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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from __________ to __________
Commission file number 001-40495

Angel Oak Mortgage, Inc.
(Exact name of registrant as specified in its charter)
Maryland37-1892154
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

3344 Peachtree Road Northeast, Suite 1725, Atlanta, Georgia 30326
(Address of Principal Executive Offices and Zip Code)

404-953-4900
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueAOMRNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
Accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
                
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

The registrant had 24,927,269 shares of common stock, $0.01 par value per share, outstanding as of May 16, 2022.



ANGEL OAK MORTGAGE, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

Part I - FINANCIAL INFORMATION
Part II. Other Information


1

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

Angel Oak Mortgage, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except for share data)

As of:
March 31, 2022December 31, 2021
ASSETS
Residential mortgage loans - at fair value$1,103,773 $1,061,912 
Residential mortgage loans in securitization trusts - at fair value1,077,967 667,365 
Commercial mortgage loans - at fair value 20,704 18,664 
RMBS - at fair value 491,287 485,634 
CMBS - at fair value10,055 10,756 
U.S. Treasury securities - at fair value 349,992 249,999 
Cash and cash equivalents90,445 40,801 
Restricted cash5,448 11,508 
Principal and interest receivable28,012 25,984 
Unrealized appreciation on TBAs and interest rate futures contracts - at fair value17,027 2,428 
Other assets3,491 2,878 
Total assets$3,198,201 $2,577,929 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Notes payable$956,165 $853,408 
Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts (see Note 2)1,031,200 616,557 
Securities sold under agreements to repurchase477,422 609,251 
Unrealized depreciation on TBAs and interest rate futures contracts - at fair value 728 
Due to broker298,654  
Collateral due to counterparties8,024  
Accrued expenses530 442 
Accrued expenses payable to affiliate1,204 1,425 
Interest payable1,709 1,283 
Income taxes payable 1,600 
Management fee payable to affiliate1,857 1,845 
Total liabilities$2,776,765 $2,086,539 
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Series A preferred stock, $0.01 par value, 12% cumulative, non-voting, 125 shares issued and outstanding as of March 31, 2022 and December 31, 2021
101 101 
Common stock, $0.01 par value. As of March 31, 2022: 350,000,000 shares authorized, 25,085,796 shares issued and outstanding. As of December 31, 2021: 350,000,000 shares authorized, 25,227,328 shares issued and outstanding.
252 252 
Additional paid-in capital463,088 476,510 
Accumulated other comprehensive (loss) income(9,987)3,000 
Retained (deficit) earnings(32,018)11,527 
Total stockholders’ equity$421,436 $491,390 
Total liabilities and stockholders’ equity$3,198,201 $2,577,929 


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

2


Angel Oak Mortgage, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except for share and per share data)
Three Months Ended
March 31, 2022March 31, 2021
INTEREST INCOME, NET
Interest income$27,109 $10,033 
Interest expense10,170 832 
NET INTEREST INCOME16,939 9,201 
REALIZED AND UNREALIZED (LOSSES) GAINS, NET
Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS26,416 (2,288)
Net unrealized (loss) gain on mortgage loans and derivative contracts(80,181)4,518 
TOTAL REALIZED AND UNREALIZED (LOSSES) GAINS, NET(53,765)2,230 
EXPENSES
Operating expenses3,784 523 
Operating expenses incurred with affiliate855 439 
Due diligence and transaction costs770 64 
Stock compensation871  
Securitization costs2,019  
Management fee incurred with affiliate1,873 918 
Total operating expenses10,172 1,944 
INCOME BEFORE INCOME TAXES(46,998)9,487 
     Income tax benefit(3,457) 
NET (LOSS) INCOME$(43,541)$9,487 
Preferred dividends(4)(4)
NET (LOSS) INCOME ALLOCABLE TO COMMON STOCKHOLDER(S)$(43,545)$9,483 
Other comprehensive (loss) income(12,987)529 
TOTAL COMPREHENSIVE (LOSS) INCOME$(56,532)$10,012 
Basic (loss) earnings per common share$(1.77)$0.60 
Diluted (loss) earnings per common share$(1.77)$0.60 
Weighted average number of common shares outstanding:
Basic24,642,96115,724,050
Diluted24,642,96115,724,050











