Angel Oak(AOMR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for Angel Oak Mortgage REIT, Inc ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements of Angel Oak Mortgage REIT, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with comprehensive notes providing detailed disclosures on the company's financial position, performance, and accounting policies Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (%) | | :--------------------------------------- | :----------------------------- | :------------------------------- | :--------- | | Total Assets | $2,554,488 | $2,269,769 | 12.5% | | Residential mortgage loans - at fair value | $200,665 | $183,064 | 9.6% | | Residential mortgage loans in securitization trusts - at fair value | $1,902,721 | $1,696,995 | 12.1% | | RMBS - at fair value | $361,884 | $300,243 | 20.5% | | Total Liabilities | $2,308,099 | $2,030,802 | 13.7% | | Non-recourse securitization obligation | $1,767,929 | $1,593,612 | 11.0% | | Due to broker | $254,228 | $201,994 | 25.9% | | Total Stockholders' Equity | $246,389 | $238,967 | 3.9% | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (YoY) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (YoY) | | :------------------------------------------------------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :----------- | :------------------------------------------- | :------------------------------------------- | :----------- | | Interest income | $35,094 | $25,902 | 35.5% | $67,961 | $51,114 | 33.0% | | Interest expense | $25,154 | $16,439 | 53.0% | $47,934 | $33,072 | 44.9% | | NET INTEREST INCOME | $9,940 | $9,463 | 5.0% | $20,027 | $18,042 | 11.0% | | TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET | $(4,075) | $(4,112) | (0.9%) | $9,368 | $5,150 | 81.9% | | Total operating expenses | $5,098 | $5,482 | (7.0%) | $8,097 | $10,162 | (20.3%) | | NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS | $767 | $(273) | (380.9%) | $21,298 | $12,601 | 69.0% | | Basic earnings (loss) per common share | $0.03 | $(0.01) | (400.0%) | $0.90 | $0.51 | 76.5% | | Diluted earnings (loss) per common share | $0.03 | $(0.01) | (400.0%) | $0.89 | $0.50 | 78.0% | Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Stockholders' equity as of Dec 31 | $238,967 | $256,106 | | Issuance of common stock, net of expenses | $1,994 | — | | Dividends paid on common stock | $(15,125) | $(15,989) | | Stock compensation | $533 | $1,260 | | Unrealized gain (loss) on RMBS and CMBS | $(1,186) | $1,828 | | Net income (loss) | $21,298 | $12,601 | | Stockholders' equity as of June 30 | $246,389 | $255,806 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (YoY) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------- | | Net income (loss) | $21,298 | $12,601 | 69.0% | | Purchases of residential mortgage loans from affiliates | $(82,757) | $(98,069) | (15.7%) | | Purchases of residential mortgage loans from non-affiliates | $(323,135) | $(60,635) | 432.9% | | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $(181,103) | $16,014 | (1230.8%) | | NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | $(5,769) | $(11,061) | (47.9%) | | Proceeds from issuances of common stock, net of expenses | $1,994 | — | N/A | | Proceeds from securitization | $269,915 | $274,793 | (1.8%) | | Net proceeds from issuance of senior notes | $41,161 | — | N/A | | NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | $188,346 | $(3,347) | (5726.9%) | | CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $1,474 | $1,606 | (8.2%) | Notes to the Condensed Consolidated Financial Statements - The notes are prepared in conformity with Article 10-01 of Regulation S-X for interim financial statements and should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2024[30] - Management's estimates, particularly for fair value, credit losses, and prepayment rates, are inherently subjective and actual results may differ materially[32] - The company operates in a single operating segment focused on acquiring, investing in, and financing mortgage-related assets[35] Note 1. Organization and Basis of Presentation - The company's primary strategy is to invest in newly-originated first lien non-QM loans, substantially sourced from its affiliate, Angel Oak Mortgage Lending[25] - Angel Oak Mortgage REIT, Inc. is externally managed by Falcons I, LLC, an affiliate of Angel Oak Capital, and has elected to be taxed as a REIT since December 31, 2019[29] Note 2. Variable Interest Entities - The company uses VIEs for securitizing whole mortgage loans to obtain long-term non-recourse financing[38] | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------------------------------------------------------ | :----------------------------- | :------------------------------- | | Aggregate unpaid principal balance of residential whole loans sold | $1,949,994 | $1,781,311 | | Residential mortgage loans in