What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 217 added, 335 removed, 442 unchanged (56% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Residential mortgage loans - at fair value $ 368,446 $ 380,040

Residential mortgage loans in securitization trusts - at fair value 1,201,210 1,221,067

Commercial mortgage loans - at fair value 5,219 9,458

RMBS - at fair value 445,136 472,058

CMBS - at fair value 6,338 6,111

Treasury securities - at fair value 149,805 149,927

2 unchanged sentences

Principal and interest receivable 10,591 7,501

Unrealized appreciation on TBAs and interest rate futures contracts - at fair value 7,857 14,756

Other assets 34,547 32,922

4 unchanged sentences

Securities sold under agreements to repurchase 193,493 193,656

Unrealized depreciation on TBAs and interest rate futures contracts - at fair value 889 1,334

Due to broker 359,892 391,964

2 unchanged sentences

Interest payable 800 820

Income taxes payable 1,528 1,241

Management fee payable to affiliate 10 1,393

3 unchanged sentences

Common stock, $ 0.01 par value.

As of September 30, 2023:

As of March 31, 2024:

350,000,000 shares authorized, 24,965,274 shares issued and outstanding.

2 unchanged sentences

Additional paid-in capital 477,698 477,068

Accumulated other comprehensive loss ( 8,172 ) ( 21,127 )

Accumulated other comprehensive income (loss) ( 3,272 ) ( 4,975 )

Retained earnings (deficit) ( 211,351 ) ( 216,236 )

5 unchanged sentences

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2024 March 31, 2023

INTEREST INCOME, NET

4 unchanged sentences

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ ( 1,422 ) $ ( 10,843 )

Net unrealized gain (loss) on trading securities, mortgage loans, debt at fair value option (see Note 2), and derivative contracts 17,299 ( 100,855 ) 27,868 ( 255,021 )

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts 10,684 10,190

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ 9,262 $ ( 653 )

7 unchanged sentences

INCOME (LOSS) BEFORE INCOME TAXES $ 13,161 $ 530

Income tax expense (benefit) — — 781 ( 3,457 )

NET INCOME (LOSS) $ 8,273 $ ( 83,349 ) $ 5,115 $ ( 179,035 )

Preferred dividends — ( 4 ) — ( 11 )

Income tax expense 287 —

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS $ 12,874 $ 530

8 unchanged sentences

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(in thousands)

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

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

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

Stockholder's equity as of December 31, 2023 $ 249 $ 477,068 $ ( 4,975 ) $ ( 216,236 ) $ 256,106

Dividends paid on common stock ($ 0.32 per share)

2 unchanged sentences

Unrealized gain on RMBS and CMBS $ — $ — $ 1,703 $ — 1,703

Net income (loss) — — — 8,273 8,273

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 June 30, 2022

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

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

Stock compensation

— — 3,340 — — 3,340

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

Unrealized gain on RMBS and CMBS — — — ( 10,227 ) — ( 10,227 )

Dividends paid on common stock — — — — ( 11,221 ) ( 11,221 )

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

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.

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

Nine Months Ended September 30, 2023

Net income $ — $ — $ — $ 12,874 12,874

Stockholders' equity as of March 31, 2024 $ 249 $ 477,698 $ ( 3,272 ) $ ( 211,351 ) $ 263,324

Three Months Ended March 31, 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

Stock compensation

— 1,195 — — 1,195

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

Dividends paid on common stock ($ 0.32 per share)

— — — ( 7,976 ) ( 7,976 )

Net income (loss) — — — 5,115 5,115

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

Stockholders’ equity as of December 31, 2021 $ 101 $ 252 $ 476,510 $ 3,000 $ 11,527 491,390

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

Stock compensation — 541 — — 541

— — 5,179 — — 5,179

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

Unrealized loss on RMBS and CMBS — — — ( 11,979 ) — ( 11,979 )

Dividends paid on common stock — — — — ( 33,725 ) ( 33,725 )

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

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

Unrealized gain on RMBS and CMBS — — 14,804 — 14,804

Net income — — — 530 530

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

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

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ 12,874 $ 530

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

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 1,422 10,843

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts ( 10,684 ) ( 10,190 )

Accretion of discount on U.S.

Treasury securities ( 1,201 ) —

Amortization of debt issuance costs 14 367

1 unchanged sentence

Accretion of non-recourse securitized obligation discount 1,184 —

Stock compensation

Accretion of discount on U.S.