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

3


Angel Oak Mortgage, Inc.
Condensed Consolidated Statements of Changes in Stockholder(s)’ Equity
(Unaudited)
(in thousands)

For the Three Months Ended March 31, 2021
Preferred StockCommon Stock at ParAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Stockholder’s Equity
Stockholder’s equity as of December 31, 2020
$101 $ $246,646 $(1,039)$2,601 $248,309 
Dividends declared - preferred— — — — (4)(4)
Unrealized gain on RMBS and CMBS— — — 529 — 529 
Equity contribution from common stockholder— — 56,261 — — 56,261 
Net income— — — — 9,487 9,487 
Stockholder’s equity as of March 31, 2021
$101 $ $302,907 $(510)$12,084 $314,582 


For the Three Months Ended March 31, 2022
Preferred StockCommon Stock at ParAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Stockholders’ Equity
Stockholders’ equity as of December 31, 2021
$101 $252 $476,510 $3,000 $11,527 $491,390 
Repurchase of common stock— — (3,003)— — (3,003)
Non-cash equity compensation— — 871 — — 871 
Dividends declared - preferred— — — — (4)(4)
Unrealized loss on RMBS and CMBS— — — (12,987)— (12,987)
Dividends paid on common stock— — (11,290)— — (11,290)
Net loss— — — — (43,541)(43,541)
Stockholders’ equity as of March 31, 2022
$101 $252 $463,088 $(9,987)$(32,018)$421,436 

























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

4


Angel Oak Mortgage, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income$(43,541)$9,487 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net realized (gain) loss on mortgage loans, derivative contracts, RMBS, and CMBS(26,416)2,288 
Net unrealized loss (gain) on mortgage loans and derivative contracts80,181 (4,518)
Amortization of debt issuance costs257 19 
Net amortization of premiums and discounts on mortgage loans3,695 27 
Non-cash equity compensation871  
Net change in:
Purchases of residential mortgage loans from non-affiliates(330,299) 
Purchases of residential mortgage loans from affiliates(347,086)(92,734)
Principal payments on residential mortgage loans18,239 5,149 
Collateral due to counterparties8,024  
Margin received from interest rate futures contracts and TBAs33,827 1,702 
Principal and interest receivable(2,028)(2,612)
Other assets(2,447)(88)
Management fee payable to affiliate12  
Accrued expenses83 212 
Accrued expenses payable to affiliate(221)(732)
Interest payable426 185 
NET CASH USED IN OPERATING ACTIVITIES(606,423)(81,615)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments in RMBS and CMBS (107,789)
Purchases of investments in U.S. Treasury Bills(349,992) 
Maturity of U.S. Treasury Bills249,999 149,993 
Sale of RMBS271,995 19,570 
Principal payments on RMBS3,635 2,281 
Principal payments on residential mortgage loans in securitization trusts88,228  
Purchases of commercial mortgage loans(3,180) 
Sale of commercial mortgage loans640  
Principal payments on commercial mortgage loans38 5 
NET CASH PROVIDED BY INVESTING ACTIVITIES261,363 64,060 
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to common stockholders(11,290) 
Repurchase of common stock(3,003) 
Contributions from prior common stockholder 56,261 
Principal payments on loans held in securitization trusts(88,228) 
Cash paid for debt issuance costs(24)(59)
Proceeds from securitization520,262  
Net proceeds from (payments on) securities sold under agreements to repurchase(131,830)(150,495)
Net proceeds from (payments on) notes payable102,757 109,892 
NET CASH PROVIDED BY FINANCING ACTIVITIES388,644 15,599 
CHANGE IN CASH AND RESTRICTED CASH43,584 (1,956)
CASH AND RESTRICTED CASH, beginning of period (1)
52,309 45,973 
CASH AND RESTRICTED CASH, end of period (1)
$95,893 $44,017 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest$9,744 $647 

(1) Cash, cash equivalents, and restricted cash as of March 31, 2022 included cash and cash equivalents of $90.4 million and restricted cash of $5.4 million, and as of March 31, 2021 included cash and cash equivalents of $40.0 million and restricted cash of $4.1 million.
The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of this statement.

