What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-09 compared with 2022-11-14 · 311 added, 347 removed, 390 unchanged (63% of the section changed)

FINANCIAL STATEMENTS

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Residential mortgage loans - at fair value $ 544,436 $ 770,982

7 unchanged sentences

Principal and interest receivable 13,645 17,497

Deferred tax asset 3,457 —

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

5 unchanged sentences

Securities sold under agreements to repurchase 442,214 52,544

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

Due to broker 447,568 1,006,022

Unrealized depreciation on TBAs and interest rate futures contracts - at fair value 8,417 —

Accrued expenses 652 1,288

1 unchanged sentence

Interest payable 1,281 2,551

Income taxes payable — 1,600

Management fee payable to affiliate 1,519 1,967

2 unchanged sentences

STOCKHOLDERS’ EQUITY

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

Common stock, $ 0.01 par value.

As of September 30, 2022:

As of March 31, 2023:

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

2 unchanged sentences

Additional paid-in capital 475,920 475,379

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

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

Accumulated other comprehensive loss ( 6,323 ) ( 21,127 )

Retained deficit ( 225,468 ) ( 218,022 )

Total stockholders’ equity $ 244,378 $ 236,479

1 unchanged sentence

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

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2023 March 31, 2022

INTEREST INCOME, NET

4 unchanged sentences

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS $ ( 10,843 ) $ 26,416

Net unrealized gain (loss) on mortgage loans, debt at fair value option (see Note 2), and derivative contracts ( 100,855 ) 6,821 ( 255,021 ) 16,151

Net unrealized gain (loss) on trading securities, mortgage loans, debt at fair value option (see Note 2), and derivative contracts 10,190 ( 80,181 )

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET $ ( 653 ) $ ( 53,765 )

19 unchanged sentences

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

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

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 June 30, 2022 $ 101 $ 249 $ 472,356 $ 1,248 $ ( 106,670 ) $ 367,284

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

Non-cash equity compensation — — 3,340 — — 3,340

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

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

Dividends paid on common stock ($ 0.45 per share)

— — — — ( 11,221 ) ( 11,221 )

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

Stockholders’ equity as of September 30, 2022

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

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

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

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

Three Months Ended March 31, 2023

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

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

Dividends paid on common stock ($ 0.32 per share)

1 unchanged sentence

Non-cash equity compensation — 541 — — 541

Dividends declared - preferred — — — — ( 5 ) ( 5 )

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

Net income — — — 530 530

Stockholders’ equity as of September 30, 2021

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

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

Angel Oak Mortgage, Inc.

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

(in thousands)

Nine Months Ended September 30, 2022

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

Three Months Ended March 31, 2022

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

3 unchanged sentences

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

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

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

Dividends paid on common stock ($ 0.45 per share)

1 unchanged sentence

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

Stockholders’ equity as of September 30, 2022

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

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

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

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 September 30, 2021

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

Stockholders’ equity as of March 31, 2022 $ 101 $ 252 $ 474,378 $ ( 9,987 ) $ ( 43,308 ) $ 421,436

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

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended

September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income $ ( 179,035 ) $ 18,056

Net income (loss) $ 530 $ ( 43,541 )

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

Net realized loss (gain) on mortgage loans, derivative contracts, RMBS, and CMBS ( 56,423 ) 19,656

Net unrealized loss (gain) on mortgage loans and derivative contracts 255,021 ( 16,151 )

Accretion of and amortization 9,330 438

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS 10,843 ( 26,416 )

Net unrealized gain (loss) on trading securities, mortgage loans, portion of debt at fair value option, and derivative contracts ( 10,190 ) 80,181

Accretion of discount on U.S.

Treasury securities ( 181 ) —

Amortization of debt issuance costs 367 257

Net amortization of premiums and discounts on mortgage loans 846 3,695

Non-cash equity compensation 541 871

2 unchanged sentences

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

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

Principal payments on residential mortgage loans 18,328 18,239

Due to broker ( 200 ) —

Collateral due to counterparties — 8,024

Margin received from interest rate futures contracts and TBAs 6,662 33,827

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

Principal and interest receivable on residential mortgage loans 3,852 ( 2,028 )

Income tax benefit ( 3,457 ) —

Other assets ( 11,477 ) ( 2,447 )

3 unchanged sentences

Interest payable ( 1,270 ) 426

NET CASH USED IN OPERATING ACTIVITIES ( 644,278 ) ( 883,722 )

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 265,140 ( 606,423 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments in RMBS and CMBS ( 1,140,153 ) ( 1,462,966 )

Purchases of investments in U.S.

