What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-14 compared with 2022-08-12 · 175 added, 156 removed, 562 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Residential mortgage loans - at fair value $ 1,069,476 $ 1,061,912

25 unchanged sentences

STOCKHOLDERS’ EQUITY

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

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

Common stock, $ 0.01 par value.

As of June 30, 2022:

As of September 30, 2022:

350,000,000 shares authorized, 24,925,357 shares issued and outstanding.

2 unchanged sentences

Additional paid-in capital 474,830 476,510

Accumulated other comprehensive income 1,248 3,000

Accumulated other comprehensive income (loss) ( 8,979 ) 3,000

Retained (deficit) earnings ( 201,244 ) 11,527

5 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

INTEREST INCOME, NET

13 unchanged sentences

Total operating expenses 11,524 6,321 29,004 10,925

INCOME BEFORE INCOME TAXES ( 52,144 ) 2,227 ( 99,143 ) 11,714

INCOME (LOSS) BEFORE INCOME TAXES ( 83,349 ) 6,344 ( 182,492 ) 18,056

Income tax benefit — — ( 3,457 ) —

1 unchanged sentence

Preferred dividends ( 4 ) ( 4 ) ( 11 ) ( 11 )

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

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS $ ( 83,353 ) $ 6,340 $ ( 179,046 ) $ 18,045

Other comprehensive income (loss) ( 10,227 ) 1,818 ( 11,979 ) 5,433

9 unchanged sentences

(in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 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

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

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

2 unchanged sentences

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

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

Dividends paid on common stock ($ 0.45 per share)

— — — — ( 11,221 ) ( 11,221 )

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

Stockholders’ equity as of June 30, 2022

Stockholders’ equity as of September 30, 2022

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

Three Months Ended June 30, 2021

Three Months Ended September 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

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

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

Dividends paid on common stock ($ 0.12 per share)

— — — — ( 3,056 ) ( 3,056 )

Non-cash equity compensation — — 833 — — 833

2 unchanged sentences

Net income — — — — 6,344 6,344

Stockholders’ equity as of June 30, 2021

Stockholders’ equity as of September 30, 2021

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

3 unchanged sentences

(in thousands)

Six Months Ended June 30, 2022

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

4 unchanged sentences

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

Dividends paid on common stock — — — — ( 22,503 ) ( 22,503 )

Dividends paid on common stock ($ 0.45 per share)

— — — — ( 33,725 ) ( 33,725 )

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

Stockholders’ equity as of June 30, 2022

Stockholders’ equity as of September 30, 2022

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

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

3 unchanged sentences

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

Shares repurchased — ( 1 ) ( 1,653 ) — — ( 1,654 )

Non-cash equity compensation — 5 919 — — 924

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

Dividends paid on common stock ($ 0.12 per share)

— — — — ( 3,056 ) ( 3,056 )

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

Net income — — — — 18,056 18,056

Stockholders’ equity as of June 30, 2021

Stockholders’ equity as of September 30, 2021

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

3 unchanged sentences

(in thousands)

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

Nine Months Ended

September 30, 2022 September 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

9 unchanged sentences

Principal payments on residential mortgage loans 249,056 63,199

Due to broker ( 200 ) —

Margin received from interest rate futures contracts and TBAs 75,689 ( 9,297 )

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

Principal and interest receivable on residential mortgage loans ( 12,689 ) ( 7,255 )

Income tax benefit ( 3,457 ) —

29 unchanged sentences

Principal payments on loans held in securitization trusts ( 177,111 ) ( 14,449 )

Cash paid for debt issuance costs ( 457 ) ( 77 )

Proceeds from securitization 520,044 —

Other ( 457 ) ( 1,600 )

Proceeds from non-recourse securitization obligations 675,360 306,352

Net proceeds from (payments on) securities sold under agreements to repurchase ( 543,727 ) 310,996

Net proceeds from notes payable 52,913 468,847

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

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 33,620 ) 1,298,498

CHANGE IN CASH AND RESTRICTED CASH ( 22,805 ) 6,297

5 unchanged sentences

Cash paid during the period for interest $ 38,535 $ 2,170

(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.

(1) Cash, cash equivalents, and restricted cash as of September 30, 2022 included cash and cash equivalents of $ 20.5 million and restricted cash of $ 9.0 million, and as of September 30, 2021 included cash and cash equivalents of $ 49.2 million and restricted cash of $ 3.0 million.

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

41 unchanged sentences

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.

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

Recent Accounting Standards - Recently Issued

7 unchanged sentences

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.

