 )

Net loss from consolidated VIEs $ 85 $ ( 4,679 ) $ ( 1,985 ) $ ( 37,921 )

(1) Interest expense includes amortization of debt issuance expense.

Net gain/(loss) from consolidated VIEs

$ 8,714 $ ( 34,407 ) $ 4,819 $ ( 72,600 )

(1) Interest expense includes amortization of debt issuance expense and accretion of non-recourse securitization obligation discount.

Angel Oak Mortgage REIT, Inc.

1 unchanged sentence

VIEs for Which the Company is Not the Primary Beneficiary

In 2019, 2020 and 2023, the Company sponsored or participated along with other affiliates of Angel Oak Capital in the formation of various entities that were considered to be VIEs.

The Company sponsored or participated along with other affiliates and entities managed by Angel Oak Capital 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 and/or small balance commercial loans contributed to securitization trusts.

2 unchanged sentences

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 these VIEs remains unchanged.

The securities received in the securitization transactions were classified as “available for sale” upon receipt and are included in “RMBS - at fair value” and “CMBS - at fair value” on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, and details on the accounting treatment and fair value methodology of the securities can be found in Note 10 — Fair Value Measurements .

See also Note 5 — Investment Securities , for the fair value of AOMT securities held by the Company as of June 30, 2023 and December 31, 2022 that were retained by the Company as a result of these securitization transactions.

The securities received in the securitization transactions were classified as “available for sale” upon receipt and are included in “RMBS - at fair value” and “CMBS - at fair value” on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, and details on the accounting treatment and fair value methodology of the securities can be found in Note 10 — Fair Value Measurements .

See also Note 5 — Investment Securities , for the fair value of AOMT securities held by the Company, and Note 14 - Other Assets , for investments in MOAs, as of September 30, 2023 and December 31, 2022 that were retained by the Company as a result of these securitization transactions.

Angel Oak Mortgage REIT, Inc.

3 unchanged sentences

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, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table sets forth the cost, unpaid principal balance, net premium on mortgage loans purchased, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s residential mortgage loan portfolio as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

($ in thousands)

8 unchanged sentences

See Note 6 — Notes Payable .

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, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

($ in thousands)

8 unchanged sentences

Commercial Mortgage Loans

Commercial mortgage loans are mortgage loans on commercial properties located in various states with concentrations in Georgia, California, and Tennessee.

Commercial mortgage loans are mortgage loans on commercial properties located in various states with concentrations in California and Tennessee.

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, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table sets forth the cost, unpaid principal balance, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s commercial mortgage loan portfolio as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

($ in thousands)

6 unchanged sentences

The net discount on commercial mortgage loans was fully amortized as of December 31, 2022.

As of June 30, 2023, one commercial mortgage loan, representing $ 4.3 million in unpaid principal balance, was in foreclosure.

On July 3, 2023, this loan was sold for $ 4.6 million representing the full outstanding principal balance and carrying amount, and accrued costs and fees (see Note 16 — Subsequent Events ) .

There were no commercial mortgage loans more than 90 days overdue or in foreclosure as of December 31, 2022.

On July 3, 2023, a commercial mortgage loan was sold for $ 4.6 million representing the full outstanding principal balance and carrying amount, and accrued costs and fees.

There were no commercial mortgage loans more than 90 days overdue or in foreclosure as of September 30, 2023 or December 31, 2022.

Angel Oak Mortgage REIT, Inc.

1 unchanged sentence

Investment Securities

As of June 30, 2023, investment securities were comprised of non‑agency RMBS (“AOMT RMBS”), Whole Pool Agency RMBS, commercial mortgage backed securities (“CMBS”), and U.S.

As of September 30, 2023, investment securities were comprised of non‑agency RMBS (“AOMT RMBS”), Whole Pool Agency RMBS, commercial mortgage backed securities (“CMBS”), and U.S.

Treasury securities.

Treasury securities held by the Company as of June 30, 2023 subsequently matured on July 13, 2023.

Treasury securities held by the Company as of September 30, 2023 subsequently matured on October 12, 2023.

The Company did not hold any U.S.

Treasury securities as of December 31, 2022.

