What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-12 compared with 2022-05-16 · 227 added, 153 removed, 491 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Residential mortgage loans - at fair value $ 1,279,341 $ 1,061,912

7 unchanged sentences

Principal and interest receivable 43,030 25,984

Deferred tax asset 3,457 —

Unrealized appreciation on TBAs and interest rate futures contracts - at fair value 594 2,428

7 unchanged sentences

Due to broker 720,405 —

Collateral due to counterparties 8,024 —

Accrued expenses 2,584 442

6 unchanged sentences

STOCKHOLDERS’ EQUITY

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

Series A preferred stock, $ 0.01 par value, 12 % cumulative, non-voting, 125 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value.

As of March 31, 2022:

As of June 30, 2022:

350,000,000 shares authorized, 24,925,930 shares issued and outstanding.

2 unchanged sentences

Additional paid-in capital 472,356 476,510

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

Accumulated other comprehensive income 1,248 3,000

Retained (deficit) earnings ( 106,670 ) 11,527

5 unchanged sentences

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

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

INTEREST INCOME, NET

2 unchanged sentences

NET INTEREST INCOME 16,431 10,297 33,370 19,499

REALIZED AND UNREALIZED (LOSSES) GAINS, NET

REALIZED AND UNREALIZED GAINS (LOSSES), NET

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS 12,718 ( 10,224 ) 39,133 ( 12,512 )

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

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

Net unrealized gain (loss) on mortgage loans, debt at fair value option (see Note 2), and derivative contracts ( 73,985 ) 4,813 ( 154,166 ) 9,330

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET ( 61,267 ) ( 5,411 ) ( 115,033 ) ( 3,182 )

Operating expenses 2,977 609 6,723 1,130

7 unchanged sentences

Income tax benefit — — ( 3,457 ) —

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

NET INCOME (LOSS) $ ( 52,144 ) $ 2,227 $ ( 95,686 ) $ 11,714

Preferred dividends ( 4 ) ( 4 ) ( 8 ) ( 8 )

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

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

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

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

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

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDER(S) $ ( 52,148 ) $ 2,223 $ ( 95,694 ) $ 11,706

Other comprehensive income (loss) 11,235 3,085 ( 1,752 ) 3,615

TOTAL COMPREHENSIVE INCOME (LOSS) $ ( 40,913 ) $ 5,308 $ ( 97,446 ) $ 15,321

Basic earnings (loss) per common share $ ( 2.13 ) $ 0.13 $ ( 3.90 ) $ 0.72

Diluted earnings (loss) per common share $ ( 2.13 ) $ 0.13 $ ( 3.90 ) $ 0.72

Weighted average number of common shares outstanding:

5 unchanged sentences

(in thousands)

For the Three Months Ended March 31, 2021

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

Stockholder’s equity as of December 31, 2020

Three Months Ended June 30, 2022

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

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

Repurchase of common stock — ( 3 ) ( 2,989 ) — — ( 2,992 )

Non-cash equity compensation — — 968 — — 968

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

Unrealized gain on RMBS and CMBS — — — 11,235 — 11,235

Dividends paid on common stock — — — — ( 11,216 ) ( 11,216 )

Net loss — — — — ( 52,144 ) ( 52,144 )

Stockholders’ equity as of June 30, 2022

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

Three Months Ended June 30, 2021

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

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

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

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

Non-cash equity compensation — 5 85 — — 90

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

Unrealized gain on RMBS and CMBS — — — 3,085 — 3,085

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

Net income — — — — 2,227 2,227

Stockholder’s equity as of March 31, 2021

Stockholders’ equity as of June 30, 2021

$ 101 $ 255 $ 479,542 $ 2,576 $ 14,307 $ 496,781

For the Three Months Ended March 31, 2022

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

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

Angel Oak Mortgage, Inc.