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 Company has recorded the issuances of non-recourse securitization obligations of AOMT 2021-7 and 2021-4 at amortized cost, and subsequent securitization issuances 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.

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

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

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 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.

6 unchanged sentences

VIEs for Which the Company is the Primary Beneficiary

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.

In 2021 and 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 these securitization vehicles.

During the three months ended September 30, 2022, in the AOMT 2022-4 transaction, the Company securitized and consolidated approximately $ 184.7 million unpaid principal balance of seasoned residential non-QM mortgage loans.

During the nine months ended September 30, 2022, in the AOMT 2022-4 and the AOMT 2022-1 transactions, the Company securitized and consolidated approximately $ 722.3 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 September 30, 2022 and December 31, 2021:

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

September 30, 2022 December 31, 2021

(in thousands)

13 unchanged sentences

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

Income and expense amounts related to the consolidated VIEs recorded in the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2022 (1) is set forth as follows:

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

Income and expense amounts related to the consolidated VIEs recorded in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2022 (1) is set forth as follows:

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands)

5 unchanged sentences

Unrealized gain on mark-to-market of non-recourse securitization obligation - at fair value 34,357 67,030

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

Securitization expenses (3)

( 1,115 ) ( 3,405 )

Operating expenses ( 247 ) ( 695 )

Net loss from consolidated VIEs $ ( 34,407 ) $ ( 72,600 )

(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.

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

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

(3) Includes securitization expenses for AOMT 2022-4 and AOMT 2022-1.

Angel Oak Mortgage, Inc.

6 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 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 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.

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 September 30, 2022 and December 31, 2021, and details on the accounting treatment and fair value methodology of the securities can be found in Note 10, Fair Value Measurements .

See Note 5, Investment Securities , for the fair value of AOMT securities held by the Company as of September 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 June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

($ in thousands)

6 unchanged sentences

Weighted average remaining maturity (years) 30 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 June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

September 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 June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

September 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 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.

There were no commercial mortgage loans more than 90 days overdue as of September 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

During the nine months ended September 30, 2022, we sold commercial loans with an unpaid principal balance of $ 11.2 million and market value of $ 10.5 million for cash proceeds of $ 11.0 million.

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 September 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.

1 unchanged sentence

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

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

September 30, 2022 December 31, 2021

(in thousands)

1 unchanged sentence

CMBS $ 10,482 $ 10,875

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:

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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

June 30, 2022:

September 30, 2022:

(in thousands)

5 unchanged sentences

Total AOMT RMBS $ 64,514 $ ( 67,454 ) $ ( 2,940 )

Other Non-Agency RMBS

Subordinate $ 3,354 $ — $ 3,354

Interest Only/Excess 2,634 — 2,634

Total Other Non-Agency RMBS $ 5,988 $ — $ 5,988

Whole Pool Agency RMBS

6 unchanged sentences

Total AOMT CMBS $ 8,857 $ — $ 8,857

(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.

Notes to the Condensed Consolidated Financial Statements

(1) AOMT RMBS held as of September 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.

December 31, 2021:

19 unchanged sentences

Total AOMT CMBS $ 10,756 $ — $ 10,756

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

7 unchanged sentences

(1) There were no U.S.

Treasury Bills held as of June 30, 2022.

Treasury Bills held as of September 30, 2022.

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

5 unchanged sentences

all vary based on the counterparty.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

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

Restricted cash as of September 30, 2022 included $ 7.6 million in margin collateral required by a lender, all of which was released in full subsequent to September 30, 2022.

There was no such margin collateral required as of 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 September 30, 2022 and December 31, 2021:

Line of Credit Facility Limit Base Interest Rate (A)

Interest Rate Spread (A)

June 30, 2022 December 31, 2021

September 30,

2022 December 31,

($ in thousands)

Barclays Bank PLC (1)

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

$ 370,572 $ 362,899

Royal Bank of Canada (2)

Multinational Bank 1 (1)

$ 600,000 Average Daily SOFR 1.95 % $ 464,695 N/A

Nomura Corporate Funding Americas, LLC (3)

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

Multinational Bank 2 (2)

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

$ 147,261 $ 362,899

Deutsche Bank, AG (4)

Global Investment Bank 1 (3)

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

Global Investment Bank 2 (4)

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

$ 98,335 231,981

Goldman Sachs Bank USA (5)

Global Investment Bank 3 (5)

$ 200,000 Compound SOFR 2.45 % $ 117,082 109,283

Banc of California, National Association (6)

Regional Bank 1 (6)

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

$ 50,834 34,838

Veritex Community Bank (7)

Regional Bank 2 (7)

$ 75,000 1 month SOFR 2.41 % $ 28,114 11,258

1 unchanged sentence

(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 (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 .

