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What changed in Angel Oak Mortgage REIT, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Angel Oak Mortgage REIT, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+425 added−416 removedSource: 10-K (2025-03-24) vs 10-K (2024-03-15)

Top changes in Angel Oak Mortgage REIT, Inc.'s 2024 10-K

425 paragraphs added · 416 removed · 336 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur objective is to generate attractive risk-adjusted returns for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles.
Biggest changeOur objective is to generate attractive risk-adjusted returns for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles.We expect to derive our returns primarily from the difference between the interest we earn on loans we invest in and our cost of capital, as well as the returns from bonds, including risk retention securities, that are retained after securitizing the underlying loan collateral.
We also may invest in other residential mortgage loans, RMBS, and other mortgage-related assets, which, collectively with non-QM loans, we refer to as our target assets. Further, we may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
We also may invest in other residential mortgage loans, RMBS, and other mortgage-related assets, which, collectively with non-QM loans, we refer to as our target assets. Further, we also may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
Our Investment Strategy Our investment 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 Angel Oak Mortgage Lending, which primarily operates through a wholesale channel and has a national origination footprint. We also may invest in other target assets as described below.
Our Investment Strategy Our investment 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 substantially sourced from Angel Oak Mortgage Lending, which primarily operates through a wholesale channel and has a national origination footprint. We also may invest in other target assets as described below.
Our 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 Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending, which currently operates primarily through a wholesale channel and has a national origination footprint.
Our 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 substantially sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending, which currently operates primarily through a wholesale channel and has a national origination footprint.
Government obligations, and other instruments or investments determined by our Manager to be of high quality; and • The acquisition of any of our target assets by us or any of our subsidiaries from Angel Oak Mortgage Lending or other affiliate of our Manager shall require the pricing approval of our affiliated transactions committee, which is comprised of three of our independent directors.
Government obligations, and other instruments or investments determined by our Manager to be of high quality; and • The acquisition of any of our target assets by us or any of our subsidiaries from Angel Oak Mortgage Lending or other affiliate of our Manager shall require the pricing approval of our Affiliated Transactions and Risk Committee, which is comprised of three of our independent directors.
Our Target Assets Our target assets include: Target assets, Investments Backed by: Examples: Residential properties Non-QM loans Non-Agency RMBS Commercial real estate properties Senior mortgage loans Commercial bridge loans Small balance commercial mortgage loans Other investments Agency RMBS Second lien mortgage loans Mezzanine loans Construction loans B-notes QM loans Conforming residential mortgage loans Residential bridge loans Subprime residential mortgage loans Alt-A mortgage loans CRT securities CMBS MSRs and excess MSRs Certain non-real estate related assets, including ABS and consumer loans Our strategy is adaptable to changing market environments, subject to our ability to maintain our qualification as a REIT for U.S. federal income tax purposes and to maintain our exclusion from regulation as an investment company under the Investment Company Act.
Our Target Assets Our target assets include: 7 Target assets, investments backed by: Examples: Residential properties Non-QM loans Non-Agency mortgage loans Non-Agency RMBS Commercial real estate properties Senior mortgage loans Commercial bridge loans Small balance commercial mortgage loans Other investments Agency RMBS Second lien mortgage loans Mezzanine loans Construction loans HELOCs B-Notes QM loans Conforming residential mortgage loans Residential bridge loans Subprime residential mortgage loans Alt-A mortgage loans CRT securities CMBS MSRs and excess MSRs Certain non-real estate related assets, including ABS and consumer loans Our strategy is adaptable to changing market environments, subject to our ability to maintain our qualification as a REIT for U.S. federal income tax purposes and to maintain our exclusion from regulation as an investment company under the Investment Company Act.
Upon accumulating an appropriate amount of assets, we expect to finance a substantial portion of our mortgage loans utilizing fixed rate term securitization funding that provides long-term financing for our mortgage loans and locks in our cost of funding, regardless of future interest rate movements.
Upon accumulating an 8 appropriate amount of assets, we expect to finance a substantial portion of our mortgage loans utilizing fixed rate term securitization funding that provides long-term financing for our mortgage loans and locks in our cost of funding, regardless of future interest rate movements.
Moreover, our charter, third amended and restated bylaws (our “bylaws”) and investment guidelines require no minimum or maximum leverage and our Manager will have the discretion, without the need for further approval by our Board of Directors, to change both our overall leverage and the leverage used for individual asset classes.
Moreover, our charter, fourth amended and restated bylaws (our “bylaws”) and investment guidelines require no minimum or maximum leverage and our Manager will have the discretion, without the need for further approval by our Board of Directors, to change both our overall leverage and the leverage used for individual asset classes.
All of our executive officers, and our dedicated or partially dedicated personnel, which include our Chief Executive Officer, Chief Financial Officer, accounting staff, in-house legal counsel, and other personnel providing services to us were employees of our Manager or one or more of our Manager’s affiliates as of December 31, 2023. Available Information Our website address is www.angeloakreit.com.
All of our executive officers, and our dedicated or partially dedicated personnel, which include our Chief Executive Officer, Chief Financial Officer and Treasurer, accounting staff, in-house legal counsel, and other personnel providing services to us were employees of our Manager or one or more of our Manager’s affiliates as of December 31, 2024. Available Information Our website address is www.angeloakreit.com.
For additional information regarding our portfolio as of December 31, 2023, see Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Portfolio ”.
For additional information regarding our portfolio as of December 31, 2024, see Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Portfolio ”.
As of December 31, 2023, our approximately $2.3 billion portfolio of total assets consisted predominantly of residential mortgage loans owned directly, residential mortgage loans held in securitization trusts, and RMBS.
As of December 31, 2024, our approximately $2.2 billion portfolio of target assets consisted predominantly of residential mortgage loans owned directly, residential mortgage loans held in securitization trusts, and RMBS.
Our Portfolio and Securitizations Since the commencement of our operations in September 2018 through December 31, 2023, we have focused on the acquisition of our target assets, including residential mortgage loans, a substantial portion of which were sourced by Angel Oak Mortgage Lending. As of 8 December 31, 2023, we have participated in thirteen rated securitization transactions.
Our Portfolio and Securitizations Since the commencement of our operations in September 2018 through December 31, 2024, we have focused on the acquisition of our target assets, including residential mortgage loans, a substantial portion of which were sourced by Angel Oak Mortgage Lending.
Our common stock is traded on the NYSE under the symbol “AOMR.” We are externally managed and advised by our Manager pursuant to a management agreement (the “Management Agreement”). We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019.
We are externally managed and advised by our Manager pursuant to a management agreement (the “Management Agreement”). We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019.
In addition to our existing loan financing lines, we employ short-term repurchase facilities to borrow against U.S. Treasury Securities, securities issued by AOMT, and other securities we may acquire in accordance with our investment guidelines.
In addition to our existing loan financing lines, we employ short-term repurchase facilities to borrow against U.S. Treasury Securities, securities issued by Angel Oak Mortgage Trust (“AOMT”), Angel Oak’s securitization platform, and other securities we may acquire in accordance with our investment guidelines.
Our Investment Guidelines Our Board of Directors has approved the following investment guidelines: • No investment shall be made that would cause us to fail to qualify as a REIT under the Code; • No investment shall be made that would cause us or any of our subsidiaries to be regulated as an investment company under the Investment Company Act; • Our investments will be predominantly in our target assets; 7 • Prior to the deployment of capital into our target assets, our Manager may cause our capital to be invested in any short-term investments in money market funds, bank accounts, overnight repurchase agreements with primary U.S.
Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap contracts, index swap contracts, interest rate cap or floor contracts, futures or forward contracts, and options. 6 Our Investment Guidelines Our Board of Directors has approved the following investment guidelines: • No investment shall be made that would cause us to fail to qualify as a REIT under the Code; • No investment shall be made that would cause us or any of our subsidiaries to be regulated as an investment company under the Investment Company Act; • Our investments will be predominantly in our target assets; • Prior to the deployment of capital into our target assets, our Manager may cause our capital to be invested in any short-term investments in money market funds, bank accounts, overnight repurchase agreements with primary U.S.