The following table sets forth a summary of AOMT RMBS, Whole Pool Agency RMBS, and CMBS at cost as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table sets forth a summary of AOMT RMBS, Whole Pool Agency RMBS, and AOMT CMBS at cost as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

(in thousands)

2 unchanged sentences

CMBS $ 6,319 $ 6,329

The following table sets forth certain information about the Company’s investments in RMBS and CMBS at fair value as of June 30, 2023 and December 31, 2022:

The following table sets forth certain information about the Company’s investments in RMBS and CMBS at fair value as of September 30, 2023 and December 31, 2022:

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

June 30, 2023:

September 30, 2023:

(in thousands)

14 unchanged sentences

Total AOMT CMBS $ 6,338 $ — $ 6,338

(1) AOMT RMBS held as of June 30, 2023 included both retained tranches of securitizations in which the Company participated where the Company was not deemed to be the primary beneficiary, and additional securities issued by affiliates of Angel Oak Capital which were purchased in secondary market transactions.

(1) AOMT RMBS held as of September 30, 2023 included both retained tranches of securitizations in which the Company participated where the Company was not deemed to be the primary beneficiary, and additional securities issued by affiliates of Angel Oak Capital which were purchased in secondary market transactions.

(2) A portion of repurchase debt includes borrowings against retained bonds received from securitizations involving consolidated VIEs.

27 unchanged sentences

Treasury securities as of

June 30, 2023 (1) :

September 30, 2023 (1) :

Date Face Value Unamortized Discount, net Amortized Cost Unrealized Gain (Loss) Fair Value Net Effective Yield

($ in thousands)

June 30, 2023 $ 300,000 $ 460 $ 299,540 $ 41 $ 299,581 5.01 %

September 30, 2023 $ 150,000 $ 182 $ 149,818 $ 88 $ 149,906 5.36 %

(1) There were no U.S.

7 unchanged sentences

Occasionally, a lender may require cash collateral to be posted as margin collateral on such agreements.

As of June 30, 2023, cash collateral for margin maintenance requirements of approximately $ 4.2 million was held for the benefit of Global Investment Bank 3 within “restricted cash” on the condensed consolidated balance sheet.

As of September 30, 2023, cash collateral for margin maintenance requirements of approximately $ 0.8 million was held for the benefit of Global Investment Bank 3 within “restricted cash” on the condensed consolidated balance sheet.

The majority of this restricted cash balance is in an economic interest rate hedging account under the control of Global Investment Bank 3, and may be drawn by Global Investment Bank 3 at its discretion.

4 unchanged sentences

the remainder of which was held in the economic interest rate hedging account referred to above.

The following table sets forth the details of the Company’s notes payable and drawn amounts for whole loan purchases as of June 30, 2023 and December 31, 2022:

The following table sets forth the details of the Company’s notes payable and drawn amounts for whole loan purchases as of September 30, 2023 and December 31, 2022:

Spread Drawn Amount

Note Payable Base Interest Rate June 30, 2023 December 31, 2022

Note Payable Base Interest Rate September 30, 2023 December 31, 2022

($ in thousands)

12 unchanged sentences

(1) On January 25, 2023, this financing facility was extended through July 25, 2023 in accordance with the terms of the agreement, which contemplates six-month renewals.

On April 26, 2023, the Company extended this financing facility through October 25, 2023, with an interest rate pricing spread of 2.15 %.

Subsequent to June 30, 2023, the Company extended this financing facility through January 25, 2024 with an interest rate pricing spread of 2.10 % (see Note 16 — Subsequent Events ).

On July 25, 2023, the Company extended this financing facility through January 25, 2024, with an interest rate pricing spread of 2.10 %.

(2) This financing facility expires on February 2, 2024.

(3) This static pool financing facility expires on December 19, 2023.

The interest rate pricing spread per the agreement began at 2.80 % for the first three months following December 19, 2022, exclusive of a 20 basis point index spread adjustment, and increases by an additional 50 basis points every three months thereafter;

The interest rate pricing spread per the agreement began at 2.80 % for the first three months following December 19, 2022, exclusive of a 20 basis points index spread adjustment, and increases by an additional 50 basis points every three months thereafter;

however, the facility does not, in general, contain “mark to market” provisions.