Treasury Bills ( 349,992 ) ( 1,000 )

Purchases of investments in RMBS ( 10,363 ) —

Purchase of investment in U.S.

Treasury securities ( 399,456 ) ( 349,992 )

Maturity of U.S.

Treasury Bills 600,000 424,984

Sale of RMBS 1,524,129 623,364

Treasury securities — 249,999

Sale of RMBS (available for sale) 164 271,995

Principal payments on RMBS 101 3,635

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

Purchases of commercial mortgage loans — ( 3,180 )

3 unchanged sentences

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

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Cash Flows

2 unchanged sentences

Dividends paid to common stockholders ( 7,976 ) ( 11,290 )

Dividends paid to preferred shareholders ( 11 ) —

Repurchase of common stock — ( 3,003 )

Contributions from prior common stockholder — 56,262

Proceeds from IPO — 136,800

Proceeds from private placement concurrent with IPO — 40,000

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

Other ( 457 ) ( 1,600 )

Principal payments on non-recourse securitization obligation ( 18,916 ) ( 88,228 )

Cash paid for debt issuance costs — ( 24 )

Proceeds from non-recourse securitization obligations — 520,262

Net proceeds from (payments on) securities sold under agreements to repurchase 389,670 ( 131,830 )

Net proceeds from notes payable 52,913 468,847

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

Net proceeds from (payments on) notes payable ( 200,618 ) 102,757

NET CASH PROVIDED BY FINANCING ACTIVITIES 162,160 388,644

CHANGE IN CASH AND RESTRICTED CASH 17,756 43,584

5 unchanged sentences

Cash paid during the period for interest $ 18,210 $ 9,744

(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.

(1) Cash, cash equivalents, and restricted cash as of March 31, 2023 included cash and cash equivalents of $ 36.8 million and restricted cash of $ 20.8 million, and as of March 31, 2022 included cash and cash equivalents of $ 90.4 million and restricted cash of $ 5.4 million.

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

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Organization and Basis of Presentation

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

(together with its subsidiaries the “Company”), is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage (“non-QM”) loans and other mortgage‑related assets in the U.S.

mortgage market.

The Company’s strategy is to make investments in first lien non‑QM loans that are primarily made to higher‑quality non‑QM loan borrowers and primarily sourced from the proprietary mortgage lending platform of affiliates, Angel Oak Mortgage Solutions LLC and Angel Oak Home Loans LLC (together, “Angel Oak Mortgage Lending”), which operates through wholesale and retail channels and has a national origination footprint.

The Company’s strategy is to make credit-sensitive investments primarily in newly-originated first lien non‑QM loans that are primarily made to higher‑quality non‑QM loan borrowers and primarily sourced from the proprietary mortgage lending platform of affiliates, Angel Oak Mortgage Solutions LLC and Angel Oak Home Loans LLC (together, “Angel Oak Mortgage Lending”), which currently operates primarily through a wholesale channel operated by Angel Oak Mortgage Solutions, LLC and has a national origination footprint.

The Company may also invest in other residential mortgage loans, residential mortgage‑backed securities (“RMBS”), and other mortgage‑related assets.

1 unchanged sentence

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

On September 18, 2018 (commencement of operations), the Board of Directors of the Company (the “Board of Directors”) authorized the Company to commence operations and on October 19, 2018 the Company began its investing activities.

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 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.

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

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

Concurrently with the completion of the IPO, the Company sold an additional 2,105,263 shares of common stock to CPPIB Credit Investments Inc.

in a private placement at $ 19.00 per share, for total proceeds of approximately $ 40.0 million.

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

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

The Operating Partnership

2 unchanged sentences

The Company’s Manager and REIT status

The Company is externally managed and advised by Falcons I, LLC (the “Manager”), a registered investment adviser with the SEC.

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

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

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

Interim Financial Statements

8 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

Angel Oak Mortgage, Inc.

Notes to the Condensed Consolidated Financial Statements

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.

It is likely that changes in these estimates (e.g., fair value changes due to inputs and underlying assumptions as described in Note 10 — Fair Value , 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.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

New Accounting Standards and Interpretations

As of March 31, 2023, there were no new accounting standards or interpretations adopted by the Company that had a material effect on its condensed consolidated financial statements.

Reclassifications

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

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

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The standard was issued to ease the accounting effects of reform to the London Interbank Offered Rate (“LIBOR”) and other reference rates.