Treasury securities ( 224 ) ( 181 )

Non-cash equity compensation 630 541

Net change in:

Purchases of residential mortgage loans from non-affiliates ( 5,469 ) ( 427,940 )

Purchases of residential mortgage loans from affiliates ( 32,036 ) —

Principal payments on residential mortgage loans in securitization trusts 74,179 177,846

Purchases of residential mortgage loans from non-affiliates ( 12,283 ) —

Sale of residential mortgage loans into affiliate’s securitization trust 45,994 229,279

Principal payments on residential mortgage loans 11,177 18,328

Collateral due to counterparties — ( 200 )

Principal payments on residential mortgage loans in securitization trusts 22,794 18,916

Margin received from interest rate futures contracts and TBAs 3,855 6,662

Sale of residential mortgage loans into affiliate’s securitization trust 313,438 —

Principal and interest receivable on residential mortgage loans ( 3,093 ) 3,852

Other assets ( 585 ) ( 11 )

Management fee payable to affiliate ( 1,383 ) ( 448 )

Accrued expenses 134 ( 636 )

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

Accrued expenses payable to affiliate ( 491 ) ( 822 )

Income tax expense 287 —

Interest payable ( 21 ) ( 1,270 )

Management fee payable to affiliate

Income tax expense (benefit) 781 ( 3,457 )

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 40,222 276,606

3 unchanged sentences

(in thousands)

Nine Months Ended

September 30, 2023 September 30, 2022

CASH FLOWS FROM INVESTING ACTIVITIES

5 unchanged sentences

Treasury securities ( 149,741 ) ( 399,456 )

Investments in majority-owned affiliates ( 1,736 ) ( 11,466 )

Principal payments on RMBS and CMBS securities 439 101

Maturity of U.S.

Treasury securities 150,000 —

Principal payments on RMBS 816 13,219

Purchases of commercial mortgage loans — ( 3,180 )

Sale of commercial mortgage loans 4,326 11,026

Principal payments on commercial mortgage loans 12 10

2 unchanged sentences

Dividends paid to common stockholders ( 7,989 ) ( 7,976 )

Dividends paid to preferred shareholders — ( 11 )

Repurchases of common stock — ( 6,862 )

Principal payments on non-recourse securitization obligation ( 22,794 ) ( 18,916 )

Cash paid for debt issuance costs ( 125 ) —

Proceeds from securitization 233,319 675,360

Net proceeds from (payments on) securities sold under agreements to repurchase 135,557 ( 543,727 )

Net proceeds from (repurchases of) securities sold under agreements to repurchase

( 163 ) 389,670

Net proceeds from (payments on) notes payable ( 6,608 ) ( 200,618 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 37,679 ) 162,160

( 171,318 ) ( 33,620 )

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

CASH AND RESTRICTED CASH, beginning of period (1)

CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 2,276 ) 17,756

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period

44,496 39,861

CASH AND RESTRICTED CASH, end of period (1)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period

$ 42,220 $ 57,617

1 unchanged sentence

Cash paid during the period for interest $ 15,435 $ 18,210

(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.

9 unchanged sentences

The Company is a Maryland corporation incorporated on March 20, 2018.

The Company achieves certain of its investment objectives by investing a portion of its assets in its wholly‑owned taxable REIT subsidiary, Angel Oak Mortgage REIT TRS, LLC (“AOMR TRS”), a Delaware limited liability company formed on March 21, 2018, which invests its assets in Angel Oak Mortgage Fund TRS, a Delaware statutory trust formed on June 15, 2018.

The Company achieves certain of its investment objectives by investing a portion of its assets in its wholly‑owned taxable REIT subsidiary, Angel Oak Mortgage REIT TRS, LLC, a Delaware limited liability company formed on March 21, 2018, which invests its assets in Angel Oak Mortgage Fund TRS, a Delaware statutory trust formed on June 15, 2018.

The Company is traded on the New York Stock Exchange under the ticker symbol AOMR.

4 unchanged sentences

The Company is externally managed and advised by Falcons I, LLC (the “Manager”), a Securities and Exchange Commission-registered investment adviser and an affiliate of Angel Oak Capital Advisors, LLC (“Angel Oak Capital”).

The Company has elected to be taxed as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2019.

The Company has elected to be taxed as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2019.

Interim Financial Statements

13 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

New Accounting Standards and Interpretations

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 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.

See Note 14 — Other Assets .

Certain comparative period amounts have been reclassified for consistency with current period presentation.

Certain comparative period amounts in the condensed consolidated financial statements have been reclassified for consistency with current period presentation.

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 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.

Specifically, certain cash flows previously presented as cash flows from operating activities on the Consolidated Statements of Cash Flows for the three months-ended March 31, 2023, have been reclassified to cash flows from investing activities as Purchases of investments in majority-owned affiliates.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”).