We believe that our portfolio validates our strategy of making credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily made to higher-quality non-QM loan borrowers and substantially sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending.
Since the commencement of our operations in September 2018 through December 31, 2024, we have participated in seventeen rated securitization transactions. We believe that our portfolio validates our strategy of making credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily made to higher-quality non-QM loan borrowers.
For example, we may enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap contracts, index swap contracts, interest rate cap or floor contracts, futures or forward contracts, and options.
For example, we may enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities.
Removed
Angel Oak Capital was established in 2009 and is a market leader in non-QM loan production via its Angel Oak Mortgage Lending affiliates. Angel Oak Mortgage Trust (“AOMT”), Angel Oak’s securitization platform, is a leading programmatic issuer of non-QM securities, and is among the largest issuers of such securities.
Added
Angel Oak Mortgage Lending, an affiliated Angel Oak mortgage origination platform, is a market leader in non‑QM loan production. Through our relationship with our Manager, we benefit from Angel Oak’s vertically integrated platform and in‑house expertise, providing us with the resources that we believe are necessary to generate attractive risk‑adjusted returns for our stockholders.
Added
Angel Oak Mortgage Lending provides us with proprietary access to non‑QM loans, as well as transparency over the underwriting process and the ability to acquire loans with our desired credit and return profile.
Added
We believe our ability to identify and acquire target assets through the secondary market is bolstered by Angel Oak’s experience in the mortgage industry and expertise in structured credit investments.
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In addition, we believe we have significant competitive advantages due to Angel Oak’s analytical investment tools, extensive relationships in the financial community, financing and capital structuring skills, investment surveillance capabilities, and operational expertise.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe enforceability of swap agreements underlying hedging transactions may depend on compliance with applicable derivatives regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. Recently, new regulations have been promulgated by U.S. and foreign regulators attempting to strengthen the oversight of derivatives contracts, including swap agreements and futures contracts.
Biggest changeRecently, new regulations have been promulgated by U.S. and foreign regulators attempting to strengthen the oversight of derivatives contracts, including swap agreements and futures contracts. Any actions taken by regulators could constrain our strategy and could increase our costs, either of which could materially and adversely affect us.
Some of our more significant challenges and risks include, but are not limited to, the following, which are described in greater detail below: • We are dependent on our Manager and certain key personnel of Angel Oak who are or may be provided to us through our Manager, and may not find a suitable replacement if our Manager terminates the Management Agreement or such key personnel are no longer available to us. • There are conflicts of interest in our relationship with Angel Oak, including our Manager, and we may compete with existing and future managed entities of Angel Oak, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and result in decisions that are not in the best interests of our stockholders. • We rely on Angel Oak Mortgage Lending to source non‑QM loans and other target assets for acquisition by us and it is under no contractual obligation to sell to us any loans that it originates. • Our Manager’s fee structure may not create proper incentives or may induce our Manager and its affiliates to make certain loans or other investments, including speculative investments, which increase the risk of our portfolio. • The Management Agreement with our Manager was not negotiated on an arm’s‑length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party and may be costly and difficult to terminate.
Some of our more significant challenges and risks include, but are not limited to, the following, which are described in greater detail below: • We are dependent on our Manager and certain key personnel of Angel Oak who are or may be provided to us through our Manager, and may not find a suitable replacement if our Manager terminates the Management Agreement or such key personnel are no longer available to us. • There are conflicts of interest in our relationship with Angel Oak, including our Manager, and we may compete with existing and future managed entities of Angel Oak, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and result in decisions that are not in the best interests of our stockholders. • We rely on our Manager to source non‑QM loans and other target assets for acquisition by us and Angel Oak Mortgage Lending is under no contractual obligation to sell to us any loans that it originates. • Our Manager’s fee structure may not create proper incentives or may induce our Manager and its affiliates to make certain loans or other investments, including speculative investments, which increase the risk of our portfolio. • The Management Agreement with our Manager was not negotiated on an arm’s‑length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party and may be costly and difficult to terminate.
Prepayment rates may adversely affect the value of our portfolio. Prepayment rates may adversely affect the value of our portfolio. Prepayment rates on our investments, where contractually permitted, are influenced by changes in current interest rates, significant improvement in the performance of underlying real estate assets and a variety of economic, geographic and other factors beyond our control.
Prepayment rates may adversely affect the value of our portfolio. Prepayment rates on our investments, where contractually permitted, are influenced by changes in current interest rates, significant improvement in the performance of underlying real estate assets and a variety of economic, geographic and other factors beyond our control.
In periods following home price declines, “strategic defaults” (decisions by borrowers to default on their mortgage loans despite having the ability to pay) also may become more prevalent.
In periods following home price declines, “strategic defaults” (decisions by borrowers to default on their mortgage loans despite having the ability to pay) also may become more prevalent.
Additionally, in the event of the bankruptcy of a residential mortgage loan borrower, the residential mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the residential mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
Additionally, in the event of the bankruptcy of a residential mortgage loan borrower, the residential mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the residential mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
Leverage will magnify both the gains and the losses on an investment. Leverage will increase our returns as long as we earn a greater return on investments purchased with borrowed funds than our cost of borrowing such funds although there can be no assurance that would be able to earn such a greater return.
Leverage will magnify both the gains and the losses on an investment. Leverage will increase our returns as long as we earn a greater return on investments purchased with borrowed funds than our cost of borrowing such funds although there can be no assurance that we would be able to earn such a greater return.
For example, we may opportunistically enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities.
For example, we may opportunistically enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive as a federal income tax matter than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the stock of REITs, including our common shares.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive as a federal income tax matter than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the stock of REITs, including our shares of common stock.
Such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our qualification and maintenance of our qualification as a REIT and maintenance of our exclusion from regulation as an investment company under the Investment Company Act, even though we do not control the joint venture.
Such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; 34 • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our qualification and maintenance of our qualification as a REIT and maintenance of our exclusion from regulation as an investment company under the Investment Company Act, even though we do not control the joint venture.
Hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related assets or liabilities being hedged; • most hedges are structured as OTC contracts with private counterparties, raising the possibility that the hedging counterparty may default on its obligations; • to the extent that the creditworthiness of a hedging counterparty deteriorates, it may be difficult or impossible to terminate or assign any hedging transactions with such counterparty to another counterparty; 39 • to the extent hedging transactions do not satisfy certain provisions of the Code and are not made through a TRS, the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by U.S. federal tax provisions governing REITs; • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value (i.e., our operating results may suffer because losses, if any, on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction or item).
Hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related assets or liabilities being hedged; • most hedges are structured as OTC contracts with private counterparties, raising the possibility that the hedging counterparty may default on its obligations; • to the extent that the creditworthiness of a hedging counterparty deteriorates, it may be difficult or impossible to terminate or assign any hedging transactions with such counterparty to another counterparty; • to the extent hedging transactions do not satisfy certain provisions of the Code and are not made through a TRS, the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by U.S. federal tax provisions governing REITs; • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value (i.e., our operating results may suffer because losses, if any, on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction or item).
Our substantial indebtedness and any future indebtedness we incur subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal and interest on our debt, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (3) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and • we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all.
Our substantial indebtedness and any future indebtedness we incur subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal and interest on our debt, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (3) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and • we may not be able to refinance debt that matures prior to the maturity (or realization) of the investment it was used to finance on favorable terms or at all.
Our charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary determination of the director’s or officer’s ultimate entitlement to indemnification to: • any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity; or 42 • any individual who, while a director or officer of ours and at our request, serves or has served as a director, officer, partner, member, manager, trustee, employee or agent of another corporation, partnership, limited liability company, joint venture, real estate investment trust, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity.
Our charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary determination of the director’s or officer’s ultimate entitlement to indemnification to: • any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity; or • any individual who, while a director or officer of ours and at our request, serves or has served as a director, officer, partner, member, manager, trustee, employee or agent of another corporation, partnership, limited liability company, joint venture, real estate investment trust, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity.