5


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



1.    Organization and Basis of Presentation
Angel Oak Mortgage, 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 may also invest in other residential mortgage loans, residential mortgage‑backed securities (“RMBS”), and other mortgage‑related assets. The Company’s objective is to generate attractive risk‑adjusted returns for its stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles.
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 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 Operating Partnership
On February 5, 2020, the Company formed Angel Oak Mortgage Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), through which substantially all of its assets are held and substantially all of its operations are conducted, either directly or through subsidiaries. The Company holds all of the limited partnership interests in the Operating Partnership and indirectly holds the sole general partnership interest in the Operating Partnership through the general partner, which is the Company’s wholly-owned subsidiary.

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.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report on Form 10-K”).

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year. The condensed consolidated financial statements include the accounts of the Company and its wholly‑owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements requires the Company to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and
6


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from the Company’s estimates and the differences could be material.
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.

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

The Company had previously elected the fair value option for many of its assets and liabilities as provided for under Accounting Standards Codification 825, Financial Instruments, with certain exceptions, including non-recourse securitization obligations, collateralized by residential mortgage loans. During the three months ended March 31, 2022, the Company elected the fair value option for the portion of the non-recourse securitization obligation, collateralized by residential mortgage loans incurred with the issuance of AOMT 2022-1, which was issued during the three months ended March 31, 2022. Debt issuance costs previously capitalized in other AOMT issuances (AOMT 2021-4 and AOMT 2021-7) continue to amortize over the related term of the liability (See Note 2 - Variable Interest Entities).

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 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 DM/Yield, recovery assumptions, tranche type, collateral coupon, age and loan size and other inputs specific to each security. These quotes are most reflective of the price that would be achieved if the bonds were sold to an independent third party on the date of the condensed consolidated financial statements.This liability is categorized as Level 2 in the fair value hierarchy.
2.    Variable Interest Entities
Since its inception, the Company has utilized Variable Interest Entities (“VIEs”) for the purpose of securitizing whole mortgage loans to obtain long-term non-recourse financing. The Company evaluates its interest in each VIE to determine if it is the primary beneficiary.
VIEs for Which the Company is the Primary Beneficiary
In the third and fourth quarters of 2021, and during the first quarter of 2022, the Company entered into securitization transactions where it was determined that the Company was the primary beneficiary, as, with respect to each securitization vehicle, it controls the class of securities with call rights, or “controlling class” of securities, the XS tranche. The Company was the sole entity to contribute residential whole mortgage loans to each of the the securitization vehicles, AOMT 2021-4, AOMT 2021-7 and AOMT 2022-1, respectively.
During the three months ended March 31, 2022, in the AOMT 2022-1 transaction, the Company securitized and consolidated approximately $537.6 million unpaid principal balance of seasoned residential non-QM mortgage loans.
The retained beneficial interest in VIEs for which the Company is the primary beneficiary is the subordinated tranches of the securitization and further interests in additional interest‑only tranches. The table below sets forth the fair values of the assets and liabilities recorded in the consolidated balance sheet related to these consolidated VIEs as of March 31, 2022 and December 31, 2021:

7


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



March 31, 2022December 31, 2021
Assets:(in thousands)
Residential mortgage loans in securitization trusts - cost$1,125,597 $665,510 
Fair value adjustment(47,630)1,855 
Residential mortgage loans in securitization trusts - at fair value$1,077,967 $667,365 
Accrued interest receivable2,130 1,728 
Liabilities (1):
Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, amortized cost$550,462 $619,108 
Less: debt issuance costs capitalized(2,303)(2,551)
Non-recourse securitization obligations, collateralized by residential mortgage loans, amortized cost, net548,159 616,557 
Non-recourse securitization obligations, collateralized by residential mortgage loans - principal balance, subject to fair value adjustment500,462  
Fair value adjustment(17,421) 
Non-recourse securitization obligations, collateralized by residential mortgage loans - at fair value, net483,041  
Total non-recourse securitization obligations, collateralized by residential mortgage loans, net$1,031,200 $616,557 
(1) During the three months ended March 31, 2022, the Company elected the fair value option for the securitization obligation of AOMT 2022-1. Thus, debt issuance costs of $2.0 million incurred during the first quarter of 2022 were immediately recorded to securitization expense upon electing the fair value option, and the portion of the obligation incurred during the three months ended March 31, 2022 is presented at fair value, while the portion of the obligation incurred with the issuances of AOMT 2021-7 and 2021-4 is presented at amortized cost.
Income and expense amounts related to the consolidated VIEs recorded in the consolidated statements of operations and comprehensive income (loss) for the period ended March 31, 2022 (1) is set forth as follows:
Total Consolidated VIEs
(in thousands)
Interest income$9,508 
Interest expense, non-recourse liabilities (2)
(4,583)
Net interest income4,925 
Net unrealized loss on mortgage loans in securitization trusts - at fair value(55,174)
Unrealized gain on mark-to-market of non-recourse securitization obligation - at fair value17,421 
Securitization expenses incurred in issuance of AOMT 2022-1(2,019)
Operating expenses(195)
Net expense from consolidated VIEs$(35,042)
(1) The Company had no consolidated VIEs during the period ended March 31, 2021.
(2) Includes amortization of debt issuance costs for AOMT 2021-4 and 2021-7.

8


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



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. These VIEs were formed to facilitate securitization issuances that were comprised of secured residential whole loans or small balance commercial loans contributed to securitization trusts.
These securities were issued as a result of the unconsolidated securitizations where the Company retained bonds from the issuances of AOMT 2019-2, AOMT 2019-4, AOMT 2019-6, AOMT 2020-3, and AOMT 2020-SBC1. The Company determined that it was not then and is not now the primary beneficiary of any of these entities, as no primary beneficiary was identified in the assessment of primary beneficiary determination, and thus has not consolidated the operating results or statements of financial position of any of these entities. The Company performs ongoing reassessments of all VIEs in which the Company has participated since its inception as to whether changes in the facts and circumstances regarding the Company’s involvement with a VIE would cause the Company’s consolidation conclusion to change, and the Company’s assessment of the VIEs in which the Company participated during the years 2019 and 2020 remains unchanged.
The securities received in the aforementioned 2019 and 2020 securitization transactions are included in “RMBS - at fair value” and “CMBS - at fair value” on the consolidated balance sheets as of March 31, 2022 and December 31, 2021, and details on the accounting treatment and fair value methodology of the securities can be found in Note 9, Fair Value Measurements. See Note 5, Investment Securities, for the fair value of AOMT securities held by the Company as of March 31, 2022 and December 31, 2021 that were retained by the Company as a result of the securitization transactions in 2020 and 2019.
3.    Residential Mortgage Loans
Residential mortgage loans are measured at fair value. The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s residential mortgage loan portfolio as of March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
($ in thousands)
Cost$1,160,553 $1,063,146 
Unpaid principal balance$1,121,910 $1,022,461 
Premium on mortgage loans purchased38,642 40,685 
Change in fair value(56,779)(1,234)
Fair value$1,103,773 $1,061,912 
Weighted average interest rate4.52 %4.49 %
Weighted average remaining maturity (years)3130
The following table sets forth data regarding the number of consumer mortgage loans secured by residential real property 90 or more days past due and also those in formal foreclosure proceedings, and the recorded investment and unpaid principal balance of such loans as of March 31, 2022 and December 31, 2021:
As of:March 31, 2022December 31, 2021
($ in thousands)
Number of mortgage loans 90 or more days past due7 8 
Recorded investment in mortgage loans 90 or more days past due$2,746 $3,241 
Unpaid principal balance of loans 90 or more days past due$3,103 $3,100 
Number of mortgage loans in foreclosure10 7 
Recorded investment in mortgage loans in foreclosure$3,752 $2,125 
Unpaid principal balance of loans in foreclosure$3,661 $2,113 