There were no recent ASUs that are expected to have a significant impact on the Company's condensed consolidated financial statements when adopted or had a significant impact on the Company's condensed consolidated financial statements upon adoption.

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 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.

The Company classifies its investments in debt securities in accordance with Accounting Standards Codification 320 - Investments - Debt Securities (“ASC 320”) as “trading,” “available for sale,” or “held to maturity”.

Historically, the Company had classified all of its investments in debt securities as available for sale (“AFS”).

In the first quarter of 2023, the Company began designating its purchases of Freddie Mac and Fannie Mae-issued whole pool agency residential mortgage-backed securities (“Whole Pool Agency RMBS”) and purchases of U.S.

Treasury securities as trading securities.

Variable Interest Entities

1 unchanged sentence

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

Below are descriptions of VIEs for which the Company is and is not the primary beneficiary.

VIEs for Which the Company is the Primary Beneficiary

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 has the power to direct the activities that most significantly impact the VIE’s economic performance.

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 September 30, 2023 and December 31, 2022:

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

September 30, 2023 December 31, 2022

(in thousands)

Residential mortgage loans in securitization trusts - cost $ 1,409,089 $ 1,193,879

Fair value adjustment ( 214,970 ) ( 166,437 )

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

Liabilities (1) :

Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, amortized cost $ 434,227 $ 474,070

debt issuance costs capitalized ( 105 ) ( 1,145 )

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, net of discount, subject to fair value adjustment

$ 836,130 $ 611,114

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

Non-recourse securitization obligations, collateralized by residential mortgage loans - at fair value, net $ 727,174 $ 530,560

Total non-recourse securitization obligations, collateralized by residential mortgage loans, net $ 1,161,296 $ 1,003,485

(1) Debt issuance costs for non-recourse securitization obligations electing the fair value option are recorded to expense upon issuance of the securitization.

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 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

The following table summarizes the key details of the Company’s loan securitization transactions currently outstanding as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

($ in thousands)

Interest income $ 15,733 $ 12,759 $ 41,213 $ 34,646

Interest expense, non-recourse liabilities (1)

( 10,956 ) ( 6,983 ) ( 26,121 ) ( 17,245 )

Net interest income $ 4,777 $ 5,776 $ 15,092 $ 17,401

Net unrealized gain (loss) on mortgage loans in securitization trusts - at fair value ( 16,863 ) ( 73,178 ) ( 9,404 ) ( 152,931 )

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

Securitization costs

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

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

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.

Aggregate unpaid principal balance of residential whole loans sold $ 2,533,008 $ 2,578,595

Face amount of Non-recourse securitization obligation issued by the VIE and purchased by third-party investors 1,619,051 1,619,051

Outstanding amount of Non-recourse securitization obligation, at carrying value 1,198,457 1,220,067

Fair value adjustment for the portion of Non-recourse securitization obligation, at fair value option ( 51,816 ) ( 50,912 )

Outstanding amount of Non-recourse securitization obligation, total $ 1,146,641 $ 1,169,154

Weighted average fixed rate for Non-recourse securitization obligation issued 2.91 % 2.91 %

Face amount of Senior Support Certificates received by the Company $ 91,330 $ 91,330

Cash received $ 194,746 $ 194,746

During the three months ended March 31, 2024, the Company did not issue and retain bonds on our consolidated balance sheets for any securitization transaction for which the Company was the primary beneficiary.

As of March 31, 2024 and December 31, 2023, as a result of the transactions described above, securitized loans with outstanding principal balance of approximately $ 1.3 billion and $ 1.3 billion are included in “Residential mortgage loans in securitization trusts” on the Company’s consolidated balance sheets, respectively.

As of March 31, 2024 and December 31, 2023, the aggregate carrying value of sold bonds issued by consolidated VIEs was $ 1.2 billion and $ 1.2 billion.

These sold bonds are disclosed as “Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts” on the Company’s consolidated balance sheets.

The holders of the securitized debt have no recourse to the general credit of the Company, but the Company does have the obligation, under certain circumstances, to repurchase assets from the VIE upon the breach of certain representations and warranties with respect to the residential

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

whole loans sold to the VIE.

In the absence of such a breach, the Company has no obligation to provide any other explicit or implicit support to any VIE.

The Company concluded that the entities created to facilitate the loan securitization transactions are VIEs.

The Company completed an analysis of whether each VIE created to facilitate the securitization transactions should be consolidated by the Company, based on consideration of its involvement in each VIE and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of each VIE.

In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:

• whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE;

• whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.