(1) On April 13, 2022, the Company and two of its subsidiaries entered into a $ 340.0 million repurchase facility with a multinational bank (“Multinational Bank 1”) through the execution of a master repurchase agreement between the Company as guarantor, and two of its subsidiaries, as sellers, and Multinational Bank 1 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, unless such term is extended or terminated earlier pursuant to the terms of the master repurchase agreement.

On August 4, 2022, the maximum line of credit under the facility with Multinational Bank 1 was increased by $ 260.0 million to a maximum facility limit of $ 600.0 million.

(2) This agreement was set to expire on September 20, 2022.

On August 23, 2022, this agreement was extended to September 30, 2022, and on September 26, 2022, this agreement was extended to October 14, 2022, on which date it expired by its terms after being paid in full.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

(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 .

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

On October 5, 2022, this agreement expired in accordance with its terms after being paid in full.

(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 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 such subsidiary is required to repay Global Investment Bank 2 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 %.

9 unchanged sentences

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.

The “Due to broker” account on the condensed consolidated balance sheets as of September 30, 2022 in the amount of $ 1.0 billion relates to the purchase of whole pool RMBS at quarter-end in the third 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.

The trade date of this purchase was prior to September 30, 2022.

For the nine months ended September 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 October 13, 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 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

Restricted cash of margin collateral for securities sold under agreements to repurchase was $ 1.1 million and $ 5.0 million as of September 30, 2022 and December 31, 2021, respectively.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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

September 30, 2022

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

13 unchanged sentences

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

Derivative instruments as of June 30, 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.

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

Restricted cash as of September 30, 2022 included $ 0.3 million in interest rate futures margin collateral.

There was no TBA margin collateral required as of September 30, 2022.

Restricted cash as of December 31, 2021 included $ 2.3 million in TBA margin collateral and $ 4.2 million in interest rate futures margin collateral.

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

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

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

Notional Amounts

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($ in thousands)

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

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

September 30, 2022 Interest rate futures 10,196 $ 6,612 $ — $ — $ 1,019,600

September 30, 2022 TBAs N/A $ 1,922 $ — $ — $ 1,062,100

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 and six months ended June 30, 2022 and June 30, 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 nine months ended September 30, 2022 and September 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 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 )

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

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

Three Months Ended September 30, 2021 Interest rate futures $ 39 $ 1,666

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

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 )

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

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

Nine Months Ended September 30, 2021 Interest rate futures $ ( 431 ) $ 2,678

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

Fair Value Measurements

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Notes to the Condensed Consolidated Financial Statements

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.

As of September 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 two new non-recourse securitization obligations 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:

The fair value of cash, restricted cash, principal and interest receivable, deferred tax assets and liabilities, other assets (principally consisting of prepaid assets), securities sold under obligation 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 following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of September 30, 2022:

Level 1 Level 2 Level 3 Total

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Unrealized appreciation on futures contracts 6,612 — — 6,612

Unrealized appreciation on TBAs 1,922 — — 1,922

Total assets at fair value $ 8,534 $ 3,211,034 $ 8,110 $ 3,227,678

2 unchanged sentences

$ — $ 562,564 $ — $ 562,564

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

Total liabilities at fair value $ — $ 562,564 $ — $ 562,564

(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.

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

(2) All AOMT CMBS held as of September 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.

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These transfers were not material.

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.

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

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

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

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

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

Angel Oak Mortgage, Inc.

13 unchanged sentences

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

Price Serve obtains its price quotes from actual sales or quotes for sale of the same or similar securities and/or provides model‑based valuations that consider inputs derived from recent market activity including default rates, conditional prepayment rates, loss severity, expected yield to maturity, baseline discount margin/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, as the valuation model has inputs that are observable for substantially the full term of the liability.

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;

As of September 30, 2022, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.1 billion and $ 992.9 million, respectively, a difference of approximately $ 116.8 million (which includes AOMT 2022-1 and AOMT 2022-4, which are marked to fair value;

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

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These transfers were not material.

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.

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

Angel Oak Mortgage, Inc.