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

(in thousands)

Six Months Ended June 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

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

Repurchase of common stock — ( 3 ) ( 5,993 ) — — ( 5,996 )

4 unchanged sentences

Net loss — — — — ( 95,686 ) ( 95,686 )

Stockholders’ equity as of March 31, 2022

Stockholders’ equity as of June 30, 2022

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

Six Months Ended June 30, 2021

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

Stockholder’s equity as of December 31, 2020 $ 101 $ 157 $ 246,489 $ ( 1,039 ) $ 2,601 $ 248,309

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

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

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

Non-cash equity compensation — 5 85 — — 90

Dividends declared - preferred — — — — ( 8 ) ( 8 )

Unrealized gain on RMBS and CMBS — — — 3,615 — 3,615

Net income — — — — 11,714 11,714

Stockholders’ equity as of June 30, 2021

$ 101 $ 255 $ 479,542 $ 2,576 $ 14,307 $ 496,781

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

2 unchanged sentences

(in thousands)

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

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

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

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

Net realized loss (gain) on mortgage loans, derivative contracts, RMBS, and CMBS ( 39,133 ) 12,512

Net unrealized loss (gain) on mortgage loans and derivative contracts 154,166 ( 9,330 )

Amortization of debt issuance costs 257 19

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

Accretion of and amortization 8,315 151

Non-cash equity compensation 1,839 90

3 unchanged sentences

Principal payments on residential mortgage loans 205,260 27,481

Collateral due to counterparties 8,024 —

Margin received from interest rate futures contracts and TBAs 73,171 471

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

Principal and interest receivable on residential motgage loans ( 10,975 ) ( 13,387 )

Income tax benefit ( 3,457 ) —

Other assets ( 296 ) ( 3,642 )

12 unchanged sentences

Principal payments on RMBS 4,936 5,178

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

Purchases of commercial mortgage loans ( 3,180 ) —

1 unchanged sentence

Principal payments on commercial mortgage loans 34 1,255

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

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 502,541 ( 705,897 )

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

Angel Oak Mortgage, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid to common stockholders ( 22,503 ) —

Dividends paid to preferred shareholders ( 8 ) —

Repurchase of common stock ( 5,996 ) —

Contributions from prior common stockholder — 56,261

Proceeds from IPO — 136,800

Proceeds from private placement concurrent with IPO — 40,000

Principal payments on loans held in securitization trusts ( 156,031 ) —

2 unchanged sentences

Net proceeds from (payments on) securities sold under agreements to repurchase ( 480,886 ) 608,885

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

Net proceeds from notes payable 248,693 233,174

NET CASH PROVIDED BY FINANCING ACTIVITIES 102,856 1,075,043

6 unchanged sentences

Cash paid during the period for interest $ 22,061 $ 647

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

(1) Cash, cash equivalents, and restricted cash as of June 30, 2022 included cash and cash equivalents of $ 16.1 million and restricted cash of $ 5.8 million, and as of June 30, 2021 included cash and cash equivalents of $ 28.9 million and restricted cash of $ 4.1 million.

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

11 unchanged sentences

For the period prior to September 18, 2018, the Company had no operating activity.

The Company achieves certain of its investment objectives by investing a portion of its assets in its wholly‑owned 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 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.

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

19 unchanged sentences

The preparation of financial statements requires the Company to make a number of significant estimates.

These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods.

It is likely that changes in these estimates (e.g., valuation changes due to supply and

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term.

revenues and expenses during the reported periods.

It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term.

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

Reclassifications

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

“Other assets” on the condensed consolidated balance sheet as of December 31, 2021 in the amount of $ 5.3 million has been reclassified to $ 2.4 million of unrealized appreciation on “To be Announced” forward-settling of mortgage-backed securities trades (“TBAs”) and interest rate futures contracts - at fair value and $ 2.9 million of other assets, to enhance transparency of the Company’s balance sheet.

The Company also reclassified the dividend paid in the first quarter of 2022 in the amount of $ 11.3 million from additional paid-in capital to retained earnings, as reflected in the balances of additional paid-in capital and retained earnings on the condensed consolidated balance sheet as of June 30, 2022 and the statements of stockholders’ equity beginning balances of additional paid-in capital and retained earnings as of March 31, 2022.

This reclassification was a result of a review of industry standards resulting from diversity in practice noted in interpretive accounting guidance regarding dividend classification.

Recent Accounting Standards - Recently Issued

5 unchanged sentences

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

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

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

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

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

Amortized Cost and Fair Value for Certain Non-Recourse Securitization Obligations of Angel Oak Mortgage Trust (“AOMT”)

The Company has recorded the issuances of non-recourse securitization obligations of AOMT 2021-7 and 2021-4 at amortized cost, and the subsequent issuance of AOMT 2022-1 at fair value (See Note 2 - Variable Interest Entities and Note 10 - Fair Value Measurements ).