The agreement requires an economic interest rate hedging account (“interest rate futures account”) to be maintained to the reasonable satisfaction of Global Investment Bank 3, as described above, which account is for its benefit and under its sole control.

On November 7, 2023, this facility was renewed for a twelve month term through November 7, 2024 and was converted from static pool financing to a revolving facility with mark to market features.

The amended facility has a maximum borrowing capacity of $ 200 million with a base interest rate pricing spread of 180 basis points plus a 20 basis points index spread adjustment (see Note 16 — Subsequent Events ).

(4) On October 4, 2022, the Company and a subsidiary entered into two separate master repurchase facilities with two affiliates of an institutional investor (“Institutional Investors A and B”) regarding a specific pool of whole loans with financing of approximately $ 168.7 million on approximately $ 239.3 million of unpaid principal balance.

3 unchanged sentences

(5) This agreement expired by its terms on March 16, 2023.

The following table sets forth the total unused borrowing capacity of each financing line as of June 30, 2023:

The following table sets forth the total unused borrowing capacity of each financing line as of September 30, 2023:

Note Payable Borrowing Capacity Balance Outstanding Available Financing

8 unchanged sentences

(1) Although available financing is uncommitted, the Company’s unused borrowing capacity is available if it has eligible collateral to pledge and meets other borrowing conditions as set forth in the applicable agreements.

(2) As of June 30, 2023, this financing facility had no unused borrowing capacity as the outstanding borrowings were based on a static pool of mortgage loans.

(2) As of September 30, 2023, this financing facility had no unused borrowing capacity as the outstanding borrowings were based on a static pool of mortgage loans.

Angel Oak Mortgage REIT, Inc.

1 unchanged sentence

Due to Broker

The “Due to broker” account on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respective in the amounts of $ 390.4 million and $ 1.0 billion, relates to the purchase of Whole Pool Agency RMBS at quarter-end in the second and fourth quarters of 2023 and 2022, respectively.

The “Due to broker” account on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, in the amounts of $ 512.0 million and $ 1.0 billion,respectively, relates to the purchase of Whole Pool Agency RMBS at quarter-end in the third and fourth quarters of 2023 and 2022, respectively.

Purchases are accounted for on a trade date basis, and, at times, there may be a timing difference between the trade date and the settlement date of a trade.

The trade dates of these purchases were prior to the applicable quarter-end dates.

These trades settled on July 13, 2023 and January 13, 2023, respectively, at which time these assets were simultaneously sold.

The purchase transactions of these Whole Pool Agency RMBS are excluded from the condensed consolidated statements of cash flows as they are noncash transactions.

These trades settled on October 12, 2023 and January 13, 2023, respectively, at which time these assets were simultaneously sold.

The purchase transactions for the unsettled Whole Pool Agency RMBS are excluded from the condensed consolidated statements of cash flows as they are noncash transactions.

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 of margin collateral for securities sold under agreements to repurchase was $ 5.0 million and $ 3.9 million as of June 30, 2023 and December 31, 2022, respectively.

The following table summarizes certain characteristics of the Company’s repurchase agreements as of June 30, 2023 and December 31, 2022:

June 30, 2023

Restricted cash of margin collateral for securities sold under agreements to repurchase was $ 0.3 million and $ 3.9 million as of September 30, 2023 and December 31, 2022, respectively.

The following table summarizes certain characteristics of the Company’s repurchase agreements as of September 30, 2023 and December 31, 2022:

September 30, 2023

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

($ in thousands)

Treasury securities $ 297,928 5.15 % 14

AOMT RMBS (1)

$ 39,861 7.08 % 15

Treasury securities 148,240 5.40 % 11

Total $ 188,101 5.76 % 12

2 unchanged sentences

($ in thousands)

AOMT RMBS (1)

52,544 6.07 % 13

Total $ 52,544 6.07 % 13

(1) A portion of repurchase debt outstanding as of both June 30, 2023 and December 31, 2022 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

(1) A portion of repurchase debt outstanding as of both September 30, 2023 and December 31, 2022 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

See Note 5 — Investment Securities.