Based on its evaluation of the factors discussed above, including its involvement in the purpose and design of the entity, the Company determined that it was required to consolidate each VIE created to facilitate the loan securitization transactions.

VIEs for Which the Company is Not the Primary Beneficiary

4 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 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.

Notes to the Condensed Consolidated Financial Statements

The securities received in the securitization transactions for which we are not the primary beneficiary were classified as “available for sale” upon receipt and are included in “RMBS - at fair value” and “Other Assets” on the consolidated balance sheets as of March 31, 2024 and December 31, 2023, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9 — Fair Value Measurements .

See also Note 4 — Investment Securities , for the fair value of AOMT securities held by the Company, and Note 13 - Other Assets , for investments in majority-owned affiliates (“MOAs”), as of March 31, 2024 and December 31, 2023 that were retained by the Company as a result of these securitization transactions.

Residential Mortgage Loans

Residential mortgage loans are mortgage loans on residences located in various states with concentrations in California, Florida, Texas, and Georgia.

Residential mortgage loans are measured at fair value.

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

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 contractual maturity of the Company’s residential mortgage loan portfolio as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

($ in thousands)

5 unchanged sentences

Weighted average interest rate 7.11 % 6.78 %

Weighted average remaining maturity (years) 29 30

At times, various forms of margin maintenance on residential mortgage loans may be required by certain financing facility counterparties.

Weighted average contractual maturity (years)

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

At times, various forms of margin maintenance may be required by certain financing facility counterparties.

See Note 5 — 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 September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

The following table sets forth data regarding the number of consumer mortgage loans secured by residential real property ninety (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 March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

($ in thousands)

5 unchanged sentences

Unpaid principal balance of loans in foreclosure $ 2,829 $ 1,889

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Commercial Mortgage Loans

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, 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)

Cost $ 5,602 $ 9,928

Unpaid principal balance $ 5,606 $ 9,928

Change in fair value ( 387 ) ( 470 )

Fair value $ 5,219 $ 9,458

Weighted average interest rate 6.24 % 7.03 %

Weighted average remaining maturity (years) 12 8

The net discount on commercial mortgage loans was fully amortized 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.

Notes to the Condensed Consolidated Financial Statements

Investment Securities

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.

As of March 31, 2024, investment securities were comprised of:

(i) non‑agency RMBS (“AOMT RMBS”) and (ii) Freddie Mac and Fannie Mae whole pool agency RMBS (“Whole Pool Agency RMBS”, and together with AOMT RMBS, “RMBS”), and (iii) U.S.

Treasury securities.

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 AOMT CMBS at cost as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Treasury securities held by the Company as of March 31, 2024 subsequently matured on April 9, 2024.

The following table sets forth a summary of RMBS at cost as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

(in thousands)

1 unchanged sentence

Whole Pool Agency RMBS $ 359,892 $ 391,964

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 September 30, 2023 and December 31, 2022:

The following tables sets forth certain information about the Company’s investments in RMBS at fair value as of March 31, 2024 and December 31, 2023:

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

September 30, 2023:

March 31, 2024:

(in thousands)

11 unchanged sentences

$ 445,136 $ ( 44,501 ) $ 400,635

Subordinate $ 2,933 $ — $ 2,933

Interest Only/Excess 3,405 — 3,405

Total AOMT CMBS $ 6,338 $ — $ 6,338

(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.

These bonds have a fair value of $ 122.7 million.

The Company reflects the underlying assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its condensed consolidated balance sheets rather than the bonds, due to the accounting rules around this type of securitization.

(1) AOMT RMBS held as of March 31, 2024 included both retained tranches of AOMT securitizations in which the Company participated and additional AOMT securities purchased in secondary market transactions.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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

December 31, 2022:

(2) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

These bonds, with a fair value of $ 119.8 million, are not reflected in the consolidated balance sheets, as the Company reflects the assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its consolidated balance sheets.

(3) The whole pool RMBS presented as of March 31, 2024 were purchased from a broker to whom the Company owes approximately $ 360 million, payable upon the settlement date of the trade.

See Note 6 - Due to Broker .

December 31, 2023 Real Estate Securities at Fair Value Securities Sold Under Agreements to Repurchase Allocated Capital

(in thousands)

11 unchanged sentences

Total RMBS $ 472,058 $ ( 44,643 ) $ 427,415

Subordinate $ 2,901 $ — $ 2,901

Interest Only/Excess 3,210 — 3,210

Total AOMT CMBS $ 6,111 $ — $ 6,111

(1) AOMT RMBS held as of December 31, 2022 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.

These bonds have a fair value of $ 110.5 million.