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

1 unchanged sentence

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

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

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.

This liability is categorized as Level 2 in the fair value hierarchy.

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.

Variable Interest Entities

2 unchanged sentences

VIEs for Which the Company is the Primary Beneficiary

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

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

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

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

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

The Company has entered into securitization transactions where it was determined that the Company was the primary beneficiary, as, with respect to each securitization vehicle, it controls the class of securities with call rights, or “controlling class” of securities, the XS tranche.

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

During the six months ended June 30, 2022, in the AOMT 2022-1 transaction, the Company securitized and consolidated approximately $ 537.6 million unpaid principal balance of seasoned residential non-QM mortgage loans.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

March 31, 2022 December 31, 2021

The table below sets forth the fair values of the assets and liabilities recorded in the consolidated balance sheet related to these consolidated VIEs as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

(in thousands)

11 unchanged sentences

Total non-recourse securitization obligations, collateralized by residential mortgage loans, net $ 949,442 $ 616,557

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

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

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

Total Consolidated VIEs

(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 six months ended June 30, 2022 (1) is set forth as follows:

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

(in thousands)

1 unchanged sentence

Interest expense, non-recourse liabilities (2)

( 5,679 ) ( 10,262 )

Net interest income $ 5,790 $ 11,625

3 unchanged sentences

Operating expenses ( 252 ) ( 448 )

Net expense from consolidated VIEs $ ( 35,042 )

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

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

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

(1) The Company had no consolidated VIEs during the three and six months ended June 30, 2021.

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

Angel Oak Mortgage, Inc.

2 unchanged sentences

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

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

These 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.

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

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

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

The Company performs ongoing reassessments of all VIEs in which the Company has participated since its inception as to whether changes in the facts and circumstances regarding the Company’s involvement with a VIE would cause the Company’s consolidation conclusion to change, and the Company’s assessment of the VIEs in which the Company participated during the years 2019 and 2020 remains unchanged.

The securities received in the aforementioned 2019 and 2020 securitization transactions are included in “RMBS - at fair value” and “CMBS - at fair value” on the consolidated balance sheets as of March 31, 2022 and December 31, 2021, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9, Fair Value Measurements .

See Note 5, Investment Securities , for the fair value of AOMT securities held by the Company as of March 31, 2022 and December 31, 2021 that were retained by the Company as a result of the securitization transactions in 2020 and 2019.

The securities received in the aforementioned 2019 and 2020 securitization transactions are included in “RMBS - at fair value” and “CMBS - at fair value” on the consolidated balance sheets as of June 30, 2022 and December 31, 2021, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9, Fair Value Measurements .

See Note 5, Investment Securities , for the fair value of AOMT securities held by the Company as of June 30, 2022 and December 31, 2021 that were retained by the Company as a result of the securitization transactions in 2020 and 2019.

Residential Mortgage Loans

Residential mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s residential mortgage loan portfolio as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

($ in thousands)

1 unchanged sentence

Unpaid principal balance $ 1,333,995 $ 1,022,461

Premium on mortgage loans purchased 38,642 40,685

Net premium on mortgage loans purchased 40,610 40,685

Change in fair value ( 95,264 ) ( 1,234 )

2 unchanged sentences

Weighted average remaining maturity (years) 31 30

The following table sets forth data regarding the number of consumer mortgage loans secured by residential real property 90 or more days past due and also those in formal foreclosure proceedings, and the recorded investment and unpaid principal balance of such loans as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

($ in thousands)

9 unchanged sentences

Commercial mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s commercial mortgage loan portfolio as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 8 8

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

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

Investment Securities

As of March 31, 2022 and December 31, 2021, investment securities were comprised of non‑agency RMBS and Freddie Mac and Fannie Mae “whole pool agency RMBS” (together, “RMBS”), commercial mortgage backed securities (“CMBS”), and U.S.

Treasury securities as presented in the condensed consolidated balance sheet.

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

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

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

There were no commercial mortgage loans more than 90 days overdue as of June 30, 2022, and there was one commercial mortgage loan more than 90 days overdue as of December 31, 2021 which loan was also in foreclosure.

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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

March 31, 2022 December 31, 2021

Investment Securities

As of June 30, 2022, investment securities were comprised of non‑agency RMBS and Freddie Mac and Fannie Mae “whole pool agency RMBS,” and commercial mortgage backed securities (“CMBS”).