9


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



4.    Commercial Mortgage Loans
Commercial mortgage loans are measured at fair value. The following table sets forth the cost, fair value, weighted average interest rate, and weighted average remaining maturity of the Company’s commercial mortgage loan portfolio as of March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
($ in thousands)
Cost$21,191$18,641 
Unpaid principal balance$21,221$18,698 
Net discount on commercial mortgage loans purchased(30)(51)
Change in fair value(487)17 
Fair value$20,704$18,664 
Weighted average interest rate6.12 %6.25 %
Weighted average remaining maturity (years)98
There were no commercial mortgage loans more than 90 days overdue as of March 31, 2022, and there was one commercial mortgage loan more than 90 days overdue as of December 31, 2021 which loan was also in foreclosure. During the three months ended March 31, 2022, the commercial mortgage loan that had been more than 90 days overdue and in foreclosure as of December 31, 2021 was sold to a third party.
5.    Investment Securities
As of March 31, 2022 and December 31, 2021, investment securities were comprised of non‑agency RMBS and Freddie Mac and Fannie Mae “whole pool agency RMBS” (together, “RMBS”), commercial mortgage backed securities (“CMBS”), and U.S. Treasury securities as presented in the condensed consolidated balance sheet. The U.S. Treasury securities held by the Company as of March 31, 2022 and December 31, 2021 matured through April 12, 2022 and on January 6, 2022, respectively. The Company recognized a nominal amount of accretion on U.S. Treasury securities for each of the three months ended March 31, 2022 and March 31, 2021.
10


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table sets forth a summary of RMBS and CMBS at cost as of March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
(in thousands)
RMBS$501,418 $482,824 
CMBS$10,841 $10,875 
The following table sets forth certain information about the Company’s investments in RMBS and CMBS as of March 31, 2022 and December 31, 2021:
Real Estate Securities at Fair ValueSecurities Sold Under Agreement to RepurchaseAllocated Capital
March 31, 2022:(in thousands)
AOMT RMBS (1)
Senior$1,840 $(2,725)$(885)
Mezzanine2,158 (1,622)536 
Subordinate58,619 (13,695)44,924 
Interest Only/Excess12,111  12,111 
Total AOMT RMBS$74,728 $(18,042)$56,686 
Other Non-Agency RMBS
Subordinate$6,899 $(1,728)$5,171 
Interest Only/Excess2,815  2,815 
Total Other Non-Agency RMBS$9,714 $(1,728)$7,986 
Whole Pool Agency RMBS
Fannie Mae$208,106 $(25,712)$182,394 
Freddie Mac198,739 (83,073)115,666 
Whole Pool Total Agency RMBS$406,845 $(108,785)$298,060 
Total RMBS
$491,287 $(128,555)$362,732 
AOMT CMBS
Subordinate$7,383 $ $7,383 
Interest Only/Excess2,672  2,672 
Total AOMT CMBS $10,055 $ $10,055 

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

11


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



December 31, 2021:Real Estate Securities at Fair ValueRepurchase DebtAllocated Capital
(in thousands)
AOMT RMBS (1)
Senior$3,076 $(4,089)$(1,013)
Mezzanine2,178 (1,631)547 
Subordinate80,058  80,058 
Interest Only/Excess15,052  15,052 
Total AOMT RMBS$100,364 $(5,720)$94,644 
Other Non-Agency RMBS
Subordinate$10,292 $ $10,292 
Interest Only/Excess2,923  2,923 
Total Other Non-Agency RMBS$13,215 $ $13,215 
Whole Pool Agency RMBS
Fannie Mae$281,225 $(267,286)$13,939 
Freddie Mac90,830 (87,495)3,335 
Whole Pool Total Agency RMBS$372,055 $(354,781)$17,274 
Total RMBS$485,634 $(360,501)$125,133 
AOMT CMBS
Subordinate$7,993 $ $7,993 
Interest Only/Excess2,763  2,763 
Total AOMT CMBS$10,756 $ $10,756 

(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.