7 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 June 30, 2023 and December 31, 2022 included both To-Be-Announced (“TBA”) securities and interest rate futures contracts.

Restricted cash relating to interest rate futures margin collateral in interest rate futures accounts under the Company’s sole control as of June 30, 2023 and December 31, 2022 included $ 0.4 million and $ 1.1 million, respectively.

There was no TBA margin collateral required as of either June 30, 2023 or December 31, 2022.

Derivative instruments as of September 30, 2023 and December 31, 2022 included both To-Be-Announced (“TBA”) securities and interest rate futures contracts.

Restricted cash relating to interest rate futures margin collateral in interest rate futures accounts under the Company’s sole control as of September 30, 2023 and December 31, 2022 included $ 0.3 million and $ 1.1 million, respectively.

There was no TBA margin collateral required as of either September 30, 2023 or December 31, 2022.

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

7 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 gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS” for realized gains and losses, and “net unrealized gain (loss) gain on trading securities, mortgage loans, debt at fair value option, and derivative contracts” for unrealized gains and losses.

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 gains and losses, and “net unrealized gain (loss) on trading securities, mortgage loans, debt at fair value option, 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.

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of June 30, 2023 and December 31, 2022:

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of September 30, 2023 and December 31, 2022:

Notional Amounts

1 unchanged sentence

($ in thousands)

June 30, 2023 Interest rate futures 1,462 $ 1,055 $ — $ — $ 146,200

June 30, 2023 TBAs N/A $ 2,239 $ — $ — $ 402,400

September 30, 2023 Interest rate futures 1,099 $ 691 $ — $ — $ 109,900

September 30, 2023 TBAs N/A $ 7,166 $ — $ — $ 523,900

December 31, 2022 Interest rate futures 4,928 $ 2,211 $ — $ — $ 492,800

December 31, 2022 TBAs N/A $ 12,545 $ — $ — $ 1,041,700

The gains and 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, 2023 and June 30, 2022 are set forth as follows:

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, 2023 and September 30, 2022 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, 2023 Interest rate futures $ ( 2,604 ) $ 8,432

Three Months Ended June 30, 2023 TBAs $ ( 2,172 ) $ 3,746

Three Months Ended June 30, 2022 Interest rate futures $ 29,429 $ ( 13,413 )

Three Months Ended June 30, 2022 TBAs $ ( 964 ) $ ( 9,577 )

Three Months Ended September 30, 2023 Interest rate futures $ 2,828 $ ( 364 )

Three Months Ended September 30, 2023 TBAs $ 7,421 $ 4,927

Three Months Ended September 30, 2022 Interest rate futures $ 17,692 $ 6,027

Three Months Ended September 30, 2022 TBAs $ ( 10,147 ) $ 10,180

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

(in thousands)

Six Months Ended June 30, 2023 Interest rate futures $ 5,770 $ ( 2,052 )

Six Months Ended June 30, 2023 TBAs $ ( 2,522 ) $ ( 10,306 )

Six Months Ended June 30, 2022 Interest rate futures $ 49,113 $ 1,322

Six Months Ended June 30, 2022 TBAs $ 13,179 $ ( 10,686 )

Nine Months Ended September 30, 2023 Interest rate futures $ 8,599 $ ( 2,416 )

Nine Months Ended September 30, 2023 TBAs $ 4,900 $ ( 5,379 )

Nine Months Ended September 30, 2022 Interest rate futures $ 66,805 $ 7,349

Nine Months Ended September 30, 2022 TBAs $ 3,032 $ ( 506 )

Angel Oak Mortgage REIT, Inc.

9 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, 2023, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2022 included in the Annual Report on Form 10-K.

As of September 30, 2023, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2022 included in the Annual Report on Form 10-K.

Included in Note 11 — Fair Value Measurements to the Consolidated Financial Statements for the year ended December 31, 2022 included in the Annual Report on Form 10-K 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.

The fair value of cash, restricted cash, principal and interest receivable, other assets (excluding investment in majority-owned affiliate), notes payable, securities sold under agreements to repurchase, amounts due to broker and accrued expenses (including those payable to an affiliate and management fees payable to an affiliate), and interest payable approximate their carrying values due to the nature of these assets and liabilities.