(1) AOMT RMBS held as of December 31, 2023 included both retained tranches of AOMT securitizations in which the Company participated and additional AOMT securities purchased in secondary market transactions.

(2) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

These bonds, with a fair value of $ 124.1 million, are not reflected in the consolidated balance sheets, as the Company reflects the assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its consolidated balance sheets.

(3) The whole pool RMBS presented as of December 31, 2023 were purchased from a broker to whom the Company owes approximately $ 392 million, payable upon the settlement date of the trade.

See Note 6 - Due to Broker .

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

Treasury securities as of

September 30, 2023 (1) :

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

Treasury securities as of March 31, 2024 and December 31, 2023:

Date Face Value Unamortized Discount, net Amortized Cost Unrealized Gain/(Loss)

Fair Value Net Effective Yield

($ in thousands)

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

(1) There were no U.S.

Treasury securities held as of December 31, 2022.

March 31, 2024 $ 150,000 $ 195 $ 149,805 $ — $ 149,805 5.19 %

December 31, 2023 $ 150,000 $ 159 $ 149,841 $ 86 $ 149,927 5.30 %

Notes Payable

The Company has the ability to finance residential and commercial whole loans utilizing repurchase agreements with various counterparties (“notes payable”), 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.

Some agreements include upfront fees, fees on unused balances, covenants and concentration limits on types of collateral pledged.

Each of these vary based on the counterparty.

One of these agreements, as noted below, is a “static pool” financing facility, where the lender has agreed to finance a certain pool of loans contributed to such financing facility, which does not allow for any revolving financing terms.

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

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.

As of December 31, 2022, cash collateral for margin maintenance requirements by whole loan financing counterparties was $ 5.6 million within “restricted cash” on the condensed consolidated balance sheet, of which $ 3.8 million was held in a segregated restricted cash account and

Some agreements include upfront fees, fees on unused balances, covenants and concentration limits on types of collateral pledged which vary based on the counterparty.

Occasionally, a lender may require certain margin collateral to be posted on a warehouse line of credit.

There was no margin collateral required as of March 31, 2024 or December 31, 2023.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

released to the Company by the applicable lender subsequent to December 31, 2022;

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 September 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 March 31, 2024 and December 31, 2023:

Spread Drawn Amount

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

Note Payable Base Interest Rate March 31, 2024 December 31, 2023

($ in thousands)

1 unchanged sentence

Average Daily SOFR 2.00 % - 2.10 %

$ 188,918 $ 206,183

Global Investment Bank 2 (2)

1 month SOFR 2.20 % - 3.45 %

1 month Term SOFR

2.10 % - 3.45 %

Global Investment Bank 3 (3)

6 unchanged sentences

Total $ 284,002 $ 290,610

(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 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 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.

The master repurchase agreements were set to expire on January 4, 2023, subject to a one-time option to extend for three months, which the Company did not utilize.

The Company repaid this financing facility in full on January 4, 2023.

The Company held restricted cash pertaining to this lender’s cash collateral requirements included in “restricted cash” on the Company’s condensed consolidated balance sheet as of December 31, 2022, as described above, which was released on January 4, 2023.

(1) On March 25, 2024, this financing facility was extended through September 25, 2024 in accordance with the terms of the agreement, which contemplates six-month renewals, with an interest rate pricing spread of 2.00 %.

Prior to this extension the interest rate pricing spread was up to 2.10 %.

(2) On March 28, 2024 the amended and restated Master Repurchase Agreement was terminated and replaced with a new $ 250 million Master Repurchase Agreement which has a termination date of March 27, 2026.

Further, the interest rate pricing margin will range from 2.10 % to 3.35 %, based on loan status, dwell time and other factors.

Prior to this extension the interest rate pricing spread was up to 3.45 %.

(3) This financing facility has a termination date of November 7, 2024.

(4) These master repurchase agreements expired by their terms on January 4, 2023.

(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 September 30, 2023:

The following table sets forth the total unused borrowing capacity of each financing line as of March 31, 2024:

Note Payable Borrowing Capacity Balance Outstanding Available Financing

7 unchanged sentences

Total $ 1,050,000 $ 284,002 $ 765,998

(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 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.

Notes to the Condensed Consolidated Financial Statements

Although available financing is uncommitted for each of these lines of credit, 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.

Due to Broker

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 “Due to broker” account on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively, in the amounts of $ 360 million and $ 392 million relates to the purchase of Whole Pool Agency RMBS at quarter-end in the first and fourth quarters of 2024 and 2023, respectively.