As of December 31, 2021, investment securities also included U.S.

Treasury securities.

Treasury securities held by the Company as of December 31, 2021 matured on January 6, 2022.

The following table sets forth a summary of RMBS and CMBS at cost as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

(in thousands)

1 unchanged sentence

CMBS $ 10,637 $ 10,875

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

The following table sets forth certain information about the Company’s investments in RMBS and CMBS as of June 30, 2022 and December 31, 2021:

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

March 31, 2022:

June 30, 2022:

(in thousands)

17 unchanged sentences

Total AOMT CMBS $ 8,982 $ — $ 8,982

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

(1) AOMT RMBS held as of June 30, 2022 included both retained tranches of securitizations in which the Company participated within the purview of AOMT, and additional AOMT securities purchased in secondary market transactions.

Angel Oak Mortgage, Inc.

23 unchanged sentences

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

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

Treasury Bills as of

December 31, 2021 (1) :

Date Face Value Unamortized Discount, net Amortized Cost (2)

1 unchanged sentence

($ in thousands)

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

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

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

(1) There were no U.S.

Treasury Bills held as of June 30, 2022.

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

7 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

The following table sets forth the details of all the lines of credit available to the Company and drawn amounts for whole loan purchases as of March 31, 2022 and December 31, 2021:

The following table sets forth the details of all the lines of credit available to the Company and drawn amounts for whole loan purchases as of June 30, 2022 and December 31, 2021:

Line of Credit Facility Limit Base Interest Rate (A)

Interest Rate Spread (A)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

($ in thousands)

Barclays Bank PLC (1)

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

$ 400,000 1 month SOFR 1.95 % - 2.00 %

$ 370,572 $ 362,899

Royal Bank of Canada (2)

$ 340,000 Average Daily SOFR 1.95 % $ 191,677 N/A

Nomura Corporate Funding Americas, LLC (3)

2 unchanged sentences

Deutsche Bank, AG (4)

$ 250,000 1 month LIBOR 2.00 % - 3.25 %

$ 250,000 1 month SOFR 2.20 % - 3.45 %

$ 217,875 231,981

Goldman Sachs Bank USA (5)

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

$ 200,000 Compound SOFR 2.45 % $ 175,291 109,283

Banc of California, National Association (6)

$ 75,000 1 month LIBOR 2.50 % - 3.13 %

$ 75,000 1 month SOFR 2.50 % - 3.50 %

$ 55,410 34,838

Veritex Community Bank (7)

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

$ 75,000 1 month SOFR 2.41 % $ 72,477 11,258

Total $ 1,640,000 $ 1,102,101 $ 853,408

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

(A) See below for timing of applicable transitions from LIBOR to the Secured Overnight Financing Rate (“SOFR”) as base interest rate and corresponding applicable definitions of “Term” and “Average” SOFR, and “SOFR base”.

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

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

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

On January 27, 2022, this repurchase facility was amended to state that (a) interest will accrue on any outstanding balance at a rate based on Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) plus a spread and (b) increase the maximum purchase price permitted under the master repurchase agreement to $ 550.0 million from $ 400.0 million, which was subject to reduction to $ 400.0 million upon the issuance of securities pursuant to a securitization of the assets underlying the master repurchase agreement.

This securitization occurred on February 7, 2022.

Prior to January 27, 2022, interest was based on 1-month LIBOR plus a spread generally in line with similar agreements that the Company or its subsidiaries have entered into, which is a range of 1.70 % - 3.50 %.

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

The master repurchase agreement was initially set to terminate on October 13, 2022, and on July 21, 2022, was extended as per the terms of the original agreement through January 20, 2023 (see Note 14 - Subsequent Events ), unless such term is extended or terminated earlier pursuant to the terms of the master repurchase agreement.

On August 4, 2022, the RBC maximum line of credit was increased by $ 260.0 million to a maximum facility limit of $ 600.0 million.

See Note 14 - Subsequent Events .

(3) This agreement was set to terminate on August 5, 2022.

On August 8, 2022, this agreement was extended through October 5, 2022, and interest will accrue on any borrowings at a rate based on Term SOFR plus an additional spread of 1.70 % - 3.50 %.

See Note 14 - Subsequent Events .