The Company’s “investment in majority-owned affiliate” included in other assets (see Note 14 — Other Assets ) and a portion of “non-recourse securitization obligations, collateralized by residential mortgage loans” are held at amortized cost.

The fair value of cash, restricted cash, principal and interest receivable, other assets (excluding investments in majority-owned affiliates), notes payable, securities sold under agreements to repurchase, amounts due to broker and accrued expenses (including those payable to an affiliate and management fees payable to an affiliate), and interest payable approximate their carrying values due to the nature of these assets and liabilities.

The Company’s “investments in majority-owned affiliates” included in other assets (see Note 14 — Other Assets ) and a portion of “non-recourse securitization obligations, collateralized by residential mortgage loans” are held at amortized cost.

The fair value of these assets and liabilities is disclosed further below in the section titled “ Assets and Liabilities Held at Amortized Cost - Fair Value Disclosure ”.

1 unchanged sentence

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 June 30, 2023:

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of September 30, 2023:

Level 1 Level 2 Level 3 Total

11 unchanged sentences

U.S Treasury Securities 149,906 — — 149,906

Unrealized appreciation on futures contracts 1,055 — — 1,055

Unrealized appreciation on interest rate futures contracts

Unrealized appreciation on TBAs 7,166 — — 7,166

4 unchanged sentences

Total liabilities, at fair value $ — $ 727,174 $ — $ 727,174

(1) Non‑Agency RMBS held as of June 30, 2023 included both retained tranches of securitizations in which the Company participated and additional AOMT securities purchased in secondary market transactions.

All AOMT CMBS held as of June 30, 2023 were comprised of a small-balance commercial loan securitization issuance in which the Company participated.

(1) Non‑Agency RMBS held as of September 30, 2023 included both retained tranches of securitizations in which the Company participated and additional AOMT securities purchased in secondary market transactions.

All AOMT CMBS held as of September 30, 2023 were comprised of a small-balance commercial loan securitization issuance in which the Company participated.

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

9 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

The following table sets forth information regarding the Company’s significant Level 3 inputs as of June 30, 2023:

The following table sets forth information regarding the Company’s significant Level 3 inputs as of September 30, 2023:

Asset Fair Value Unobservable Input Range Average

11 unchanged sentences

To determine the fair value of the Company’s non-recourse securitization obligations, collateralized by residential mortgage loans, net, held at amortized cost, the Company uses the same method of valuation as described in the Annual Report on Form 10-K, Note 11 — Fair Value for both the portion of the obligation measured at fair value and the portion of the obligation held at amortized cost, for which fair value is disclosed below.

As of June 30, 2023, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.4 billion and $ 1.1 billion, respectively, a difference of approximately $ 274.7 million (which includes AOMT 2022-1, AOMT 2022-4, and AOMT 2023-4, which are marked to fair value;

As of September 30, 2023, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.4 billion and $ 1.1 billion, respectively, a difference of approximately $ 297.9 million (which includes AOMT 2022-1, AOMT 2022-4, and AOMT 2023-4, which are marked to fair value;

and AOMT 2021-7 and AOMT 2021-4, which are carried at amortized cost, as the fair value option was not elected at the time of the creation of these obligations).

7 unchanged sentences

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

Investment in Majority-Owned Affiliate

To determine the fair value of the Company’s investment in majority-owned affiliate, which is held at amortized cost and is included in “other assets”, the Company uses the prices of the underlying bonds in the investment to determine fair value.

Investments in Majority-Owned Affiliates

To determine the fair value of the Company’s investments in majority-owned affiliates, which are held at amortized cost and included in “other assets”, the Company uses the prices of the underlying bonds in the investments to determine fair value.

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

1 unchanged sentence

We believe that 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.

The amortized cost and fair value of this investment as of June 30, 2023 was approximately $ 11.5 million and $ 11.0 million, respectively.

The amortized cost and fair value of these investments as of September 30, 2023 was approximately $ 14.7 million and $ 13.3 million, respectively.

Angel Oak Mortgage REIT, Inc.