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

These trades settled on April 11, 2024 and January 16, 2024, 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 until settled 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 $ 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

Restricted cash of margin collateral for securities sold under agreements to repurchase was $ 0.3 million and $ 0.3 million as of March 31, 2024 and December 31, 2023, respectively.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table summarizes certain characteristics of the Company’s repurchase agreements as of March 31, 2024 and December 31, 2023:

March 31, 2024

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

($ in thousands)

Treasury securities $ 148,992 5.50 % 9

AOMT RMBS (1)

$ 44,501 6.96 % 17

Treasury securities 148,240 5.40 % 11

Total $ 193,493 5.84 % 11

1 unchanged sentence

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

($ in thousands)

Treasury Bills $ 149,013 5.57 % 10

AOMT RMBS (1)

1 unchanged sentence

Total $ 193,656 5.91 % 11

(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).

(1) A portion of repurchase debt outstanding as of both March 31, 2024 and December 31, 2023 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).

See Note 4 - Investment Securities.

The repurchase debt against the U.S.

Treasury securities was repaid in full upon the maturity of the U.S.

Treasury securities.

Although the transactions under repurchase agreements represent committed borrowings until maturity, the lenders retain the right to mark the underlying collateral at fair value.

3 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, 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.

Derivative instruments as of March 31, 2024 and December 31, 2023 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 March 31, 2024 and December 31, 2023 included $ 2.4 million and $ 2.5 million, respectively.

There was no TBA margin collateral required as of either March 31, 2024 or December 31, 2023.

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

1 unchanged sentence

The Company’s credit risk with respect to economic hedges is the risk of default on its investments that result from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

The Company may at times hold TBAs in order to mitigate its interest rate risk on certain specified mortgage-backed securities.

2 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) 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, portion of 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 September 30, 2023 and December 31, 2022:

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of March 31, 2024 and December 31, 2023:

Notional Amounts

1 unchanged sentence

($ in thousands)

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

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

March 31, 2024 Interest rate futures 1,714 $ — $ 636 $ — $ 171,400

March 31, 2024 TBAs N/A $ — $ 253 $ — $ 372,000

December 31, 2023 Interest rate futures 1,489 $ — $ 840 $ — $ 148,900

December 31, 2023 TBAs N/A $ — $ 494 $ — $ 386,700

The gains and losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three and 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 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

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, 2024 and March 31, 2023 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)

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.

Notes to the Condensed Consolidated Financial Statements

Three Months Ended March 31, 2024 Interest rate futures $ 3,549 $ 204

Three Months Ended March 31, 2024 TBAs $ 306 $ 241

Three Months Ended March 31, 2023 Interest rate futures $ 8,374 $ ( 9,121 )

Three Months Ended March 31, 2023 TBAs $ ( 350 ) $ ( 14,052 )

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, 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 March 31, 2024, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2023 included in the Annual Report on Form 10-K.

Included in Note 10 — Fair Value Measurements to the Consolidated Financial Statements for the year ended December 31, 2023 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 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 fair value of cash, restricted cash, principal and interest receivable, other assets (excluding investments in MOA’s), 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 13 — Other Assets ) and a portion of “non-recourse securitization obligations, collateralized by residential mortgage loans” are held at amortized cost.

2 unchanged sentences

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 September 30, 2023:

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of March 31, 2024:

Level 1 Level 2 Level 3 Total

3 unchanged sentences

Residential mortgage loans in securitization trusts — 1,186,339 14,871 1,201,210

Commercial mortgage loans — 5,219 — 5,219

Investments in securities

Non-Agency RMBS (1)

AOMT RMBS (1)

— 84,761 — 84,761

Whole Pool Agency RMBS — 360,376 — 360,376

AOMT CMBS (1)

— 6,338 — 6,338

U.S Treasury Securities 149,805 — — 149,805

Unrealized appreciation on interest rate futures contracts

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

Other Assets, at fair value (2)

— 11,782 — 11,782

Total assets, at fair value $ 149,805 $ 2,005,153 $ 21,422 $ 2,176,380

2 unchanged sentences

$ — $ 728,082 $ — $ 728,082

Unrealized depreciation on futures contracts ( 636 ) — — ( 636 )

Unrealized depreciation on TBAs ( 253 ) — — ( 253 )

Total liabilities, at fair value $ ( 889 ) $ 728,082 $ — $ 727,193

(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.

(1) AOMT RMBS held as of March 31, 2024 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.

(2) Includes Commercial Loans and AOMT commercial mortgage backed securities (“CMBS)” assets.

All AOMT CMBS held as of March 31, 2024 was comprised of a small-balance commercial loan securitization issuance in which the Company participated.