(4) On February 4, 2022, this facility was amended to extend the initial termination date of the master repurchase agreement from February 11, 2022 to February 2, 2024;

remove any draw fees;

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

and adjust the pricing rate whereby upon the Company’s or the subsidiary’s repurchase of a mortgage loan, the Company or the subsidiary is required to repay Deutsche Bank the principal amount related to such mortgage loan plus accrued and unpaid interest at a rate (determined based on the type of loan) equal to the sum of (A) the greater of (i) 0.00 % and (ii) Term SOFR and (B) a spread generally ranging from 2.20 % to 3.45 %.

Prior to February 4, 2022, interest was based on 1-month LIBOR plus a spread of 2.00 % - 3.25 %.

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

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

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

Prior to January 1, 2022, interest was based on 3-month LIBOR plus a spread of 2.25 %.

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

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

Prior to March 7, 2022, interest was based on 1-month LIBOR plus a spread of 2.50 % - 3.13 %.

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

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

On February 11, 2022, the Company amended the financing facility to (1) increase the size of the financing facility to $ 75.0 million from $ 50.0 million, and (2) provide that interest will accrue on any outstanding balance at a rate based on Term SOFR plus a margin equal to 2.41 % per annum;

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

Prior to February 11, 2022, interest was based on 1-month LIBOR plus a spread of 2.30 %.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Due to Broker

The “Due to broker” account on the condensed consolidated balance sheets as of June 30, 2022 in the amount of $ 720.4 million relates to the purchase of whole pool RMBS at quarter-end in the second quarter of 2022.

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 date of this purchase was prior to June 30, 2022.

For the six months ended June 30, 2022, this transaction is excluded from the condensed consolidated statements of cash flows as it is a noncash transaction.

The cash for these whole pool RMBS settled on July 14, 2022, at which time these assets were simultaneously sold.

Securities Sold Under Agreements to Repurchase

1 unchanged sentence

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

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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

March 31, 2022

Restricted cash included margin collateral for securities sold under agreements to repurchase (along with margin collateral for TBAs and interest rate futures) as of each of June 30, 2022 and December 31, 2021.

The following table summarizes certain characteristics of the Company’s repurchase agreements as of June 30, 2022 and December 31, 2021:

June 30, 2022

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

($ in thousands)

Treasury Bills $ 348,867 0.32 % 9

RMBS $ 128,365 1.51 % 15

11 unchanged sentences

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

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

Derivative instruments as of June 30, 2022 and December 31, 2021 included both TBAs and interest rate futures contracts.

Restricted cash included margin collateral for TBAs and interest rate futures (as well as for securities sold under agreements to repurchase) as of each of June 30, 2022 and December 31, 2021.

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

4 unchanged sentences

As part of executing these trades, the Company may enter into agreements with its TBA counterparties that govern the transactions for the TBA purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements, and various other provisions.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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.

1 unchanged sentence

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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of June 30, 2022 and December 31, 2021:

Notional Amounts

1 unchanged sentence

($ in thousands)

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

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

June 30, 2022 Interest rate futures 12,902 $ 594 $ — $ — $ 1,290,200

June 30, 2022 TBAs N/A $ — $ ( 8,258 ) $ — $ 876,000

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

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

The gains and losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022 and March 31, 2021 are set forth as follows:

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, 2022 and June 30, 2021 are set forth as follows:

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

(in thousands)

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

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

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

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

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 June 30, 2021 Interest rate futures $ ( 2,546 ) $ 746

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

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, 2022 Interest rate futures $ 49,113 $ 1,322

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

Six Months Ended June 30, 2021 Interest rate futures $ ( 2,443 ) $ 2,481

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

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

Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2021 is a detailed description of our other financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

As of June 30, 2022, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2021 included in the Annual Report on Form 10-K, with the exception of electing the fair value option for a new non-recourse securitization obligation added in 2022, collateralized by residential mortgage loans, as described in Note 1.

Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2021 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 following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of June 30, 2022:

Level 1 Level 2 Level 3 Total

9 unchanged sentences

— 8,982 — 8,982

Treasury Bills 349,992 — — 349,992

Unrealized appreciation on futures contracts 594 — — 594

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

Total assets at fair value $ 594 $ 3,202,237 $ 11,720 $ 3,214,551

2 unchanged sentences

$ — $ 444,289 $ — $ 444,289

Unrealized depreciation on TBAs 8,258 — — 8,258

Total liabilities at fair value $ 8,258 $ 444,289 $ — $ 452,547

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

All AOMT CMBS held as of March 31, 2022 were comprised of retained tranches of AOMT securitizations.