The following table sets forth certain information about the Company’s investments in U.S. Treasury Bills as of March 31, 2022 and December 31, 2021:
DateFace ValueUnamortized Discount, net
Amortized Cost (1)
Unrealized LossFair ValueNet Effective Yield
($ in thousands)
March 31, 2022$225,000 $8 $224,992 $ $224,992 10.00 basis points
March 31, 2022$125,000 $ $125,000 $ $125,000 1.00 basis point
December 31, 2021$250,000 $ $250,000 $(1)$249,999 2.30 basis points
(1) 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.
6.    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. 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; all vary based on the counterparty.
12


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table sets forth the details of all the lines of credit available to the Company and drawn amounts for whole loan purchases as of March 31, 2022 and December 31, 2021:
Drawn Amount
Line of CreditFacility Limit
Base Interest Rate (A)
Interest Rate Spread (A)
March 31, 2022December 31, 2021
($ in thousands)
Barclays Bank PLC (1)
$400,000 1 month LIBOR
1.70% - 3.50%
$379,333 $362,899 
Nomura Corporate Funding Americas, LLC (2)
$300,000 1 month or 3 month LIBOR
1.70% - 3.50%
$20,207 103,149 
Deutsche Bank, AG (3)
$250,000 1 month LIBOR
2.00% - 3.25%
$235,743 231,981 
Goldman Sachs Bank USA (4)
$200,000 3 month LIBOR2.25%$193,351 109,283 
Banc of California, National Association (5)
$75,000 1 month LIBOR
2.50% - 3.13%
$52,869 34,838 
Veritex Community Bank (6)
$75,000 1 month LIBOR2.30%$74,662 11,258 
   Total$1,300,000 $956,165 $853,408 

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

(1) This agreement terminates on September 20, 2022. On January 27, 2022, this repurchase facility was amended to state that interest will accrue on any outstanding balance at a rate based on Term SOFR plus a spread and increase the maximum purchase price permitted under the Master Repurchase Agreement to $550.0 million from $400.0 million, which was subject to reduction to $400.0 million upon the issuance of securities pursuant to a securitization of the assets underlying the Master Repurchase Agreement which occurred on February 7, 2022.

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

(3) On February 4, 2022, this facility was amended to extend the initial termination date of the Master Repurchase Agreement from February 11, 2022 to February 2, 2024; remove any draw fees; and adjust the pricing rate whereby upon the Company’s or the Subsidiary’s repurchase of a mortgage loan, the Company or the Subsidiary is required to repay Deutsche Bank the principal amount related to such mortgage loan plus accrued and unpaid interest at a rate (determined based on the type of loan) equal to the sum of (A) the greater of (i) 0.00% and (ii) Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) and (B) a spread generally ranging from 2.20% to 3.45%.

(4) 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.

(5) On March 7, 2022, the agreement was amended to terminate on March 16, 2023, unless terminated earlier pursuant to the terms of the agreement. Additionally, the amendment increased the aggregate purchase price limit to $75.0 million from $50.0 million, and beginning March 8, 2022, provided that interest will accrue on any new transactions under the Loan Financing Line at a rate based on Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) plus an additional spread.

(6) This agreement terminates on August 16, 2023. On February 11, 2022, the Company amended the financing facility to (1) increase the size of the financing facility to $75.0 million from $50.0 million, and (2) interest will accrue on any outstanding balance at a rate based on Term SOFR (which is defined as the forward-looking term rate based on the Secured Overnight Financing Rate for a corresponding tenor of one month) plus a margin equal to 2.41% per annum; provided that the interest rate may not be less than 3.125% per annum.
7.    Securities Sold Under Agreements to Repurchase
Transactions involving securities sold under agreements to repurchase are treated as collateralized financial transactions, and are recorded at their contracted repurchase amounts. Margin (if required) for securities sold under agreements to repurchase represents margin collateral amounts held to ensure that the Company has sufficient coverage for securities sold under agreements to repurchase in case of adverse price changes. Restricted cash was substantially comprised of margin collateral for securities sold under agreements to repurchase as of each of March 31, 2022 and December 31, 2021.
13