(3) 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 September 30, 2023:

The following table sets forth information regarding the Company’s significant Level 3 inputs as of March 31, 2024:

Asset Fair Value Unobservable Input Range Average

10 unchanged sentences

Portion of Non-Recourse Securitization Obligations, Collateralized by Residential Mortgage Loans — Held at Amortized Cost

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 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;

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 10 — Fair Value Measurements 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 March 31, 2024, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.15 billion and $ 1.07 billion, respectively, a difference of approximately $ 86.1 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).

The fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 121.4 million less than the amortized cost.

The difference between the amortized cost and fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 80.6 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.

As of December 31, 2022, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.1 billion and $ 914.3 million, respectively, a difference of approximately $ 170.9 million (which includes AOMT 2022-1 and AOMT 2022-4, which are marked to fair value;

As of December 31, 2023, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.24 billion and $ 1.09 billion, respectively, a difference of approximately $ 247.8 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).

The difference between the amortized cost and fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 90.3 million.

The fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 81.9 million less than the amortized cost.

4 unchanged sentences

PriceServe 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 discount margin/yield, recovery assumptions, tranche type, collateral coupon, age and loan size, and other inputs specific to each security.

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 these investments as of September 30, 2023 was approximately $ 14.7 million and $ 13.3 million, respectively.

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 consolidated financial statements.

The amortized cost and fair value of this investment as of March 31, 2024 was approximately $ 18.0 million and $ 22.8 million, respectively.

The amortized cost and fair value of these investments as of December 31, 2023 was approximately $ 16.2 million and $ 16.7 million, respectively.

Angel Oak Mortgage REIT, Inc.

6 unchanged sentences

Residential mortgage loans in securitization trusts — 1,207,804 13,263 1,221,067

Commercial mortgage loans — 9,458 — 9,458

Investments in securities

Non-Agency RMBS (1)

AOMT RMBS (1)

— 79,696 — 79,696

Whole Pool Agency RMBS — 392,362 — 392,362

AOMT CMBS (1)

Treasury Securities.

149,927 — — 149,927

Unrealized appreciation on interest rate futures contracts

Other Assets, at fair value (2)

— 32,923 — 32,923

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

Total assets, at fair value $ 149,927 $ 2,086,789 $ 19,299 $ 2,256,015

2 unchanged sentences

$ — $ 743,189 $ — $ 743,189

Unrealized depreciation on futures contracts

( 840 ) — — ( 840 )

Unrealized depreciation on TBAs

( 494 ) — — ( 494 )

Total liabilities, at fair value $ ( 1,334 ) $ 743,189 $ — $ 741,855

(1) Non‑Agency RMBS held as of December 31, 2022 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.

(1) AOMT RMBS held as of December 31, 2023 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.

(2) Includes Commercial Loans and AOMT CMBS assets.

All AOMT CMBS held as of December 31, 2023 was comprised of a small-balance commercial loan securitization issuance in which the Company participated.

(3) 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.

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.

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.

Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place.

These transfers were not material.

Transfers between Level 2 and Level 3 were immaterial for the year ended December 31, 2023.

Angel Oak Mortgage REIT, Inc.

6 unchanged sentences

Asset Fair Value Unobservable Input Range Average

($ in thousands)

Residential mortgage loans, at fair value $ 6,036 Prepayment rate (annual CPR) 6.86 % - 19.93 %

11 unchanged sentences

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:

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the period and year ended as of March 31, 2024 and December 31, 2023:

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

Amount of Loans Purchased from Affiliates during the Year-to-Date/Year Ended Number of Loans Purchased from Affiliates during the Year-to-Date/Year Ended Number of Loans Purchased from Affiliates, Owned and Held as of the Periods Ended (1)

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, Owned and Held as of Year-to-Date/Year End (1) :

($ in thousands)

September 30, 2023 $ 89,673 232 593

March 31, 2024 $ 32,036 96 650

December 31, 2023 $ 199,793 475 589

(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

(1) Excludes loans held in consolidated securitizations.

Securitization Transactions and Majority-Owned Affiliate

2 unchanged sentences

Management Fee

The Company’s management agreement, effective as of June 21, 2021, by and among the Company, the Operating Partnership, and the Manager (the “Management Agreement”), provides that the Company will pay the Manager, in arrears, an aggregate fixed management fee equal to 1.5 % per annum of the Company’s Equity (as is defined in the Management Agreement).

The Company’s management agreement, effective as of June 21, 2021, by and among the Company, the Operating Partnership, and the Manager (the “Management Agreement”), provides that the Company will pay the Manager, in arrears, on a quarterly basis, an aggregate fixed management fee equal to 1.5 % per annum of the Company’s Equity (as is defined in the Management Agreement).