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Residential Mortgage Loan Purchases

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

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

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

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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 June 30, 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 September 30, 2022 and December 31, 2021:

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

1 unchanged sentence

($ in thousands)

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

September 30, 2022 $ 567,324 1,141 1,125

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

3 unchanged sentences

Commercial Mortgage Loan Purchases

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

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

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

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

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

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

1 unchanged sentence

($ in thousands)

June 30, 2022 $ — None 4

September 30, 2022 $ — None 4

December 31, 2021 $ — None 5

Pre-IPO Management Fee

A pre-IPO management agreement (the “Pre-IPO Management Agreement”) existed among the Company, the Manager, and Angel Oak Mortgage Fund, LP (“Angel Oak Mortgage Fund”), the Company’s sole common stockholder prior to the IPO.

Per the Pre-IPO Management Agreement, on a quarterly basis in advance, the Company paid the Manager an aggregate, fixed management fee equal to 1.5 % per annum of the total Actively Invested Capital (as defined in the Pre-IPO Management Agreement) of the limited partners in Angel Oak Mortgage Fund.

A pre-IPO management agreement (the “Pre-IPO Management Agreement”) existed among the Company, our Manager, and Angel Oak Mortgage Fund, LP (“Angel Oak Mortgage Fund”), the Company’s sole common stockholder prior to the IPO.

Per the Pre-IPO Management Agreement, on a quarterly basis in advance, the Company paid our Manager an aggregate, fixed management fee equal to 1.5 % per annum of the total Actively Invested Capital (as defined in the Pre-IPO Management Agreement) of the limited partners in Angel Oak Mortgage Fund.

The Pre-IPO Management Agreement terminated on June 21, 2021, in connection with the IPO.

Post-IPO Management Fee

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

Per the Management Agreement, on a quarterly basis in arrears, 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).

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

Per the Management Agreement, on a quarterly basis in arrears, after the IPO, the Company paid our 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.

Under the Management Agreement, our 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 our 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

The Company is also required to pay the Manager reimbursements for certain general and administrative expenses pursuant to the Management Agreement.

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

The Company is also required to pay our Manager reimbursements for certain general and administrative expenses pursuant to the Management Agreement.

Accrued expenses payable to affiliate and operating expenses incurred with affiliate are substantially comprised of payroll reimbursements, which includes an executive severance expense accrual, to an affiliate of our Manager.

On September 28, 2022, the Company’s Board of Directors appointed Mr.

Sreeniwas Prabhu as the Company’s new Chief Executive Officer and President effective as of September 28, 2022.

The Company does not expect to reimburse our Manager for compensation paid to Mr.

Prabhu for his service with the Company.

Prabhu is an equity owner of our Manager.

Simultaneously with the appointment of Mr.

Prabhu as the Company’s Chief Executive Officer and President, the Company’s previous Chief Executive Officer and President, Mr.

Robert Williams, ceased serving as the Company’s Chief Executive Officer and President, effective September 28, 2022.

Accordingly, the Company recorded a severance charge of approximately $ 1.4 million in connection with this event, in accordance with the Angel Oak Mortgage, Inc.

Executive Severance and Change in Control Plan, which is described in the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the Securities and Exchange Commission on April 8, 2022 (the “2022 Proxy Statement”).

For a description of the fees, compensation, and reimbursements payable to our Manager by the Company and other transactions between the Company and our Manager or its affiliates, see the section titled “Certain Relationships and Related Party Transactions” in the 2022 Proxy Statement.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

Commitments and Contingencies

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

As of 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.

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

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

Equity and Earnings per Share (“EPS”)

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.

Basic and Diluted EPS for the three and nine months ended September 30, 2022

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

Shares of unvested restricted stock totaling 425,461 shares are anti-dilutive and are not included in the calculation of diluted earnings per share.

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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:

Basic and Diluted EPS for the three and nine months ended September 30, 2021

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

Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

September 30, 2021 Nine Months Ended

September 30, 2021

(in thousands, except share data)

9 unchanged sentences

Subsequent Events

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.

On October 4, 2022, the Company entered into master repurchase agreements with two affiliated institutional investors (“Institutional Investors A and B” or “Lenders”) for a pool of loans with financing of approximately $ 168.7 million.

Pursuant to the master repurchase agreements, the Company as seller (“Seller”) may sell certain securities to the Lenders representing whole loan assets and later repurchase such securities from the Lenders at a date not later than three months from the date of the master repurchase agreements.

The master repurchase agreements may be extended one time for an additional period of three months .

The interest rate on the borrowing under the master repurchase agreements that the Seller is required to pay the Lenders is equal to the sum of (1) a spread of 3.50 %, and (2) one-month Term SOFR.

On November 8, 2022, the Company declared a dividend of $ 0.32 per share of common stock, to be paid on November 30, 2022 to common stockholders of record as of November 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