The standard provides optional expedients and exceptions for applying GAAP to debt, derivatives, and other contracts affected by reference rate reform.

The standard is effective for all entities as of March 12, 2020 through December 31, 2022 and may be elected over time as reference rate reform activities occur.

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

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

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 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 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.

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.

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

See Note 14 — Other Assets .

Summary of Significant Accounting Policies

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

During the period ended March 31, 2023, the Company elected a new accounting classification regarding certain of its investments in debt securities, as further described below, as the Company classifies securities on a trade-by-trade basis upon purchase.

The Company did not transfer any securities between classifications.

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

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

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

Treasury securities as trading securities.

Variable Interest Entities

1 unchanged sentence

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

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

VIEs for Which the Company is the Primary Beneficiary

1 unchanged sentence

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.

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(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 nine months ended September 30, 2022 (1) is set forth as follows:

Three Months Ended September 30, 2022 Nine Months Ended September 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 months ended March 31, 2023 and 2022 is set forth as follows:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in thousands)

3 unchanged sentences

Net interest income $ 5,014 $ 4,925

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

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

Net unrealized gain (loss) on mortgage loans in securitization trusts - at fair value 21,441 ( 55,174 )

Unrealized gain (loss) on mark-to-market of non-recourse securitization obligation - at fair value ( 27,768 ) 17,421

Securitization expenses — ( 2,019 )

( 1,115 ) ( 3,405 )

Operating expenses ( 247 ) ( 695 )

Realized losses and operating expenses ( 757 ) ( 195 )

Net loss from consolidated VIEs $ ( 2,070 ) $ ( 35,042 )

(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.

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

VIEs for Which the Company is Not the Primary Beneficiary

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

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

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

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

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

The Company 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 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.

These securities were issued as a result of the unconsolidated securitizations where the Company retained bonds from the issuances of securitizations issued by a depositor that the Company does not control.

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

The securities received in the aforementioned 2019 and 2020 securitization transactions were classified as “available for sale” upon receipt and are included in “RMBS - at fair value” and “CMBS - at fair value” on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, and details on the accounting treatment and fair value methodology of the securities can be found in Note 10 — Fair Value Measurements .

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Residential Mortgage Loans

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

Residential mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s residential mortgage loan portfolio as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

($ 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 September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

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

See Note 6 — Notes Payable .

March 31, 2023 December 31, 2022

($ in thousands)

5 unchanged sentences

Unpaid principal balance of loans in foreclosure $ 1,463 $ 849

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Commercial Mortgage Loans

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

Commercial mortgage loans are measured at fair value.

The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s commercial mortgage loan portfolio as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

($ in thousands)

1 unchanged sentence

Unpaid principal balance $ 9,918 $ 9,928

Net discount on commercial mortgage loans purchased — ( 51 )

Change in fair value ( 458 ) ( 470 )

2 unchanged sentences

Weighted average remaining maturity (years) 7 8

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.

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.

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

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Investment Securities

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.

As of March 31, 2023, investment securities were comprised of non‑agency RMBS (“AOMT RMBS”), Whole Pool Agency RMBS, commercial mortgage backed securities (“CMBS”), and U.S.

Treasury securities.

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

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

Treasury securities held by the Company as of March 31, 2023 subsequently matured on April 11, 2023.

The Company did not hold any U.S.

Treasury securities as of December 31, 2022.

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

March 31, 2023 December 31, 2022

(in thousands)

RMBS $ 1,075,749 $ 482,824

AOMT RMBS $ 69,542 $ 69,922

Whole Pool Agency RMBS $ 447,568 $ 1,006,022

CMBS $ 6,329 $ 6,329

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

September 30, 2022:

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

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

March 31, 2023:

(in thousands)

AOMT RMBS (1)

Senior $ 47 $ ( 180 ) $ ( 133 )

Mezzanine $ 9,965 $ ( 1,372 ) $ 8,593

1 unchanged sentence

Interest Only/Excess 12,327 ( 1,684 ) 10,643

Retained RMBS in VIEs (2)

— ( 12,979 ) ( 12,979 )

Total AOMT RMBS $ 73,709 $ ( 44,711 ) $ 28,998

7 unchanged sentences

Total AOMT CMBS $ 6,480 $ — $ 6,480

(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:

Real Estate Securities at Fair Value Repurchase Debt Allocated Capital

(1) AOMT RMBS held as of March 31, 2023 included both retained tranches of securitizations in which the Company participated where the Company was not deemed to be the primary beneficiary, and additional securities issued by affiliates of Angel Oak Capital which were purchased in secondary market transactions.