Incentive Fee

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 and no expense recognized in the Company’s financial statements.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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 and no expense has been 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 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.

As of March 31, 2024, the Company was not aware of any legal claims that could materially impact its financial condition.

As of March 31, 2024, the Company had no unfunded commitments.

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.

As of March 31, 2024, the Company has a total purchase commitments of $ 80.1 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 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

The following table sets forth the net unrealized gain/(loss) on available-for-sale (“AFS”) securities for the three months ended March 31, 2024 and 2023, which is the sole component of the changes in the Company’s Accumulated Other Comprehensive Income/(Loss) (“AOCI”) for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

(in thousands)

4 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

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

(in thousands)

AOCI balance, beginning of period $ ( 21,127 ) $ 3,000

Net unrealized gain/(loss) on AFS securities 12,955 ( 11,979 )

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

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

The following table sets forth the detail of other assets included in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

($ in thousands)

Investments in Majority-Owned Affiliates

$ 18,021 $ 16,232

Commercial Mortgage Loans

Deferred tax asset 3,457 3,457

3 unchanged sentences

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.

In 2023 and the first quarter of 2024, the Company participated in securitization transactions AOMT 2023-1, AOMT 2023-5, AOMT 2023-7, and AOMT 2024-3, which involved MOAs in which the Company received investments of 41.21 %, 34.42 %, 10.35 %, and 10.98 %, 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.

2 unchanged sentences

See Note 9 — Fair Value Measurements .

Commercial Mortgage Loans

Commercial mortgage loans are measured at fair value.

As of March 31, 2024 and December 31, 2023, the cost and unpaid principal balance of the assets was $ 5.6 million and $ 5.6 million, with a fair value of $ 5.2 million and $ 5.2 million, respectively.

The weighted average interest rate was 6.24 % with a weighted average maturity of 12 years, as of March 31, 2024.

There were no commercial mortgage loans more than ninety (90) days past due or in foreclosure as of March 31, 2024 or December 31, 2023.

Commercial Mortgage Backed Securities

CMBS are held at fair value.

As of March 31, 2024 and December 31, 2023, the cost of these assets were $ 6.3 million and $ 6.3 million, with a fair value of $ 6.6 million and $ 6.6 million, respectively.

There was no repurchase debt held against these assets at March 31, 2024 or December 31, 2023.

Equity and Earnings per Share (“EPS”)

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.

In the calculations of basic and diluted earnings per common share for the three months ended March 31, 2024 and 2023, 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 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.

For the three months ended March 31, 2024, there were 186,886 anti-dilutive outstanding restricted stock awards and 123,767 performance-based restricted stock units.

To date we have expensed $ 0.1 million related to the performance-based restricted stock units based on current market conditions.

However, these units were not included in the diluted weighted average common shares outstanding.

For the three months ended March 31, 2023, there were no anti-dilutive outstanding restricted stock awards, although the market-based “total stockholder return” conditions for 64,096 performance-based restricted stock units had not been achieved and thus these units were not included in the diluted weighted average common shares outstanding.

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 September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

(in thousands, except share and per share data)

Basic Earnings (Loss) per Common Share:

Net income (loss) to common stockholders $ 8,273 $ ( 83,353 )

Dividends allocated to participating securities ( 60 ) —

Net income (loss) to common stockholders - basic $ 8,213 $ ( 83,353 )

Basic weighted average common shares outstanding 24,768,921 24,505,438

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

Diluted Earnings (Loss) per Common Share:

Net income (loss) to common stockholders - basic $ 8,273 $ ( 83,353 )

Dividends allocated to participating securities ( 60 ) —

Net income (loss) to common stockholders - diluted $ 8,213 $ ( 83,353 )

Basic weighted average common shares outstanding 24,768,921 24,505,438

Net effect of dilutive equity awards 188,747 —

Diluted weighted average common shares outstanding 24,957,668 24,505,438

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 nine months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

The following table sets forth the calculation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

March 31, 2024 March 31, 2023

(in thousands, except share and per share data)

14 unchanged sentences

Subsequent Events

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.

On April 11, 2024, the Company securitized residential mortgage loans with an unpaid principal balance of $ 300 million in the issuance of AOMT 2024-4.

Similar to certain previous securitizations, the Company will consolidate the VIE used to facilitate this

See Note 2 “Variable Interest Entities” for a discussion of the accounting policies applied to the consolidation of VIEs and transfers of financial assets in connection with financing transactions.

On May 7, 2024, the Company declared a dividend of $ 0.32 per share of common stock, to be paid on May 31, 2024 to common stockholders of record as of May 22, 2024.

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