13 unchanged sentences

— 6,111 — 6,111

Unrealized appreciation on futures contracts 2,211 — — 2,211

Unrealized appreciation on interest rate futures contracts

2,211 — — 2,211

Unrealized appreciation on TBAs 12,545 — — 12,545

31 unchanged sentences

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 Company purchases the mortgage loans on a servicing retained basis.

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the six month period ended June 30, 2023 and 12 month period ended December 31, 2022:

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

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the nine month period ended September 30, 2023 and 12 month period ended December 31, 2022:

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

1 unchanged sentence

($ in thousands)

June 30, 2023 $ 11,515 38 563

September 30, 2023 $ 89,673 232 593

December 31, 2022 $ 567,324 1,141 845

(1) Excludes loans held in consolidated securitizations.

(1) Excludes loans held in residential mortgage loans in securitization trust, at fair value

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Commercial Mortgage Loan Purchases

The Company has commercial loan purchase agreements with various affiliates of the Company.

The Company did not purchase any commercial loans in either the six month period ended June 30, 2023 or the 12 month period ended December 31, 2022.

Securitization Transactions and Majority-Owned Affiliate

5 unchanged sentences

Under the Management Agreement, the Manager is also entitled to an incentive fee, which is calculated and payable in cash with respect to each calendar quarter (or part thereof that the Management Agreement is in effect) in arrears in an amount, not less than zero , equal to the excess of (1) the product of (a) 15 % and (b) the excess of (i) the Company’s Distributable Earnings (as defined in the Management Agreement) for the previous 12-month period, over (ii) the product of (A) the Company’s Equity (as defined in the Management Agreement) in the previous 12-month period, and (B) 8 % per annum, over (2) the sum of any incentive fee earned by the Manager with respect to the first three calendar quarters of such previous 12-month period.

To date, the incentive fee has not been earned.

To date, the incentive fee has not been earned and no expense recognized in the Company’s financial statements.

Operating Expense Reimbursements

3 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, 2023, the Company was not aware of any legal claims that could materially impact its financial condition.

As of June 30, 2023, the Company had no unfunded commitments.

As of September 30, 2023, the Company was not aware of any legal claims that could materially impact its financial condition.

As of September 30, 2023, the Company had no unfunded commitments.

The Company has a loan release obligation on the facility with Global Investment Bank 3 that is eligible for up to a 100 % reduction based on certain criteria that may extended beyond the current term of the financing facility.

The maximum potential liability is $ 0.7 million, which has not been recorded in the condensed consolidated financial statements as the actual liability is not currently determinable.

The Company has entered into forward purchase commitments with counterparties whereby the Company commits to purchasing residential mortgage loans at a particular price, provided the residential mortgage loans close with the counterparties.

As of September 30, 2023, the Company has a total purchase commitments of $ 113 million related to both Angel Oak Mortgage Lending and third parties.

These commitments represent off-balance sheet risk where the Company may be required to extend credit.

Accumulated Other Comprehensive Income/(Loss)

The following table sets forth the net unrealized gain/(loss) on AFS securities for the three months ended June 30, 2023 and 2022, which is the sole component of the changes in the Company’s Accumulated Other Comprehensive Income/(Loss) (“AOCI”) for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

The following table sets forth the net unrealized gain/(loss) on AFS securities for the three months ended September 30, 2023 and 2022, which is the s ole component of the changes in the Company’s Accumulated Other Comprehensive Income/(Loss) (“AOCI”) for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(in thousands)

2 unchanged sentences

AOCI balance, end of period $ ( 8,172 ) $ ( 8,979 )

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

(in thousands)

2 unchanged sentences

AOCI balance, end of period $ ( 8,172 ) $ ( 8,979 )

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the detail of other assets included in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table sets forth the detail of other assets included in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

($ in thousands)

Investment in Majority-Owned Affiliate $ 11,510 $ —

Investments in Majority-Owned Affiliates

Deferred tax asset 3,457 3,457

2 unchanged sentences

Total other assets $ 20,140 $ 4,767

Investment in Majority-Owned Affiliate (“MOA”)

In the first quarter of 2023, the Company participated in a securitization transaction, AOMT 2023-1, which involved a MOA in which the Company received a 41.21 % investment, proportional to its share of the unpaid principal balance of the residential whole loans contributed to the securitization.