securitization trusts, at fair value | $1,902,721 | $1,696,995 | | Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts | $1,767,929 | $1,593,612 | | Weighted average coupon rate for residential mortgage loans in securitization trusts | 5.80% | 5.56% | | Weighted average fixed rate for Non-recourse securitization obligation issued | 4.14% | 3.86% | - During Q2 2025, the company and its affiliates issued and sold bonds with a current face value of $261.3 million to third-party investors, generating $271.7 million in proceeds[40] Note 3. Residential Mortgage Loans | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------ | :----------------------------- | :------------------------------- | | Fair value | $200,665 | $183,064 | | Unpaid principal balance | $193,268 | $178,373 | | Weighted average interest rate | 8.37% | 7.39% | | Weighted average remaining contractual maturity (years) | 29 | 30 | | Delinquency Status | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Number of mortgage loans 90+ days past due | 1 | — | | Recorded investment in mortgage loans 90+ days past due | $1,367 | — | | Number of mortgage loans in foreclosure | 2 | — | | Recorded investment in mortgage loans in foreclosure | $917 | — | Note 4. Investment Securities | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | | AOMT RMBS (at fair value) | $104,332 | $98,791 | | Whole Pool Agency RMBS (at fair value) | $257,552 | $201,452 | | Total RMBS (at fair value) | $361,884 | $300,243 | - Whole Pool Agency RMBS as of June 30, 2025, were purchased from a broker, with approximately $254 million owed, payable upon settlement[56] Note 5. Financing | Note Payable | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------- | :----------------------------- | :------------------------------- | | Multinational Bank 1 | $77,603 | $100,711 | | Global Investment Bank 2 | $143 | $15,111 | | Global Investment Bank 3 | $40,873 | $13,637 | | Total Notes Payable | $118,619 | $129,459 | | Senior Unsecured Notes | Principal Amount (in thousands) | Interest Rate | Maturity | Net Proceeds (in thousands) | | :--------------------- | :------------------------------ | :------------ | :------- | :-------------------------- | | 2030 Notes (issued May 2025) | $42,500 | 9.750% | June 1, 2030 | $40,600 | | 2029 Notes (issued July 2024) | $50,000 | 9.500% | July 30, 2029 | $47,500 | - The company's total unused borrowing capacity for whole loan financing lines was $931.38 million as of June 30, 2025[64] Note 6. Due to Broker | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------- | :----------------------------- | :------------------------------- | | Due to broker | $254,228 | $201,994 | - The "Due to broker" balance reflects a timing difference between the trade date and settlement date for Whole Pool Agency RMBS purchases, which are excluded from cash flows until settled[76][77] Note 7. Securities Sold Under Agreements to Repurchase | Repurchase Agreements | June 30, 2025 (in thousands) | Weighted Average Interest Rate | Weighted Average Remaining Maturity (Days) | December 31, 2024 (in thousands) | Weighted Average Interest Rate | Weighted Average Remaining Maturity (Days) | | :-------------------- | :----------------------------- | :----------------------------- | :--------------------------------------- | :------------------------------- | :----------------------------- | :--------------------------------------- | | AOMT RMBS | $68,062 | 5.85% | 11 | $50,555 | 5.76% | 19 | - Restricted cash for margin collateral on repurchase agreements was $1.2 million at both June 30, 2025, and December 31, 2024[79] Note 8. Derivative Financial Instruments - The company uses interest rate futures and TBA securities as economic hedges to mitigate interest rate and prepayment risk on whole loan investments[81][82][83] | Derivative Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Realized Gains (Losses) on Interest rate futures | $(1,064) | $290 | $(2,536) | $3,839 | | Net Realized Gains (Losses) on TBAs | $(3,016) | $1,818 | $(1,853) | $2,124 | | Net Change in Unrealized Appreciation (Depreciation) on Interest rate futures | $(199) | $844 | $(2,134) | $1,048 | | Net Change in Unrealized Appreciation (Depreciation) on TBAs | $(4,629) | $1,748 | $(3,737) | $1,988 | Note 9. Fair Value Measurements - The fair value hierarchy prioritizes market inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[88] | Asset/Liability (at fair value) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :------------------------------------------------------------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Assets: | | | | | | Residential mortgage loans | $— | $199,043 | $1,622 | $200,665 | | Residential mortgage loans in securitization trusts | $— | $1,872,751 | $29,970 | $1,902,721 | | AOMT RMBS | $— | $104,332 | $— | $104,332 | | Whole Pool Agency RMBS | $— | $257,552 | $— | $257,552 | | Liabilities: | | | | | | Non-recourse securitization obligation, collateralized by residential mortgage loans | $— | $1,401,980 | $— | $1,401,980 | | Unrealized depreciation on futures contracts | $1,147 | $— | $— | $1,147 | | Unrealized depreciation on TBAs | $3,208 | $— | $— | $3,208 | | Level 3 Asset | Fair Value (in thousands) | Unobservable Input | Range | Average | | :------------------------------------------ | :------------------------ | :------------------------- | :---------- | :---------- | | Residential mortgage loans | $1,622 | Prepayment rate (annual CPR) | 13% - 13% | 13.28% | | | | Default rate | 15% - 15% | 15.34% | | | | Loss severity | (25.00)% - 10.00% | (7.81)% | | Residential mortgage loans in securitization trust | $29,970 | Prepayment rate (annual CPR) | 5.51% - 22.76% | 10.44% | | | | Default rate | 7.36% - 39.21% | 16.35% | | | | Loss severity | (25.00)% - 25.00% | 0.28% | Note 10. Related Party Transactions | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | | Amount of Loans Purchased from Affiliates (YTD) | $82,757 | $255,368 | | Number of Loans Purchased from Affiliates (YTD) | 194 | 558 | - The management fee is 1.5% per annum of the Company's Equity, payable quarterly in arrears[112] - An incentive fee may be earned based on Distributable Earnings, calculated as 15% of the excess of Distributable Earnings over 8% of the Company's Equity for the previous 12-month period; no incentive fee has been earned to date[113][115] Note 11. Commitments and Contingencies - No material legal claims or unfunded commitments as of June 30, 2025[117] | Commitment Type | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :---------------------------- | :------------------------------ | | Total purchase commitments | $181.0 | $152.6 | Note 12. Accumulated Other Comprehensive Income/(Loss) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | | AOCI balance, beginning of period | $(3,475) | $(4,975) | | Net unrealized gain/(loss) on AFS securities | $(1,186) | $1,828 | | AOCI balance, end of period | $(4,661) | $(3,147) | Note 13. Other Assets | Other Asset Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | | Investments in Majority-Owned Affiliates | $20,992 | $20,680 | | Commercial Mortgage Loans, at fair value | $5,201 | $5,214 | | CMBS, at fair value | $5,297 | $5,593 | | Deferred tax asset | $3,457 | $3,457 | | Prepaid expenses | $2,447 | $1,095 | | Total other assets | $38,015 | $36,918 | - Investments in MOAs are accounted for as equity method investments and held at amortized cost, tested for impairment annually[122] Note 14. Equity - The company issued 215,622 shares of common stock through its ATM Program for net proceeds of $2.2 million during the three and six months ended June 30, 2025[124][269] - Approximately $71 million of gross proceeds remained available under the ATM Program as of June 30, 2025[269] Note 15. Earnings per Share ("EPS") | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) to common stockholders - basic | $729 | $(302) | $21,226 | $12,547 | | Basic weighted average common shares outstanding | 23,524,735 | 24,810,021 | 23,460,798 | 24,792,918 | | Basic earnings (loss) per common share | $0.03 | $(0.01) | $0.90 | $0.51 | | Diluted earnings (loss) per common share | $0.03 | $(0.01) | $0.89 | $0.50 | Note 16. Subsequent Events - A dividend of $0.32 per common share was declared on August 5, 2025, payable on August 29, 2025[128] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition, results of operations, and key performance drivers for the periods presented. It covers the macroeconomic environment, recent strategic developments, non-GAAP financial metrics, detailed analysis of income and expenses, portfolio composition and characteristics, and liquidity and capital resources, including financing arrangements and cash flow analysis General - The company's strategy focuses on credit-sensitive investments, primarily newly-originated first lien non-QM loans sourced from Angel Oak Mortgage Lending[134] - The company benefits from Angel Oak's vertically integrated platform, providing proprietary access to non-QM loans and expertise in structured credit investments[136][138] - A strategic transaction between Angel Oak Companies and Brookfield Asset Management Ltd. is expected to close in Q3 2025, with no material changes anticipated to the company's investment objectives or management team[139] Trends and Recent Developments - Q2 2025 saw market volatility due to tariff announcements and inflation concerns, with Treasury yields decreasing for 2- and 5-year terms, and 30-year fixed mortgage rates increasing to 6.77%[142][143][144] - The company issued $42.5 million in 9.750% Senior Notes due 2030 in May 2025, with net proceeds of $40.6 million used for general corporate purposes and asset