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table summarizes certain characteristics of the Company’s repurchase agreements as of March 31, 2022 and December 31, 2021:
March 31, 2022
Repurchase AgreementsAmount OutstandingWeighted Average Interest RateWeighted Average Remaining Maturity (Days)
($ in thousands)
U.S. Treasury Bills$348,867 0.32 %9
RMBS128,555 0.56 %15
Total$477,422 0.38 %11
December 31, 2021
Repurchase AgreementsAmount OutstandingWeighted Average Interest RateWeighted Average Remaining Maturity (Days)
($ in thousands)
U.S. Treasury Bills$248,750 0.12 %6
RMBS360,501 0.16 %18
Total$609,251 0.15 %13

Although the transactions under repurchase agreements represent committed borrowings until maturity, the lenders retain the right to mark the underlying collateral at fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls.
8.    Derivative Financial Instruments
In the normal course of business, the Company enters into derivative financial instruments to manage its exposure to market risk, including interest rate risk and prepayment risk on its whole loan investments. The derivatives in which the Company invests, and the market risk that the economic hedge is intended to mitigate are further discussed below. Derivative instruments as of March 31, 2022 and December 31, 2021 included both “To be Announced” forward-settling of mortgage-backed securities trades (“TBAs”) and interest rate futures contracts.

The Company uses interest rate futures as economic hedges to hedge a portion of its interest rate risk exposure. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. 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.

The Company may at times hold TBAs in order to mitigate its interest rate risk on certain specified mortgage-backed securities. Amounts or obligations owed by or to the Company are subject to the right of set-off with the TBA counterparty. 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.
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.
The Company considers the notional amounts, categorized by primary underlying risk, to be representative of the volume of its derivative activities.
14


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table sets forth the derivative instruments presented on the condensed consolidated balance sheets and notional amounts as of March 31, 2022 and December 31, 2021:
Notional Amounts
As of:Derivatives Not Designated as Hedging InstrumentsNumber of ContractsAssetsLiabilitiesLong ExposureShort Exposure
($ in thousands)
March 31, 2022Interest rate futures11,139$13,279 $ $ $1,113,900 
March 31, 2022TBAsN/A$3,748 $ $ $445,019 
December 31, 2021Interest rate futures10,438$ $(728)$ $1,043,800 
December 31, 2021TBAsN/A$2,428 $ $ $523,938 
The gains and losses arising from these derivative instruments in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022 and March 31, 2021 are set forth as follows:

Derivatives Not Designated as Hedging InstrumentsNet Realized Gains (Losses) on Derivative InstrumentsNet Change in Unrealized Appreciation (Depreciation) on Derivative Instruments
(in thousands)
Three Months Ended March 31, 2022Interest rate futures$19,684 $14,007 
Three Months Ended March 31, 2022TBAs$14,413 $1,319 
Three Months Ended March 31, 2021Interest rate futures$1,702 $1,677 
Three Months Ended March 31, 2021TBAs$(373)$(67)

9.    Fair Value Measurements
For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.
In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.
As of March 31, 2022, our valuation policy and processes had not changed from those described in our consolidated financial statements for the year ended December 31, 2021 included in the Annual Report on Form 10-K, with the exception of electing the fair value option for non-recourse securitization obligations, collateralized by residential mortgage loans, as described in Note 1. Included in Note 10 to the Consolidated Financial Statements for the year ended December 31, 2021 is a detailed description of our other financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.


15


Angel Oak Mortgage, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of March 31, 2022:
Level 1Level 2Level 3Total
Assets, at fair value(in thousands)
Residential mortgage loans$ $1,097,275 $6,498 $1,103,773 
Residential mortgage loans in securitization trust 1,076,532 1,435 1,077,967 
Commercial mortgage loans 20,704  20,704 
Investments in securities
Non-Agency RMBS (1)
 84,442  84,442 
Agency whole pool loan securities 406,846