Although we utilize third-party pricing vendors to evaluate the fairness of the price for non-QM loans or other target assets we acquire from Angel Oak Mortgage Lending, there can be no assurance that we will purchase such non-QM loans or other target assets from Angel Oak Mortgage Lending at a fair price. ◦ In addition, although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily sourced from Angel Oak Mortgage Lending, this strategy may need to adapt to changing market conditions or other factors.
Although we utilize third-party pricing vendors to evaluate the fairness of the price for non-QM loans or other target assets we acquire from Angel Oak Mortgage Lending, there can be no assurance that we will purchase such non-QM loans or other target assets from Angel Oak Mortgage Lending at a fair price. ◦ In addition, although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are substantially sourced from Angel Oak Mortgage Lending, this strategy may need to adapt to changing market conditions or other factors.
Such acquisitions and investments will subject us to risks which include, among others: • declines in the value of residential or commercial real estate; • risks related to benchmark rates such as the Secured Overnight Financing Rate (“SOFR”) as reference rates for loans, borrowings and securities; • risks related to general and local economic conditions, including unemployment rates; • lack of available mortgage funding for borrowers to refinance or sell their homes or other properties; • overbuilding and/or housing availability; • increases in property taxes; • changes in U.S. federal and state lending laws; • changes in zoning laws; • costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems, such as indoor mold; • casualty or condemnation losses; • acts of God, terrorism, social unrest, and civil disturbances; • uninsured damages from floods, earthquakes, or other natural disasters, including those resulting from global climate change; 18 • limitations on and variations in rents; • fluctuations in interest rates; • undetected or unknown fraudulent activity by borrowers, originators, sellers of mortgage loans and/or other third party service providers; • undetected deficiencies and/or inaccuracies in underlying mortgage loan documentation and calculations; and • failure of the borrower to adequately maintain the property.
Such acquisitions and investments will subject us to risks which include, among others: • declines in the value of residential or commercial real estate; • risks related to benchmark rates such as the Secured Overnight Financing Rate (“SOFR”) as reference rates for loans, borrowings and securities; • risks related to general and local economic conditions, including unemployment rates; • lack of available mortgage funding for borrowers to refinance or sell their homes or other properties; • overbuilding and/or housing availability; • increases in property taxes; • changes in U.S. federal and state lending laws; • changes in zoning laws; • costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems, such as indoor mold; • casualty or condemnation losses; • acts of God, terrorism, social unrest, and civil disturbances; • uninsured damages from floods, earthquakes, wildfires, or other natural disasters, including those resulting from global climate change; • limitations on and variations in rents; • fluctuations in interest rates; • undetected or unknown fraudulent activity by borrowers, originators, sellers of mortgage loans and/or other third party service providers; • undetected deficiencies and/or inaccuracies in underlying mortgage loan documentation and calculations; and • failure of the borrower to adequately maintain the property.
Accordingly, downturns relating generally to non-QM loans may result in defaults on a number of our non-QM loans within a short time period, and adverse conditions in the areas where the properties securing or otherwise underlying our investments are concentrated (including unemployment rates, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our investments, any of which may materially and adversely affect us.
Accordingly, downturns relating generally to non-QM loans may result in defaults on a number of our non-QM loans within a short time period, and adverse conditions in the areas where the properties securing or otherwise underlying our investments are concentrated (including unemployment rates, changing demographics and 17 other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our investments, any of which may materially and adversely affect us.
Although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily sourced from Angel Oak Mortgage Lending, Angel Oak Mortgage Lending has no obligation to sell non-QM loans and other target assets to us and, as a result, we may need to acquire non-QM loans and other target assets from unaffiliated third parties, including through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
Although our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are substantially sourced from Angel Oak Mortgage Lending, Angel Oak Mortgage Lending has no obligation to sell non-QM loans and other target assets to us and, as a result, we may need to acquire non-QM loans and other target assets from unaffiliated third parties, including through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
The rate of principal payments on a pool of RMBS will in turn be affected by the amortization schedules of the assets (which, in the case of assets with an adjustable-rate feature, may change periodically to accommodate adjustments to the mortgage rates thereon) and the rate of principal prepayments thereon (including for this purpose, voluntary prepayments by borrowers and prepayments resulting from liquidations of RMBS due to defaults, casualties, or condemnations affecting the related properties).
The rate of principal payments on a pool of RMBS will in turn be affected by the amortization schedules of the assets (which, in the case of assets with an adjustable-rate feature, may change periodically to accommodate adjustments to the mortgage rates thereon) and the rate of principal prepayments thereon (including for this purpose, voluntary prepayments by borrowers and prepayments resulting from liquidations of underlying assets due to defaults, casualties, or condemnations affecting the related properties).
Additional risks associated with commercial real mortgage investments include, but are not limited to, changes in the general economic climate or local conditions (such as an oversupply of space or a reduction in demand for space), competition based on rental rates, attractiveness and location of the properties, changes in the financial condition of tenants, increases in work-from-home policies, and changes in operating costs.
Additional risks associated with commercial real mortgage investments include, but are 22 not limited to, changes in the general economic climate or local conditions (such as an oversupply of space or a reduction in demand for space), competition based on rental rates, attractiveness and location of the properties, changes in the financial condition of tenants, increases in work-from-home policies, and changes in operating costs.
Even if a borrower does not succeed in the challenge, additional costs may be incurred in connection with challenging and defending such claims, which may be more costly in judicial foreclosure jurisdictions than in non-judicial foreclosure jurisdictions, and there may be more of a likelihood such claims are made since the borrower is already exposed to the judicial system to process the foreclosure 17 The non-QM loans in which we invest are subject to increased risks.
Even if a borrower does not succeed in the challenge, additional costs may be incurred in connection with challenging and defending such claims, which may be more costly in judicial foreclosure jurisdictions than in non-judicial foreclosure jurisdictions, and there may be more of a likelihood such claims are made since the borrower is already exposed to the judicial system to process the foreclosure The non-QM loans in which we invest are subject to increased risks.
Our Manager’s and Angel Oak’s management of other managed entities could create a conflict of interest to the extent our Manager or Angel Oak is aware of material non-public information concerning potential investment decisions. In addition, this conflict may limit the freedom of our Manager to make potentially profitable investments, which could have an adverse effect on our operations.
Our Manager’s and Angel Oak’s management of other managed entities could create a conflict of interest to the extent our Manager or Angel Oak is aware of material non-public information concerning potential investment decisions. In addition, this conflict may limit the freedom of our Manager to make potentially profitable investments, which could have an adverse effect on 13 our operations.
The SEC has periodically solicited public comment on a wide range of issues relating to the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage-backed securities, including the nature of the assets that qualify 33 for purposes of the exemption and whether mortgage REITs should be regulated in a manner similar to investment companies.
The SEC has periodically solicited public comment on a wide range of issues relating to the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage-backed securities, including the nature of the assets that qualify for purposes of the exemption and whether mortgage REITs should be regulated in a manner similar to investment companies.
Subject to maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we expect to continue to utilize various derivative instruments and other hedging instruments to mitigate interest rate risk, but there can be no assurances that our hedges will be successful, or 19 that we will be able to enter into or maintain such hedges.
Subject to maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we expect to continue to utilize various derivative instruments and other hedging instruments to mitigate interest rate risk, but there can be no assurances that our hedges will be successful, or that we will be able to enter into or maintain such hedges.
In acquiring non-QM loans and other target assets from unaffiliated third 30 parties, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. Additionally, we may also compete with the U.S. Federal Reserve and the U.S.
In acquiring non-QM loans and other target assets from unaffiliated third parties, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. Additionally, we may also compete with the U.S. Federal Reserve and the U.S.
If third-party pricing is obtained, validating such pricing may be more subjective than it would be for more liquid assets due to the 27 uncertainties inherent in valuing assets for which reliable market quotations are not available. Any illiquidity of our assets may make it difficult for us to sell such assets on favorable terms or at all.