acquisition[145] | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | | :--------------------------------------- | :--------------------- | :--------------------- | :----------- | | Net Interest Income | $9,940 | $9,463 | 5.0% | | Net realized gain (loss) | $(2,499) | $(6,770) | (63.1%) | | Net unrealized gain (loss) | $(1,576) | $2,658 | (159.3%) | - During Q2 2025, the company purchased $146.6 million of newly-originated non-QM residential mortgage loans, Closed-End Seconds, and HELOCs, with a weighted average coupon of 8.68%[149] - The company issued AOMT 2025-4 ($284.3 million) and participated in AOMT 2025-6 ($349.7 million) securitizations in Q2 2025, using proceeds to repay debt and for new loan purchases/operations[150][151] Key Financial Metrics - Distributable Earnings is a non-GAAP measure used to evaluate financial performance and is a factor in dividend declarations, excluding unrealized gains/losses, impairment losses, and non-cash equity compensation[154] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income (loss) allocable to common stockholders (GAAP) | $767 | $(273) | $21,298 | $12,601 | | Distributable Earnings (Non-GAAP) | $2,639 | $(2,301) | $6,782 | $519 | | Distributable Earnings Return on Average Equity | 4.2% | (3.5%) | 5.5% | 0.4% | | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total stockholders' equity (GAAP, in thousands) | $246,389 | $238,967 | | Book value per share of common stock (GAAP) | $10.37 | $10.17 | | Economic book value per share of common stock (Non-GAAP) | $12.97 | $13.10 | Results of Operations Three Months Ended June 30, 2025 and 2024 | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | | :--------------------------------------- | :--------------------- | :--------------------- | :----------- | | Interest income | $35,094 | $25,902 | 35.5% | | Interest expense | $25,154 | $16,439 | 53.0% | | NET INTEREST INCOME | $9,940 | $9,463 | 5.0% | | TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET | $(4,075) | $(4,112) | (0.9%) | | Total operating expenses | $5,098 | $5,482 | (7.0%) | | NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS | $767 | $(273) | (380.9%) | - Operating expenses decreased due to reduced fees associated with whole loan acquisition, while stock compensation decreased due to vesting of IPO awards. Securitization costs increased due to AOMT 2025-4 and AOMT 2025-6 securitizations[169][171][172] Six Months Ended June 30, 2025 and 2024 | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (YoY) | | :------------------------------------------------------------------------------------------------ | :------------------------------------------- | :------------------------------------------- | :----------- | | Interest income | $67,961 | $51,114 | 33.0% | | Interest expense | $47,934 | $33,072 | 44.9% | | NET INTEREST INCOME | $20,027 | $18,042 | 11.0% | | TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET | $9,368 | $5,150 | 81.9% | | Total operating expenses | $8,097 | $10,162 | (20.3%) | | NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS | $21,298 | $12,601 | 69.0% | - Operating expenses decreased due to cost savings actions, in-sourcing of accounting functions, and vendor contract negotiations. Stock compensation decreased due to vesting of IPO awards[179][180][181] Our Portfolio - The total portfolio value was approximately $2.5 billion as of June 30, 2025, comprising residential mortgage loans, RMBS, and other target assets[184] | Portfolio Component | Fair Value (in thousands) | Collateralized Debt (in thousands) | Allocated Capital (in thousands) | % of Total Capital | | :--------------------------------------- | :------------------------ | :------------------------------- | :------------------------------- | :----------------- | | Residential mortgage loans | $200,665 | $118,619 | $82,046 | 33.3% | | Residential mortgage loans in securitization trust | $1,902,721 | $1,767,929 | $134,792 | 54.7% | | RMBS | $361,884 | $68,062 | $293,822 | 119.3% | | Total investment portfolio | $2,486,262 | $1,954,610 | $531,652 | 215.8% | Residential Mortgage Loans | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Weighted average interest rate | 8.37% | 7.4% | | FICO score at loan origination (average) | 755 | 752 | | CLTV at loan origination (average) | 68.6% | 71.7% | | Percentage of first lien loans | 72.9% | 96.7% | | Percentage of loans 90+ days delinquent (based on UPB) | 1.1% | 0% | Residential Mortgage Loans Held in Securitization Trusts | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | | UPB | $1,949,994 | $1,781,311 | | Fair Value | $1,902,721 | $1,696,995 | | Number of loans | 4,564 | 4,183 | | Weighted average loan coupon | 5.80% | 5.6% | | Weighted average credit score at loan origination and deal date | 744 | 743 | | Current 3-month constant prepayment rate ("CPR") | 9.9% | 7.4% | | Percentage of loans 90+ days delinquent (based on UPB) | 1.4% | 2.0% | RMBS | RMBS Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :-------------------- | :-------------------------------------- | :-------------------------------------- | | AOMT RMBS | $104,332 | $98,791 | | Third Party RMBS (Whole Pool) | $257,552 | $201,452 | | Total RMBS | $361,884 | $300,243 | | AOMT Securitization Vintage | UPB of loans (in thousands) | Weighted average loan coupon | Weighted average credit score | 90+ day delinquency (% of UPB) | | :-------------------------- | :-------------------------- | :--------------------------- | :---------------------------- | :------------------------------ | | 2019 | $266,418 | 7.14% | 708 | 9.2% | | 2020 | $141,846 | 5.81% | 720 | 2.3% | | 2023 | $1,033,497 | 5.21% | 732 | 3.6% | | 2024 | $1,092,647 | 5.75% | 736 | 2.0% | | 2025 | $348,086 | 7.65% | 751 | 0% | Liquidity and Capital Resources - Primary financing sources include principal/interest payments, unused borrowing capacity from loan financing lines and repurchase facilities, securitizations, and the ATM Program[223] - The company maintains three warehouse loan financing lines with an aggregate borrowing capacity of up to $1.1 billion as of June 30, 2025[227] | Financing Line | Borrowing Capacity (in thousands) | Drawn Amount (in thousands) | Available Financing (in thousands) | | :----------------------- | :-------------------------------- | :-------------------------- | :--------------------------------- | | Multinational Bank 1 | $600,000 | $77,603 | $522,397 | | Global Investment Bank 2 | $250,000 | $143 | $249,857 | | Global Investment Bank 3 | $200,000 | $40,873 | $159,127 | | Total | $1,050,000 | $118,619 | $931,381 | - The company issued $42.5 million in 9.750% Senior Notes due 2030 in May 2025 and $50 million in 9.500% Senior Notes due 2029 in July 2024 to fund asset acquisitions and for general corporate purposes[267][268] - Cash and cash equivalents were $40.5 million and restricted cash was $3.9 million as of June 30, 2025, deemed sufficient to meet liquidity covenants and potential margin calls[8][272][273] Overview - Liquidity sources include principal/interest payments, unused borrowing capacity, securitizations, and the ATM Program[223] - The company uses loan financing lines for short-term asset acquisition and fixed-rate term securitization funding for long-term financing[224] - The company may raise additional capital through public or private offerings of equity, equity-related, or debt securities[223] Description of Existing Financing Arrangements - The company had three warehouse loan financing lines with an aggregate borrowing capacity of up to $1.1 billion as of June 30, 2025[227] - Financing facilities are subject to advance rates (60%-92%) and restrictive covenants, including minimum tangible net worth, maximum debt-to-tangible net worth (5:1), and minimum liquidity ($10.0 million)[228] - The Multinational Bank 1 facility was renewed through December 25, 2025, with an interest rate spread of 1.65%-2.10% over average daily SOFR[231][232] - The Global Investment Bank 2 facility was updated in March 2024 and extended through March 27, 2026, with an interest rate spread of 1.75%-3.35% over 1-month Term SOFR[237][238] - The Global Investment Bank 3 facility's termination date was extended to November 1, 2025, with an interest rate spread of 1.90%-4.75% over Compound SOFR[244] Short-Term Repurchase Facilities - Short-term repurchase facilities are used to borrow against U.S. Treasury securities, AOMT securities, and other securities to add leverage and increase asset yield[252][254] | Repurchase Agreements | June 30, 2025 (in thousands) | Weighted Average Interest Rate | Weighted Average Remaining Maturity (Days) | | :-------------------- | :----------------------------- | :----------------------------- | :--------------------------------------- | | AOMT RMBS | $68,062 | 5.85% | 11 | | Quarter | Quarter End Balance (in thousands) | Average Balance in Quarter (in thousands) | Highest Month-End Balance in Quarter (in thousands) | | :------ | :--------------------------------- | :---------------------------------------- | :-------------------------------------------------- | | Q2 2025 | $68,062 | $71,980 | $148,467 | | Q1 2025 | $148,467 | $62,631 | $148,467 | | Q4 2024 | $50,555 | $53,412 | $51,843 | Securitization Transactions - In May 2025, the company participated in AOMT 2025-6, a $349.7 million securitization, contributing $87.2 million in loans and receiving $9.2 million cash after repaying $73.1 million debt[255] - In April 2025, the company was the sole participant in AOMT 2025-4, a $284.3 million securitization, using proceeds to repay $242.4 million debt and retaining $24.7 million cash[256] - The company consolidated AOMT 2024-10 and AOMT 2024-4 securitizations on its balance sheet, maintaining the residential mortgage loans and related financing obligations[260][264] Notes Offerings - Issued $42.5 million