The purpose of the MOA is to retain and hold risk retention bonds issued by the securitization trust.

The MOA is an LLC and is accounted for as an equity method investment and held at amortized cost.

Investments in Majority-Owned Affiliates (“MOA”)

In the first and third quarters of 2023, the Company participated in securitization transactions AOMT 2023-1 and AOMT 2023-5, which involved MOAs in which the Company received a 41.21 % investment and 34.42 % investment, respectively, in each case proportional to its share of the unpaid principal balance of the residential whole loans contributed to the securitizations.

The purpose of the MOAs is to retain and hold risk retention bonds issued by the securitization trust.

Each MOA is a limited liability company and is accounted for as an equity method investment and held at amortized cost.

The investment will be tested for impairment at least annually utilizing undiscounted cash flows of the underlying risk retention bonds.

1 unchanged sentence

Equity and Earnings per Share (“EPS”)

In the calculations of basic and diluted earnings per common share for the three and six month periods ended June 30, 2023 and 2022, the Company included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights.

In the calculations of basic and diluted earnings per common share for the three and nine month periods ended September 30, 2023 and 2022, the Company included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights.

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 the three and six month periods ended June 30, 2023, there were 165,473 anti-dilutive outstanding restricted stock awards and 49,370 performance shares, although the market-based “total stockholder return” conditions for performance share units had not been achieved and thus these units were not included in the diluted weighted average common shares outstanding.

For the three and six month periods ended June 30, 2022, there were 362,536 outstanding restricted stock awards that were anti-dilutive and thus not included in the diluted weighted average common shares outstanding.

There were no market-based performance share units outstanding as of June 30, 2022.

For the three and nine month periods ended September 30, 2023, there were 186,645 anti-dilutive outstanding restricted stock awards and 95,832 performance shares, although the market-based “total stockholder return” conditions for performance share units had not been achieved and thus these units were not included in the diluted weighted average common shares outstanding.

For the three and nine month periods ended September 30, 2022, there were 425,461 outstanding restricted stock awards that were anti-dilutive and thus not included in the diluted weighted average common shares outstanding.

There were 56,978 market-based performance share units outstanding as of September 30, 2022.

Angel Oak Mortgage REIT, 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 months ended June 30, 2023 and 2022:

June 30, 2023 June 30, 2022

The following table sets forth the calculation of basic and diluted earnings per share for the three months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

(in thousands, except share and per share data)

13 unchanged sentences

Diluted earnings (loss) per common share $ 0.33 $ ( 3.40 )

The following table sets forth the calculation of basic and diluted earnings per share for the six months ended June 30, 2023 and 2022:

June 30, 2023 June 30, 2022

The following table sets forth the calculation of basic and diluted earnings per share for the nine months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

(in thousands, except share and per share data)

14 unchanged sentences

Subsequent Events

On July 3, 2023, a commercial mortgage loan representing $ 4.3 million in principal balance was sold for $ 4.6 million representing the full outstanding principal balance and carrying amount, and accrued costs and fees.

On July 25, 2023, the Company renewed its loan financing facility with Multinational Bank 1 in accordance with the mechanism for six-month renewal periods provided for in the original Master Repurchase Agreement with Multinational Bank 1, dated April 13, 2022.

This loan financing facility has been extended to January 25, 2024 with an updated interest rate pricing spread of 2.10 %.

On August 8, 2023, the Company declared a dividend of $ 0.32 per share of common stock, to be paid on August 31, 2023 to common stockholders of record as of August 22, 2023.

On November 7, 2023, we converted our loan financing facility with Global Investment Bank 3 from static pool financing to a revolving facility with mark to market features.

The amended facility has a maximum borrowing capacity of $ 200 million with a base interest rate pricing spread of 180 basis points plus a 20 basis points index spread adjustment and an expiration date of November 7, 2024.

On November 8, 2023, the Company declared a dividend of $ 0.32 per share of common stock, to be paid on November 30, 2023 to common stockholders of record as of November 22, 2023.

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