If third-party pricing is obtained, validating such pricing may be more subjective than it would be for more liquid assets due to the uncertainties inherent in valuing assets for which reliable market quotations are not available. Any illiquidity of our assets may make it difficult for us to sell such assets on favorable terms or at all.
Finally, laws may delay the initiation or completion of foreclosure proceedings on specified types of residential mortgage loans or otherwise limit the ability of mortgage servicers to take actions that may be essential to preserve the value of the loan. Any such limitations are likely to cause delayed or reduced collections from mortgagors and generally increase servicing costs.
Finally, laws may delay the initiation or completion of foreclosure proceedings on specified types of residential mortgage loans or otherwise limit the ability of mortgage servicers to take actions that may be essential to preserve the value of the loan. Any such limitations are likely to cause delayed or reduced collections from mortgagors and 29 generally increase servicing costs.
Further, rating agencies could alter their ratings processes or criteria after we have accumulated loans for securitization in a manner that reduces the value of previously acquired loans or that requires us to incur additional costs to comply with those processes and criteria. Our securitization transactions may result in litigation, which could materially and adversely affect us.
Further, rating agencies could alter their ratings processes or criteria after we 37 have accumulated loans for securitization in a manner that reduces the value of previously acquired loans or that requires us to incur additional costs to comply with those processes and criteria. Our securitization transactions may result in litigation, which could materially and adversely affect us.
Insurance proceeds on a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property. There are certain types of losses, generally of a catastrophic nature, such as acts of God, earthquakes, floods, hurricanes, terrorism, or acts of war, which may be uninsurable or not economically insurable.
Insurance proceeds on a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property. There are certain types of losses, generally of a catastrophic nature, such as acts of God, earthquakes, floods, hurricanes, wildfires, terrorism, or acts of war, which may be uninsurable or not economically insurable.
If we sell an asset at a lower price than has been reflected in that asset’s most recent mark to market value, our reported earnings will be reduced. SOFR has generally replaced U.S. dollar LIBOR as a reference rate of interest, which subjects us to various risks.
If we sell an asset at a lower price than has been reflected in that asset’s most recent mark to market value, our reported earnings will be reduced. SOFR has replaced U.S. dollar LIBOR as a reference rate of interest, which subjects us to various risks.
For example, by relying on incorrect models and data, especially valuation or cash flow models, we may be induced to buy certain assets at prices that are too high, to sell certain other assets at prices that are too low, to overestimate or underestimate the timing or amount of cash flows expected to be collected, or to miss favorable opportunities altogether.
For example, by relying on incorrect models and data, especially valuation or cash flow models, we may be induced to buy certain assets at prices that are too 26 high, to sell certain other assets at prices that are too low, to overestimate or underestimate the timing or amount of cash flows expected to be collected, or to miss favorable opportunities altogether.
New legislation, U.S. Treasury regulations, administrative interpretations or court decisions might significantly change the U.S. federal income tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of such qualification. We believe that we have been organized and operate in conformity with the requirements for qualification as a REIT under the Code.
New legislation, U.S. Treasury regulations, administrative interpretations or court decisions might significantly 45 change the U.S. federal income tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of such qualification. We believe that we have been organized and operate in conformity with the requirements for qualification as a REIT under the Code.
While many of the rule-makings required by the Dodd-Frank Act have been finalized and are either effective or pending effectiveness, others remain to be finalized or even proposed. Further, many of the rules that have been finalized have been subject to modification or interpretation since their effective date, oftentimes in order to clarify ambiguities present in the final 36 rules.
While many of the rule-makings required by the Dodd-Frank Act have been finalized and are either effective or pending effectiveness, others remain to be finalized or even proposed. Further, many of the rules that have been finalized have been subject to modification or interpretation since their effective date, oftentimes in order to clarify ambiguities present in the final rules.
As a result, we cannot provide any assurances regarding the amount of time our Manager will dedicate to the management of our business, and Angel Oak, including our 11 Manager, may have conflicts in allocating employees’ time, resources, and services among our business and any other entities they manage, and such conflicts may not be resolved in our favor.
As a result, we cannot provide any assurances regarding the amount of time our Manager will dedicate to the management of our business, and Angel Oak, including our Manager, may have conflicts in allocating employees’ time, resources, and services among our business and any other entities they manage, and such conflicts may not be resolved in our favor.
Some examples of conflicts of interest that may arise by virtue of our relationship with Angel Oak, including our Manager, include: • Loans Originated by Angel Oak Mortgage Lending. Our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending.
Some examples of conflicts of interest that may arise by virtue of our relationship with Angel Oak, including our Manager, include: • Loans Originated by Angel Oak Mortgage Lending. Our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are substantially sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending.
However, we cannot guarantee that we will qualify as a REIT in any given year because: • the rules governing REITs are highly complex; • we do not control all factual circumstances and legal determinations by courts or regulatory bodies that affect REIT qualification; and 45 • our circumstances may change in the future.
However, we cannot guarantee that we will qualify as a REIT in any given year because: • the rules governing REITs are highly complex; • we do not control all factual circumstances and legal determinations by courts or regulatory bodies that affect REIT qualification; and • our circumstances may change in the future.
Under the Management Agreement, our Manager maintains a contractual as opposed to a fiduciary relationship with us which limits our Manager’s obligations to us to those specifically set forth in the Management Agreement. The right of our Manager or its personnel and 15 its officers to engage in other business activities may reduce the time our Manager spends managing us.
Under the Management Agreement, our Manager maintains a contractual as opposed to a fiduciary relationship with us which limits our Manager’s obligations to us to those specifically set forth in the Management Agreement. The right of our Manager or its personnel and its officers to engage in other business activities may reduce the time our Manager spends managing us.
Unscheduled prepayments of ABS may result in a loss of income. Movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain types of ABS. Borrower 25 loan loss rates may be significantly affected by delinquencies, defaults, economic downturns, or general economic conditions beyond the control of individual borrowers.
Unscheduled prepayments of ABS may result in a loss of income. Movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain types of ABS. Borrower loan loss rates may be significantly affected by delinquencies, defaults, economic downturns, or general economic conditions beyond the control of individual borrowers.
The continued pursuit of our strategy under these circumstances may result in losses. The significant majority of the loans that Angel Oak Mortgage Lending currently originates are non-QM loans. Similarly, failure to adjust our strategy may cause us to forego other attractive investment opportunities outside investments in non-QM loans.
The continued pursuit of our strategy under these 12 circumstances may result in losses. The significant majority of the loans that Angel Oak Mortgage Lending currently originates are non-QM loans. Similarly, failure to adjust our strategy may cause us to forego other attractive investment opportunities outside investments in non-QM loans.
Currently, we are focused on acquiring and investing in non-QM loans, which may subject us to legal, administrative, regulatory, and other risks, which could materially and adversely affect us. Currently, we are focused on acquiring and investing in non-QM loans that will not have the benefit of enhanced legal protections otherwise available in connection with the origination of QM loans.
Currently, we are focused on acquiring and investing in non-QM loans, which may subject us to legal, administrative, regulatory, and other risks, which could materially and adversely affect us. Currently, we are focused on acquiring and investing in non-QM loans that may not have the benefit of enhanced legal protections otherwise available in connection with the origination of QM loans.
As a result, among other things, our Board of Directors may establish a class or series of shares of our common stock or preferred stock that could delay or prevent a transaction or a change in control of us that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
As a result, among other things, our Board of Directors may establish a class or series of shares of our common stock or 42 preferred stock that could delay or prevent a transaction or a change in control of us that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
The rights and remedies afforded a senior lender may limit or preclude the exercise of rights and remedies by us, with resultant loss to us. Further, the equity owners of properties or 23 entities in which we invest may raise defenses (including protection under bankruptcy laws) to enforcement of rights or imposition of remedies by us.
The rights and remedies afforded a senior lender may limit or preclude the exercise of rights and remedies by us, with resultant loss to us. Further, the equity owners of properties or entities in which we invest may raise defenses (including protection under bankruptcy laws) to enforcement of rights or imposition of remedies by us.
Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in the financial services industry and may occur on our systems in the future. We rely heavily on our financial, accounting, and other data processing systems. Financial services institutions have reported breaches of their systems, some of which have been significant.
Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in the financial services industry and may occur on our systems in the future. We rely heavily on our financial, accounting, and other data processing systems. 32 Financial services institutions have reported breaches of their systems, some of which have been significant.
Our business is materially affected by conditions in the residential mortgage market, the residential real estate market, the financial markets, and the economy, including increasing inflation, energy costs, unemployment, geopolitical issues, pandemics, concerns over the creditworthiness of governments worldwide and the stability of the global banking system.
Our business is materially affected by conditions in the residential mortgage market, the residential real estate market, the financial markets, and the economy, including increasing inflation, energy costs, unemployment, geopolitical issues, pandemics, endemics, concerns over the creditworthiness of governments worldwide and the stability of the global banking system.
If we act as the purchaser under a loan financing line, a risk exists that the seller will not pay to us the agreed upon sum on the delivery date at which point we would generally be entitled to sell the relevant loans that we purchased.
If we act as the purchaser under a loan financing line, a risk exists that the seller will not pay to us the agreed upon sum on the delivery date at which point we would generally be entitled to sell the 38 relevant loans that we purchased.
Subject to maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we have utilized, and in the future expect to continue to utilize various derivative instruments and other hedging instruments to mitigate interest rate risk, credit risk and other risks.
Subject to maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we have utilized, and in the future expect to continue to utilize various derivative instruments and other 39 hedging instruments to mitigate interest rate risk, credit risk and other risks.
In that event, we may need to borrow funds or take other actions to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized. We are dependent on external sources of capital to finance our growth.
In that 47 event, we may need to borrow funds or take other actions to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized. We are dependent on external sources of capital to finance our growth.
Accordingly, our stockholders’ ability to control our operations is limited, which could negatively affect the value of our common stock. If securities analysts do not publish research or reports about our business or if they downgrade our stock or our core market, our stock price and trading volume could decline.
Accordingly, our stockholders’ ability to control our operations is limited, which could negatively affect the value of our securities. If securities analysts do not publish research or reports about our business or if they downgrade our stock or our core market, the price of our securities and trading volume could decline.
This increase in borrowers’ monthly payments, together with any increase in prevailing market interest rates, may result in significantly increased monthly payments for borrowers subject to adjustable-rates. Borrowers seeking to avoid these increased monthly payments by refinancing may no longer be able to find alternatives at comparably low interest rates.
This increase in borrowers’ monthly payments, together with any increase in prevailing market interest rates, may result in significantly increased monthly payments for borrowers subject to adjustable-rates. 21 Borrowers seeking to avoid these increased monthly payments by refinancing may no longer be able to find alternatives at comparably low interest rates.
We have invested in, and may continue to invest in, jumbo prime mortgage loans, which may expose us to an increased risk of loss. 22 We have invested in, and may continue to invest in jumbo prime mortgage loans, which generally may not conform to GSE underwriting guidelines for a variety of reasons, such as exceeding GSE loan limits.
We have invested in, and may continue to invest in, jumbo prime mortgage loans, which may expose us to an increased risk of loss. We have invested in, and may continue to invest in jumbo prime mortgage loans, which generally may not conform to GSE underwriting guidelines for a variety of reasons, such as exceeding GSE loan limits.
The value of ABS may be affected by other factors, such as the availability of information concerning the pool and its structure, the creditworthiness of the servicing agent for the pool, the originator of the underlying assets or the entities providing credit enhancements and the ability of the servicer to service the underlying collateral.
The value of ABS may be affected by other factors, such as the availability of information concerning the pool and its structure, the creditworthiness of the 25 servicing agent for the pool, the originator of the underlying assets or the entities providing credit enhancements and the ability of the servicer to service the underlying collateral.
These trends may not be indicative of future results. 26 Furthermore, the assumptions underlying the models may prove to be inaccurate, causing the models to also be incorrect. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.
These trends may not be indicative of future results. Furthermore, the assumptions underlying the models may prove to be inaccurate, causing the models to also be incorrect. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.
If we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the intrinsic value of the assets and/or the value at which we previously recorded such assets. Assets that are illiquid are more difficult to finance using leverage.
If we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the intrinsic value of the assets and/or the value at which we previously recorded such assets. 27 Assets that are illiquid are more difficult to finance using leverage.
However, there can be no assurance that our mortgage loan purchase agreements will contain appropriate representations and warranties, that we will be able to enforce our contractual right to repurchase or substitution, or that our counterparties will remain solvent or otherwise be able to honor their obligations under these mortgage loan purchase 31 agreements.
However, there can be no assurance that our mortgage loan purchase agreements will contain appropriate representations and warranties, that we will be able to enforce our contractual right to repurchase or substitution, or that our counterparties will remain solvent or otherwise be able to honor their obligations under these mortgage loan purchase agreements.
We use leverage in executing our business strategy, which may materially and adversely affect us. 35 We use leverage in connection with the investment in and holding of mortgage loans and other assets, and we have financed, and expect to continue to finance, a substantial portion of our mortgage loans through securitizations.
We use leverage in executing our business strategy, which may materially and adversely affect us. We use leverage in connection with the investment in and holding of mortgage loans and other assets, and we have financed, and expect to continue to finance, a substantial portion of our mortgage loans through securitizations.
We or Angel Oak, including our Manager and its affiliates, may be subject to regulatory inquiries or proceedings. 32 At any time, industry-wide or company-specific regulatory inquiries or proceedings can be initiated and we cannot predict when or if any such regulatory inquiries or proceedings will be initiated that involve us or Angel Oak, including our Manager and its affiliates.
We or Angel Oak, including our Manager and its affiliates, may be subject to regulatory inquiries or proceedings. At any time, industry-wide or company-specific regulatory inquiries or proceedings can be initiated and we cannot predict when or if any such regulatory inquiries or proceedings will be initiated that involve us or Angel Oak, including our Manager and its affiliates.
As a result, we may be required to liquidate otherwise profitable assets prematurely, which could reduce the return on our assets, which could materially and adversely affect us. The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.
As a result, we may be required to liquidate otherwise profitable assets prematurely, which could reduce the return on our assets, which could materially and adversely affect us. 48 The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.
Our Manager could acquire non-QM loans or other target assets on our behalf from Angel Oak Mortgage Lending even if such non-QM loans or other target assets were unsuitable for us, or we could identify better quality non-QM loans or other target assets, or obtain better pricing, 12 from unaffiliated third parties.
Our Manager could acquire non-QM loans or other target assets on our behalf from Angel Oak Mortgage Lending even if such non-QM loans or other target assets were unsuitable for us, or we could identify better quality non-QM loans or other target assets, or obtain better pricing, from unaffiliated third parties.
The value of non-QM loans is also subject to property damage caused by hazards, such as earthquakes or environmental hazards, not covered by standard property insurance policies and to a reduction in a borrower’s mortgage debt by a bankruptcy court.
The value of non-QM loans is also subject to property damage caused by hazards, such as earthquakes, wildfires, or environmental hazards, not covered by standard property insurance policies and to a reduction in a borrower’s mortgage debt by a bankruptcy court.
In addition, legislation that has been enacted or that may be enacted in order to reduce or prevent foreclosures through, among other things, loan modifications may reduce the value of our mortgage loans or loans underlying our investments. Mortgage servicers may be 29 incentivized by the U.S.
In addition, legislation that has been enacted or that may be enacted in order to reduce or prevent foreclosures through, among other things, loan modifications may reduce the value of our mortgage loans or loans underlying our investments. Mortgage servicers may be incentivized by the U.S.
Changes in the fair values of our assets, liabilities, and derivatives can have a material adverse effect on us, including reduced earnings, increased earnings volatility, and volatility in our book value. Fair values for our assets and liabilities, including derivatives, can be volatile and our revenue and income can be impacted by changes in fair values.