in 9.750% Senior Notes due 2030 in May 2025, with net proceeds of $40.6 million[267] - Issued $50 million in 9.500% Senior Notes due 2029 in July 2024, with net proceeds of $47.5 million[268] - Both 2029 and 2030 Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Operating Partnership[267][268] ATM Program - The ATM Program allows for the sale of up to $75 million in common stock[269] - 215,622 shares were sold for $2.2 million net proceeds during the three and six months ended June 30, 2025[269] - Approximately $71 million of gross proceeds remained available under the ATM Program as of June 30, 2025[269] Leverage and Hedging Strategies - The company uses a prudent amount of leverage, adjusted based on portfolio characteristics, financing availability, and market conditions[270] - Derivative instruments like interest rate swaps, futures, and options are used to mitigate interest rate and credit risks, subject to REIT qualification and Investment Company Act exclusion[271] Cash Availability | Cash Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $40,500 | $40,762 | | Restricted cash | $3,867 | $2,131 | - Cash balance is sufficient to meet liquidity covenants and potential margin calls; no margin collateral was required as of June 30, 2025, or December 31, 2024[272] - Restricted cash primarily comprises interest rate futures margin collateral ($2.7 million) and margin collateral for securities sold under repurchase agreements ($1.2 million) as of June 30, 2025[273] Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (YoY) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------- | | Cash flows provided by (used in) operating activities | $(181,103) | $16,014 | (1230.8%) | | Cash flows provided by (used in) investing activities | $(5,769) | $(11,061) | (47.9%) | | Cash flows provided by financing activities | $188,346 | $(3,347) | (5726.9%) | - Residential loan activity is classified as operating cash flow, while commercial mortgage loan activity is classified as investing cash flow[278] Critical Accounting Policies and Estimates - Critical accounting policies and estimates, including fair value, credit losses, and prepayment rates, have not materially changed since December 31, 2024[279] - The company expects quarter-to-quarter GAAP earnings volatility, particularly from fair value changes of consolidated assets and liabilities[280] Recent Accounting Pronouncements - No recent ASUs are expected to have a significant impact on the condensed consolidated financial statements[34][281] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Angel Oak Mortgage REIT, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[283] ITEM 4. CONTROLS AND PROCEDURES The company's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There have been no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[284] - No material changes in internal control over financial reporting occurred during the quarter[285] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults on senior securities, other information, and a list of exhibits ITEM 1. LEGAL PROCEEDINGS The company reported no legal proceedings during the quarter ended June 30, 2025 - No legal proceedings were reported[286] ITEM 1A. RISK FACTORS There have been no material changes to the principal risk factors previously disclosed in the Annual Report on Form 10-K. The risks outlined in the 10-K remain relevant, and additional unknown risks may also affect the business - No material changes to principal risk factors from the Annual Report on Form 10-K[287] - Readers should refer to Item 1A. "Risk Factors" in the Annual Report on Form 10-K for a comprehensive discussion of potential risks[130][287] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or issuer purchases of equity securities during the quarter ended June 30, 2025 - No unregistered sales of equity securities or issuer purchases of equity securities occurred during the quarter[288][289] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the quarter ended June 30, 2025 - No defaults upon senior securities were reported[290] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - This item is not applicable[291] ITEM 5. OTHER INFORMATION No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[292] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures for senior notes, certifications (CEO, CFO), and XBRL-related documents - The exhibits include Articles of Amendment, Supplemental Indentures for Senior Notes, CEO and CFO certifications (Sarbanes-Oxley Act), and XBRL documents[293] Signatures The report is duly signed on behalf of Angel Oak Mortgage REIT, Inc. by Sreeniwas Prabhu, Chief Executive Officer and President, and Brandon R. Filson, Chief Financial Officer and Treasurer, as of August 6, 2025 - The report is signed by Sreeniwas Prabhu (CEO and President) and Brandon R. Filson (CFO and Treasurer) on August 6, 2025[297]