(1) Non‑Agency RMBS held as of June 30, 2022 included both retained tranches of securitizations in which the Company participated, additional AOMT securities purchased in secondary market transactions, and other RMBS purchased in secondary market transactions.

(2) All AOMT CMBS held as of June 30, 2022 were 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.

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 from Level 2 to Level 3 were comprised of residential loans more than 90 days overdue (including those in foreclosure).

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

5 unchanged sentences

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

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

The following table sets forth information regarding the Company’s significant Level 3 inputs as of June 30, 2022:

Angel Oak Mortgage, Inc.

16 unchanged sentences

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

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

As of June 30, 2022, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 981.2 million and $ 916.6 million, respectively, a difference of approximately $ 64.6 million (which includes AOMT 2022-1, which is marked to fair value;

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

24 unchanged sentences

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

All AOMT CMBS held as of December 31, 2021 was comprised of retained tranches of AOMT securitizations.

(2) All AOMT CMBS held as of December 31, 2021 were comprised of a small-balance commercial loan securitization issuance in which the Company participated.

28 unchanged sentences

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

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

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the period and year ended and as of June 30, 2022 and December 31, 2021:

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

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

($ in thousands)

March 31, 2022 $ 347,086 685 930

June 30, 2022 $ 541,875 1,088 1,304

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

(1) Excludes loans held in consolidated securitizations.

Angel Oak Mortgage, Inc.

4 unchanged sentences

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

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

1 unchanged sentence

($ in thousands)

March 31, 2022 $ — — 4

December 31, 2021 $ — — 5

June 30, 2022 $ — None 4

December 31, 2021 $ — None 5

Pre-IPO Management Fee

5 unchanged sentences

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

Post-IPO 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 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.

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

As of March 31, 2022, the Company had no unfunded commitments.

As of June 30, 2022, the Company was not aware of any legal claims that could materially impact its financial condition.

As of June 30, 2022, the Company had no unfunded commitments.

Equity and Earnings per Share (“EPS”)

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

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

Basic and Diluted EPS for the three and six months ended June 30, 2022

Basic and diluted earnings per share are equivalent for the three and six months ended June 30, 2022, due to net losses for the periods.

Shares of unvested restricted stock totaling 362,536 shares are anti-dilutive and are not included in the calculation of diluted earnings per share.

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

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

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

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

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

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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

immediately prior to the completion of the IPO, and the related share data and earnings per share calculations include the share amounts that have been retroactively restated accordingly for the calculations of earnings per share for the three months ended March 31, 2021.

Basic and Diluted EPS for the three and six months ended June 30, 2021

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

Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

(in thousands, except share data)

Basic Earnings per Common Share:

Net income allocable to common stockholders $ 2,223 $ 11,706

Basic weighted average common shares outstanding 16,746,606 16,238,153

Basic earnings per common share $ 0.13 $ 0.72

Diluted Earnings per Common Share:

Net income allocable to common stockholders $ 2,223 $ 11,706

Net effect of dilutive equity awards 52,054 26,170

Diluted weighted average common shares outstanding 16,798,660 16,264,323

Diluted earnings per common share $ 0.13 $ 0.72

Subsequent Events

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

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

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

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

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

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

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

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

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

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

On July 13, 2022, the Company securitized residential mortgage loans with an unpaid principal balance of $ 184.7 million in the issuance of AOMT 2022-4.

The Company is the Depositor for this securitization and also owns and holds the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.

On July 21, 2022, the RBC facility was extended as per the terms of the original agreement through January 20, 2023.

On August 4, 2022, the facility limit under the RBC master repurchase agreement was increased by $ 260.0 million to $ 600.0 million.

On August 8, 2022, the Nomura facility was extended through October 5, 2022, and interest will accrue on any borrowings at a rate based on Term SOFR plus an additional spread of 1.70 % - 3.50 %.

On August 9, 2022, the Company declared a dividend of $ 0.45 per share of common stock, to be paid on August 31, 2022 to common stockholders of record as of August 22, 2022.

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

What changed 10-Q

Item 1. Financial Statements