Changes in the fair values of our assets, liabilities, and derivatives can have a material adverse effect on us, including reduced earnings, increased earnings volatility, and volatility in our book value. 19 Fair values for our assets and liabilities, including derivatives, can be volatile and our revenue and income can be impacted by changes in fair values.
We are dependent on our Manager’s relationship with Angel Oak Mortgage Lending and our Manager’s ability to source investment opportunities consistent with our strategy, which is currently focused on the acquisition of non-QM loans from Angel Oak Mortgage Lending.
We are dependent on our Manager’s relationship with Angel Oak Mortgage Lending and Angel Oak Capital and our Manager’s ability to source investment opportunities consistent with our strategy, which is currently focused on the acquisition of non-QM loans from Angel Oak Mortgage Lending.
As a public company with listed equity securities, we are required to comply with various laws, regulations and requirements, including the requirements of the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and requirements of the NYSE.
As a public company with listed securities, we are required to comply with various laws, regulations and requirements, including the requirements of the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and requirements of the NYSE.
Certain commercial banks, investment banks, insurance companies, and mortgage-related investment vehicles (including publicly traded mortgage REITs) incurred extensive losses from exposure to the residential mortgage market as a result of these difficulties and conditions.
Certain commercial banks, investment banks, insurance companies, and mortgage-related investment vehicles (including publicly traded mortgage REITs) have incurred extensive losses from exposure to the residential mortgage market as a result of these difficulties and conditions.
Additionally, we may be required to foreclose on a mortgage loan and such actions would subject us to greater concentration of the risks of the real estate markets and risks related to the ownership and management of real property.
Additionally, we may be required to foreclose on a mortgage loan and 18 such actions would subject us to greater concentration of the risks of the real estate markets and risks related to the ownership and management of real property.
Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business or industry, the price of our stock could decline.
Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business or industry, the price of our securities could decline.
Additionally, our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are primarily sourced from Angel Oak Mortgage Lending.
Additionally, our strategy is to make credit-sensitive investments primarily in newly-originated first lien non-QM loans that are substantially sourced from Angel Oak Mortgage Lending.
Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation and have a material adverse impact on our business and financial results When we acquire or originate real estate mortgage loans, we come into possession of borrower non-public personal information that an identity thief could utilize in engaging in fraudulent activity or theft.
Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation and have a material adverse impact on our business and financial results. 31 When we acquire real estate mortgage loans, we come into possession of borrower non-public personal information that an identity thief could utilize in engaging in fraudulent activity or theft.
We are subject to risks associated with pandemics or other public health crises, which could materially and adversely affect us. We are subject to risks associated with pandemics or other public health crises, including the COVID-19 pandemic.
We are subject to risks associated with pandemics or other public health crises, which could materially and adversely affect us. 28 We are subject to risks associated with pandemics or other public health crises, including the COVID-19 pandemic.
In the future, we may attempt to increase our capital resources by making offerings of debt securities (or causing our operating partnership to issue debt securities) or additional offerings of equity securities.
Additionally, in the future, we may attempt to increase our capital resources by making additional offerings of debt securities (or causing our operating partnership to issue debt securities) or additional offerings of equity securities.
If rising interest rates cause us to be unable to acquire a sufficient volume of our target assets with a yield that is above our borrowing cost, it could materially and adversely affect us. An increase in interest rates could also cause financial strain on borrowers with adjustable rate mortgages, who might then be more likely to default.
If rising or elevated interest rates cause us to be unable to acquire a sufficient volume of our target assets with a yield that is above our borrowing cost, it could materially and adversely affect us. An increase in interest rates could also cause financial strain on borrowers with adjustable rate mortgages, who might then be more likely to default.
Key personnel provided to us by our Manager may become unavailable to us as a result of their departure from our Manager or for any other reason.
Key personnel provided to us by our Manager may 11 become unavailable to us as a result of their departure from our Manager or for any other reason.
In the event such defenses were successful, or resulted in delay, we could incur losses, which could materially and adversely affect us. • Construction Loans.
In the event such defenses were successful, or resulted in delay, we could incur losses, which could materially and adversely affect us. 23 • Construction Loans.
These limitations imposed by access to material non-public information could therefore materially and adversely affect us. We rely on Angel Oak Mortgage Lending to source non-QM loans and other target assets for acquisition by us and it is under no contractual obligation to sell to us any loans that it originates.
These limitations imposed by access to material non-public information could therefore materially and adversely affect us. We rely on our Manager to source non-QM loans and other target assets for acquisition by us and Angel Oak Mortgage Lending is under no contractual obligation to sell to us any loans that it originates.
Furthermore, unless it satisfies the criteria for no-action relief from the CFTC’s commodity pool operator registration rules, a mortgage REIT that enters into derivatives transactions, including swap agreements and futures contracts, may be considered to be a regulated commodity pool that is required to be operated by a registered or exempt “commodity pool operator.” Although we believe we satisfy the criteria for this no-action relief, there can be no assurance that we will continue to do so or that such no-action relief will continue to be available.
Furthermore, unless it satisfies the criteria for no-action relief from the CFTC’s commodity pool operator registration rules, a mortgage REIT that enters into derivatives transactions, including swap agreements and futures contracts, may be considered to be a regulated commodity pool, the operator of which may be required to be operated by a registered or exempt “commodity pool operator.” Although we believe we satisfy the criteria for this no-action relief, there can be no assurance that we will continue to do so or that such no-action relief will continue to be available.
In addition, as of December 31, 2023, more than 5% of the unpaid principal balance of the loans underlying our portfolio of RMBS from the AOMT securitizations in which we participated and/or were the primary beneficiary were secured by properties located in each of California, Florida, Texas, and Georgia.
In addition, as of December 31, 2024, more than 5% of the unpaid principal balance of the loans underlying our portfolio of RMBS from the AOMT securitizations in which we participated and/or were the primary beneficiary were secured by properties located in each of California, Florida, Texas, and Georgia.
Our ability to continue to obtain permanent non-recourse financing through securitizations is affected by a number of factors, including: • conditions in the securities markets, generally; • conditions in the asset-backed securities markets, specifically; • yields on our portfolio of mortgage loans; • the credit quality of our portfolio of mortgage loans; and • our ability to obtain any necessary credit enhancement.
Our ability to continue to obtain permanent non-recourse financing through securitizations is affected by a number of factors, including: • conditions in the securities markets, generally; • conditions in the asset-backed securities markets, specifically; • yields on our portfolio of mortgage loans; • the credit quality of our portfolio of mortgage loans; and • our ability to obtain any necessary credit ratings.
As of December 31, 2023, Angel Oak Mortgage Lending was licensed to originate loans in 46 states and in the District of Columbia, and is currently subject to significant regulation by both U.S. federal and state regulators, including the CFPB and various state offices of financial regulation.
As of December 31, 2024, Angel Oak Mortgage Lending was licensed to originate loans in 46 states and in the District of Columbia, and is currently subject to significant regulation by both U.S. federal and state regulators, including the CFPB and various state offices of financial regulation.
As a result, interest rate fluctuations can cause significant losses, reductions in income, and could materially and adversely affect us. In addition, rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.
As a result, interest rate fluctuations can cause significant losses, reductions in income, and could materially and adversely affect us. In addition, rising or elevated interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.
In general, any factors that increase the attractiveness of selling a mortgaged property or refinancing such property, enhance a borrower’s ability to sell or refinance or increase the likelihood of default under a MBS would be expected to cause the rate of prepayment in respect of a pool of MBS to accelerate.
In general, any factors that increase the attractiveness of selling a mortgaged property or refinancing such property, enhance a borrower’s ability to sell or refinance or increase the likelihood of default under a RMBS would be expected to cause the rate of prepayment in respect of a pool of RMBS to accelerate.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause the price of our securities or trading volume to decline.
In such event, we may generate less cash flow than taxable income in a particular 46 year.