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

These bonds have a fair value of $ 116.7 million.

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

December 31, 2022 Real Estate Securities at Fair Value Securities Sold Under Agreements to Repurchase Allocated Capital

(in thousands)

AOMT RMBS (1)

Senior $ 3,076 $ ( 4,089 ) $ ( 1,013 )

Mezzanine $ 1,958 $ ( 1,470 ) $ 488

1 unchanged sentence

Interest Only/Excess 10,424 ( 1,506 ) 8,918

Retained RMBS in VIEs (2)

— ( 24,586 ) ( 24,586 )

Total AOMT RMBS $ 61,960 $ ( 52,544 ) $ 9,416

Other Non-Agency RMBS

Subordinate $ 10,292 $ — $ 10,292

Interest Only/Excess 2,923 — 2,923

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

Whole Pool Agency RMBS

6 unchanged sentences

Total AOMT CMBS $ 6,111 $ — $ 6,111

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.

(1) AOMT RMBS held as of December 31, 2022 included both retained tranches of securitizations in which the Company participated where the Company was not deemed to be the primary beneficiary, and additional securities issued by affiliates of Angel Oak Capital which were purchased in secondary market transactions.

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

These bonds have a fair value of $ 110.5 million.

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

Treasury Bills as of

December 31, 2021 (1) :

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

Unrealized Loss Fair Value Net Effective Yield

Treasury securities as of

March 31, 2023 (1) :

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

($ in thousands)

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

March 31, 2023 $ 400,000 $ 363 $ 399,637 $ ( 5 ) $ 399,632 3.55 %

(1) There were no U.S.

Treasury Bills held as of September 30, 2022.

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

Treasury Bills is substantially equal, due to the short length of time until maturity on these financial instruments.

Treasury securities held as of December 31, 2022.

Notes Payable

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

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

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

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

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

all vary based on the counterparty.

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)

September 30,

2022 December 31,

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

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

As of March 31, 2023, cash collateral for margin maintenance requirements of approximately $ 15.4 million was held for the benefit of Global Investment Bank 3 within “restricted cash” on the condensed consolidated balance sheet.

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

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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

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

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

Spread Drawn Amount

Note Payable Base Interest Rate March 31, 2023 December 31, 2022

($ in thousands)

Multinational Bank 1 (1)

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

Multinational Bank 2 (2)

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

$ 147,261 $ 362,899

Global Investment Bank 1 (3)

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

Average Daily SOFR 2.25 % $ 160,457 $ 352,038

Global Investment Bank 2 (2)

1 month SOFR 2.20 % - 3.45 %

$ 98,335 231,981

Global Investment Bank 3 (3)

Compound SOFR 2.80 %

Regional Bank 1 (6)

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

278,795 119,137

Institutional Investors A and B (4)

1 month Term SOFR 3.50 % N/A 168,695

Regional Bank 1 (5)

1 unchanged sentence

Total $ 439,252 $ 639,870

(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) 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.

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

Subsequent to March 31, 2023, the Company extended this financing facility through October 25, 2023, with an interest rate pricing spread of 2.15 % (See Note 16 — Subsequent Events ).

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

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

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

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

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

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

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

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

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

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

The following table sets forth the total unused borrowing capacity of each financing line as of March 31, 2023:

Note Payable Borrowing Capacity Balance Outstanding Available Financing

(in thousands)

Multinational Bank 1 (1)

$ 600,000 $ 160,457 $ 439,543

Global Investment Bank 2 (1)

250,000 — 250,000

Global Investment Bank 3 (2)

278,795 278,795 —

Total $ 1,128,795 $ 439,252 $ 689,543

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

(2) As of March 31, 2023, this financing facility had no unused borrowing capacity as the outstanding borrowings were based on static pools of mortgage loans.

Angel Oak Mortgage REIT, 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 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 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 %.

(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, 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 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) 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 %.

Due to Broker

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 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.

The “Due to broker” account on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively, in the amounts of $ 447.6 million and $ 1.0 billion relates to the purchase of Whole Pool Agency RMBS at quarter-end in the first and fourth quarters of 2023 and 2022, respectively.