In such event, we may generate less cash flow than taxable income in a particular year.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of its overall enterprise risk management program, Angel Oak Capital has developed an information security framework (the “Cybersecurity Program”). The purpose of the Cybersecurity Program is to mitigate the risks associated with unauthorized attempts to access Angel Oak Capital’s (including our) network for unintended purposes.
Biggest changeMembers of the IT Service Provider have relevant qualifications such as extensive work experience implementing data security measures, developing cybersecurity policies and procedures and assessing, managing and reporting cybersecurity risk. As part of its overall enterprise risk management program, Angel Oak Capital has developed an information security framework (the “Cybersecurity Program”).
Presentations to the Audit Committee or the full Board of Directors may also be provided from time to time by the IT Service Provider or another third party firm providing cybersecurity-related services for us or Angel Oak Capital, including our Manager, as deemed necessary or appropriate.
Presentations to the Audit Committee or our full Board of Directors may also be provided from time to time by the IT Service Provider or another third party firm providing cybersecurity-related services for us or Angel Oak Capital, including our Manager, as deemed necessary or appropriate.
In addition to its engagement of the IT Service Provider, we and/or Angel Oak Capital may engage other third parties, including auditors and consultants, to perform assessments or audits of our and/or its cybersecurity policies and procedures and/or to assist with the evaluation of a cybersecurity threat or incident, among other matters.
In addition to its engagement of the IT Service Provider, we and/or Angel Oak Capital may engage other third parties, including auditors and 51 consultants, to perform assessments or audits of our and/or its cybersecurity policies and procedures and/or to assist with the evaluation of a cybersecurity threat or incident, among other matters.
In addition, the IT Service Provider and Angel Oak Capital have established a notification and escalation framework, based on the severity of a cybersecurity threat or incident, to determine when and to whom the IT Service Provider will provide 51 notifications regarding cybersecurity threats or incidents. The framework includes notification to the Head of IT.
In addition, the IT Service Provider and Angel Oak Capital have established a notification and escalation framework, based on the severity of a cybersecurity threat or incident, to determine when and to whom the IT Service Provider will provide notifications regarding cybersecurity threats or incidents. The framework includes notification to the Head of IT.
Risk Factors—Risks Related to Our Company—“Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation and have a material adverse impact on our business and financial results” and “We are highly dependent on information systems, and system failures could significantly disrupt our business, which may, in turn, have a material adverse effect on us.” We maintain a cybersecurity insurance policy to mitigate risks associated with cybersecurity incidents.
“Risk Factors—Risks Related to Our Company—Maintaining cybersecurity and data security is important to our business and a breach of our cybersecurity or data security could result in serious harm to our reputation and have a material adverse impact on our business and financial results” and “— We are highly dependent on information systems, and system failures could significantly disrupt our business, which may, in turn, have a material adverse effect on us.” We maintain a cybersecurity insurance policy to mitigate risks associated with cybersecurity incidents.
For a discussion of the risks we face from cybersecurity threats, including those that could materially affect us, see “Item 1A.
For a discussion of the risks we face from cybersecurity threats, including those that could materially affect us, see “Part I, Item 1A.
Certain representatives of Angel Oak Capital, including our Manager, periodically report to the Audit Committee as well as to the full Board of Directors, as appropriate, on cybersecurity matters, primarily through presentations by the Head of IT.
Certain representatives of Angel Oak Capital, including our Manager, regularly report (not less frequently than annually) to the Audit Committee as well as to our full Board of Directors, as appropriate, on cybersecurity matters, primarily through presentations by the Head of IT.
The Cybersecurity Program is used to assess and understand risks involving information systems and to provide controls and procedures for mitigating those risks and promptly responding to cybersecurity threats and incidents.
The purpose of the Cybersecurity Program is to mitigate the risks associated with unauthorized attempts to access Angel Oak Capital’s (including our) network for unintended purposes. The Cybersecurity Program is used to assess and understand risks involving information systems and to provide controls and procedures for mitigating those risks and promptly responding to cybersecurity threats and incidents.
Added
An independent member of our Board of Directors has experience managing the information technology function of a mortgage acquisition, servicing, and securitization platform.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of December 31, 2023, we did not own any property. Our principal offices are located in space leased by an affiliate of our Manager at 3344 Peachtree Road Northeast, Suite 1725, Atlanta, Georgia 30326. Item 3. Legal Proceedings None.
Biggest changeItem 2. Properties As of December 31, 2024, we did not own any property. Our principal offices are located in space leased by an affiliate of our Manager at 3344 Peachtree Road Northeast, Suite 1725, Atlanta, Georgia 30326. Item 3. Legal Proceedings None.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS On June 17, 2021, our common stock began trading on the NYSE under the symbol “AOMR.” As of March 1, 2024, there were 17 holders of record of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.
Biggest changeITEM 5. Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities On June 17, 2021, our common stock began trading on the NYSE under the symbol “AOMR.” As of March 1, 2025, there were 17 holders of record of our common stock.
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the quarter ended December 31, 2023. Item 6. Reserved
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the quarter ended December 31, 2024. Item 6. Reserved Not applicable.
For more information regarding risk factors that could materially adversely affect our actual results of operations, see Part I. Item IA. “Risk Factors.” There were no issuer purchases of equity securities made by us during the year ended December 31, 2023.
For more information regarding risk factors that could materially adversely affect our actual results of operations, see Part I, Item IA, “Risk Factors.” Issuer Purchases of Equity Securities During the quarter ended December 31, 2024, we did not repurchase any shares of our common stock.
Dividends We intend to make regular quarterly distributions to holders of our common stock.
This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers. Dividends We intend to make regular quarterly distributions to holders of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth the details of our financing lines as of each of December 31, 2023 and 2022: Interest Rate Pricing Spread Drawn Amount Line of Credit (Note Payable) Base Interest Rate December 31, 2023 December 31, 2022 ($ in thousands) Multinational Bank 1 (1) Average Daily SOFR 2.10% - 2.25% $ 206,183 352,038 Multinational Bank 2 (2) 1 month SOFR 1.95% - 2.00% — $ — Global Investment Bank 1 (3) 1 month or 3 month SOFR 1.70% - 3.50% — — Global Investment Bank 2 (4) 1 month SOFR 2.20% - 3.45% — — Global Investment Bank 3 (5) Compound SOFR 2.00% - 4.50% 84,427 119,137 Institutional Investors A and B (6) 1 month Term SOFR 3.50% — 168,695 Regional Bank 1 (7) 1 month SOFR 2.50% - 3.50% — — Regional Bank 2 (8) 1 month SOFR 2.41% — — Total $ 290,610 $ 639,870 (1) This loan financing facility expires on June 25, 2024.
Biggest changeWe and our subsidiary are also required to pay certain customary fees to Global Investment Bank 3 and to reimburse Global Investment Bank 3 for certain costs and expenses incurred in connection with its structuring, management, and ongoing administration of the agreement. 78 The following table sets forth the details of our financing lines as of each of December 31, 2024 and 2023: Interest Rate Pricing Spread Drawn Amount Line of Credit (Note Payable) Base Interest Rate December 31, 2024 December 31, 2023 ($ in thousands) Multinational Bank 1 (1) Average Daily SOFR 1.75% - 2.10% $ 100,711 $ 206,183 Global Investment Bank 2 (2) 1 month SOFR 1.75% - 3.35% 15,111 — Global Investment Bank 3 (3) Compound SOFR 1.90% - 4.75% 13,637 84,427 Total $ 129,459 $ 290,610 (1) On June 24, 2024 this facility was amended with an updated interest pricing spread of 1.75% and extended until December 26, 2024.
We also may invest in other residential mortgage loans, RMBS, and other mortgage-related assets, which, collectively with non-QM loans, we refer to as our target assets. Further, we may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
We also may invest in other residential mortgage loans, RMBS, and other mortgage-related assets, which, collectively with non-QM loans, we refer to as our target assets. Further, we also may identify and acquire our target assets through the secondary market when market conditions and asset prices are conducive to making attractive purchases.
In addition, the agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction.
In addition, the agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction.
We are the sole member of the Depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.