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

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

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

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

Securities Sold Under Agreements to Repurchase

1 unchanged sentence

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

Restricted cash of margin collateral for securities sold under agreements to repurchase was $ 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

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

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

March 31, 2023

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

($ in thousands)

RMBS $ 67,454 4.50 % 15

Treasury securities $ 397,503 3.65 % 11

$ 44,711 6.55 % 12

Total $ 442,214 3.94 % 11

2 unchanged sentences

($ in thousands)

Treasury Bills $ 248,750 0.12 % 6

RMBS 360,501 0.16 % 18

52,544 6.07 % 13

Total $ 52,544 6.07 % 13

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

See Note 5 - Investment Securities.

The repurchase debt against the U.S.

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

Treasury securities.

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

3 unchanged sentences

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

Derivative instruments as of September 30, 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.

Derivative instruments as of March 31, 2023 and December 31, 2022 included both TBAs and interest rate futures contracts.

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

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

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

1 unchanged sentence

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

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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

1 unchanged sentence

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.

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

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

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

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

Notional Amounts

1 unchanged sentence

($ in thousands)

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

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

March 31, 2023 Interest rate futures 3,327 $ — $ ( 6,909 ) $ — $ 332,700

March 31, 2023 TBAs N/A $ — $ ( 1,508 ) $ — $ 468,800

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

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

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

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, 2023 and March 31, 2022 are set forth as follows:

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

(in thousands)

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

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

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

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

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

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.

Angel Oak Mortgage, Inc.

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

Included in Note 11 — Fair Value Measurements to the Consolidated Financial Statements for the year ended December 31, 2022 included in the Annual Report on Form 10-K is a detailed description of our other financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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 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:

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

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

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

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of March 31, 2023:

Level 1 Level 2 Level 3 Total

Assets, at fair value (in thousands)

(in thousands)

Assets, at fair value

Residential mortgage loans $ — $ 539,879 $ 4,557 $ 544,436

Residential mortgage loans in securitization trust — 1,058,778 3,807 1,062,585

Residential mortgage loans in securitization trusts — 1,023,085 5,683 1,028,768

Commercial mortgage loans — 9,460 — 9,460

2 unchanged sentences

— 73,709 — 73,709

Agency whole pool loan securities — 1,004,158 — 1,004,158

Whole Pool Agency RMBS — 449,178 — 449,178

AOMT CMBS (1)

— 6,480 — 6,480

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

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

U.S Treasury Securities 399,632 — — 399,632

Total assets, at fair value $ 399,632 $ 2,101,791 $ 10,240 $ 2,511,663

Liabilities, at fair value

Unrealized depreciation on futures contracts $ 6,909 $ — $ — $ 6,909

Unrealized depreciation on TBAs 1,508 — — 1,508

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

1 unchanged sentence

Total liabilities, at fair value $ 8,417 $ 550,540 $ — $ 558,957

(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.

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

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

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

3 unchanged sentences

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 (loss) for the periods presented.

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

2 unchanged sentences

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

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

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

The following table sets forth information regarding the Company’s significant Level 3 inputs as of March 31, 2023:

Asset Fair Value Unobservable Input Range Average

8 unchanged sentences

Expected remaining life 1.42 - 4.08 years

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

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

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

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

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

As of 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).

Assets and Liabilities Held at Amortized Cost — Fair Value Disclosure

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

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

As of March 31, 2023, the total amortized cost basis and fair value of our non-recourse securitization obligations was $ 1.1 billion and $ 924.2 million, respectively, a difference of approximately $ 142.1 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 the fair value option was not elected at the time of the creation of these obligations).

The difference between the amortized cost and fair value solely attributable to AOMT 2021-4 and 2021-7 is approximately $ 89.3 million.

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

Angel Oak Mortgage, Inc.

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

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

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

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

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

Investment in Majority-Owned Affiliate

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

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

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

The amortized cost and fair value of this investment as of March 31, 2023 was approximately $ 11.5 million and $ 12.0 million, respectively.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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— 61,960 — 61,960

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

Whole Pool Agency RMBS — 993,378 — 993,378

AOMT CMBS (1)

— 6,111 — 6,111

Treasury Bills 249,999 — — 249,999

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

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

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

Total assets, at fair value $ 14,756 $ 2,853,379 $ 15,952 $ 2,884,087

Liabilities, at fair value

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

Total liabilities $ 728 $ — $ — $ 728

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

$ — $ 530,560 $ — $ 530,560

Total liabilities, at fair value $ — $ 530,560 $ — $ 530,560

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

(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.

All AOMT CMBS held as of December 31, 2022 was comprised of a small-balance commercial loan securitization issuance in which the Company participated.

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

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.

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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 (loss) for the periods presented.

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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Expected remaining life 1.42 - 3.72 years

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

Sale or Liquidation timeline 39 - 50 months

39 - 50 months

Related Party Transactions

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

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

The following table sets forth certain financial information pertaining to whole loan activity purchased from affiliates during the period and year ended and as of September 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 March 31, 2023 and December 31, 2022:

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

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($ in thousands)

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

March 31, 2023 $ — — 532

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

(1) Excludes loans held in consolidated securitizations.

Angel Oak Mortgage, Inc.

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

2 unchanged sentences

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

The 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:

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($ in thousands)

September 30, 2022 $ — None 4

March 31, 2023 $ — None 4

December 31, 2022 $ — None 4

Pre-IPO Management Fee

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 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, 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.

Securitization Transactions and Majority-Owned Affiliate

From time to time, the Company participates in securitization transactions with other affiliates of Angel Oak Capital.

See Note 2 — Variable Interest Entities , “ VIEs for Which the Company is Not the Primary Beneficiary” and Note 14 — Other Assets .

Management Fee

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

Incentive Fee

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

To date, the incentive fee has not been earned.

Operating Expense Reimbursements

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

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.

Commitments and Contingencies

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

As of September 30, 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.

As of March 31, 2023, the Company was not aware of any legal claims that could materially impact its financial condition.

As of March 31, 2023, the Company had no unfunded commitments.

Accumulated Other Comprehensive Income/(Loss)

The following table sets forth the net unrealized gain/(loss) on AFS securities for the three months ended March 31, 2023 and 2022, which is the sole component of the changes in the Company’s Accumulated Other Comprehensive Income/(Loss) (“AOCI”) for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in thousands)

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

Net unrealized gain/(loss) on AFS securities 14,804 ( 12,987 )

AOCI balance, end of period $ ( 6,323 ) $ ( 9,987 )

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

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

March 31, 2023 December 31, 2022

($ in thousands)

Investment in Majority-Owned Affiliate $ 11,464 $ —

Deferred tax asset 3,457 3,457

Prepaid expenses 1,323 1,310

Total other assets $ 16,244 $ 4,767

Investment in Majority-Owned Affiliate (“MOA”)

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

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

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

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

See Note 10 — Fair Value Measurements .

Equity and Earnings per Share (“EPS”)

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.

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

September 30, 2021 Nine Months Ended

September 30, 2021

(in thousands, except share data)

Basic Earnings per Common Share:

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

In the calculations of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022, the Company included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights.

Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

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

For the three months ended March 31, 2022, there were 507,900 outstanding restricted stock awards that were anti-dilutive and thus not included in the diluted weighted average common shares outstanding.

There were no market-based performance share units outstanding as of March 31, 2022.

The following table sets forth the calculation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022:

March 31, 2023 March 31, 2022

(in thousands, except share and per share data)

Basic Earnings (Loss) per Common Share:

Net income (loss) to common stockholders $ 530 $ ( 43,545 )

Dividends allocated to participating securities ( 85 ) —

Net income (loss) to common stockholders - basic $ 445 $ ( 43,545 )

Basic weighted average common shares outstanding 24,662,737 24,642,961

Basic earnings per common share $ 0.25 $ 0.94

Diluted Earnings per Common Share:

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

Basic earnings (loss) per common share $ 0.02 $ ( 1.77 )

Diluted Earnings (Loss) per Common Share:

Net income (loss) to common stockholders - basic $ 530 $ ( 43,545 )

Dividends allocated to participating securities ( 85 ) —

Net income (loss) to common stockholders - diluted $ 445 $ ( 43,545 )

Basic weighted average common shares outstanding 24,662,737 24,642,961

Net effect of dilutive equity awards 262,620 —

Diluted weighted average common shares outstanding 24,925,357 24,642,961

Diluted earnings per common share $ 0.25 $ 0.93

Diluted earnings (loss) per common share $ 0.02 $ ( 1.77 )

Angel Oak Mortgage REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

Subsequent Events

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.

On April 26, 2023, the Company renewed its loan financing facility with Multinational Bank 1 in accordance with the mechanism for six-month renewal periods as provided for in the original Master Repurchase Agreement with Multinational Bank 1, dated April 13, 2022.

This loan financing facility has been extended to October 25, 2023, and the interest rate pricing spread decreased to 2.15 %.

On May 4, 2023, the Company declared a dividend of $ 0.32 per share of common stock, to be paid on May 31, 2023 to common stockholders of record as of May 22, 2023.

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

What changed 10-Q

Item 1. Financial Statements