We are the sole member of the Depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.
We are the sole member of the Depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the bonds.
We are the sole member of the Depositor and also own and hold the call rights on the XS tranche of bonds, which is the “controlling class” of the 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.
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.
Due to market volatility, some of our cash was restricted, as further described below, by margin maintenance requirements by certain whole loan financing facility counterparties, along with cash collateral held by counterparties for interest rate futures and repurchase obligations. We may also participate in upcoming securitizations either solely or with other Angel Oak entities.
Due to market volatility, some of our cash was restricted, as further described below, by margin maintenance requirements by certain whole loan financing facility counterparties, along with cash collateral held by counterparties for interest rate futures and 82 repurchase obligations. We may also participate in upcoming securitizations either solely or with other Angel Oak entities.
Securitization Transactions In December 2023, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 60% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2023-7 issued approximately $397.2 million in face value of bonds.
In December 2023, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 60% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2023-7 issued approximately $397.2 million in face value of bonds.
Our 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 Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending, which currently operates primarily through a wholesale channel and has a national origination footprint.
Our 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 substantially sourced from Angel Oak’s proprietary mortgage lending platform, Angel Oak Mortgage Lending, which currently operates primarily through a wholesale channel and has a national origination footprint.
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 consolidated financial statements. The portion of this liability for which we have elected the fair value option is categorized as Level 2 in the fair value hierarchy.
We believe that these quotes are most reflective of the price that would be achieved if the bonds were sold to an independent third party on the 84 date of the consolidated financial statements. The portion of this liability for which we have elected the fair value option is categorized as Level 2 in the fair value hierarchy.
For VIEs that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIE’s economic performance may be determined by an entity’s involvement with the design and structure of the VIE. VIEs for which we are considered to be the primary beneficiary: 85 Determining the primary beneficiary of a VIE requires judgment.
For VIEs that do not have substantial on-going activities, the power to direct the activities that most significantly impact the VIE’s economic performance may be determined by an entity’s involvement with the design and structure of the VIE. VIEs for which we are considered to be the primary beneficiary: Determining the primary beneficiary of a VIE requires judgment.
We believe these identified sources of financing will be adequate for purposes of meeting our short‑term (within one year) and our longer‑term liquidity needs. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to 76 meet our obligations as they come due.
We believe these identified sources of financing will be adequate for purposes of meeting our short‑term (within one year) and our longer‑term liquidity needs. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due.
The availability of valuation techniques and the ability to attain observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the 84 type of investment, whether the investment is newly issued and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
The availability of valuation techniques and the ability to attain observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is newly issued and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
Because these securitizations did not result in the consolidation of VIE entities, we recognized a loss on the sale of these loans; however, the realized losses were less than the previous period’s unrealized losses for these loans, which drove overall positive GAAP net income for these securitizations. 54 Net unrealized gain .
Because these securitizations did not result in the consolidation of VIE entities, we recognized a loss on the sale of these loans; however, the realized losses were less than the previous period’s unrealized losses for these loans, which drove overall positive GAAP net income for these securitizations. Net unrealized gain .
To calculate our economic book value, the portions of our non-recourse financing obligation held at amortized cost are adjusted to fair value. These adjustments are also reflected in the table below in our end of period total stockholders’ equity.
To calculate our economic book value, the portions of our non-recourse financing obligation held at amortized cost are adjusted to their fair value. These adjustments are also reflected in the table below in our end of period total stockholders’ equity.
Certain of these portfolio assets are located in states such as Florida and California where natural disasters such as hurricanes and earthquakes may occasionally occur. We require all of our collateral to be adequately insured.
Certain of these portfolio assets are located in states such as Florida and California where natural disasters such as hurricanes, wildfires, and earthquakes may occasionally occur. We require all of our collateral to be adequately insured.
The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the agreement and Multinational Bank 1’s right to liquidate the mortgage loans then subject to the agreement.
The remedies for such events of default are also customary for this type of transaction 77 and include the acceleration of the principal amount outstanding under the agreement and Multinational Bank 1’s right to liquidate the mortgage loans then subject to the agreement.
We derecognized the mortgage loans sold in AOMT 2023-7 and recorded an investment in majority-owned affiliates located within “other assets” on our consolidated balance sheet as of December 31, 2023.
We derecognized the mortgage loans sold in AOMT 2023-7 and recorded an investment in majority-owned affiliates located within “other assets” on our consolidated balance sheet as of December 31, 2024.
Numbers presented may not sum to 100% due to rounding. 65 The following charts illustrate additional characteristics of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2022, based on the product profile, borrower profile and geographic location (percentages are based on the aggregate unpaid principal balance of such loans): Characteristics of Our Residential Mortgage Loans as of December 31, 2022: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2022.
Numbers presented may not sum to 100% due to rounding. 65 The following charts illustrate additional characteristics of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2023, based on the product profile, borrower profile and geographic location (percentages are based on the aggregate unpaid principal balance of such loans): Characteristics of Our Residential Mortgage Loans as of December 31, 2023: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2023.
Numbers presented may not sum to 100% due to rounding. 73 The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2022 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Loans Underlying Our Portfolio of RMBS Issued in AOMT Securitization Transactions (as of December 31, 2022) No state in “Other” represents more than a 4% concentration of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2022.
Numbers presented may not sum to 100% due to rounding. 73 The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2023 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Loans Underlying Our Portfolio of RMBS Issued in AOMT Securitization Transactions (as of December 31, 2023) No state in “Other” represents more than a 4% concentration of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2023.
In August 2023, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 36% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2023-5 issued approximately $260.6 million in face value of bonds.
In August 2023, we and other affiliated entities participated in a securitization transaction of a pool of residential mortgage loans, approximately 49% of which were mortgage loans originated by our affiliated mortgage origination companies, secured primarily by first liens on one‑to‑four family residential properties. In the transaction, AOMT 2023-5 issued approximately $260.6 million in face value of bonds.
Our most restrictive covenants (when covenants are required by any of our three active lenders) included: (1) our minimum tangible net worth must not (i) decline 20% or more in the previous 30 days, 25% or more in the previous 90 days, or 35% or more in the previous year, or, if shorter, in the period from September 30, 2022 to the applicable date of determination, or (ii) fall below $200.0 million of tangible net worth as of September 30, 2022 plus 50% of any capital contribution made or raised after September 30, 2022; (2) our minimum liquidity must not fall below the greatest of (x) the product of 5% and the aggregate repurchase price as it relates to Global Investment Bank 3 as of such date of determination, (y) $10.0 million and (z) any other amount of liquidity that we have covenanted to maintain in any other note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction (including, without limitation, any repurchase agreement, loan and security agreement, or similar credit facility or agreement for borrowed funds); and (3) the maximum ratio of our and our subsidiaries’ total indebtedness to tangible net worth must not be greater than 5:1.
Our most restrictive covenants (when covenants are required by any of our three active lenders) included: (1) our minimum tangible net worth must not (i) decline 20% or more in the previous 30 days, 25% or more in the previous 90 days, or 35% or more in the previous year, or (ii) fall below $200.0 million of tangible net worth as of September 30, 2022 plus 50% of any capital contribution made or raised after September 30, 2022; (2) our minimum liquidity must not fall below the greatest of (x) the product of 5% and the aggregate repurchase price as it relates to Global Investment Bank 3 as of such date of determination, (y) $10.0 million and (z) any other amount of liquidity that we have covenanted to maintain in any other note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction (including, without limitation, any repurchase agreement, loan and security agreement, or similar credit facility or agreement for borrowed funds); and (3) the maximum ratio of our and our subsidiaries’ total indebtedness to tangible net worth must not be greater than 5:1.
We will adjust our plans as appropriate in response to changes in our expectations and any potential changes in market conditions. Description of Existing Financing Arrangements As of December 31, 2023, we were a party to three uncommitted loan financing lines for a total borrowing capacity in an aggregate amount of up to $1.1 billion.
We will adjust our plans as appropriate in response to changes in our expectations and any potential changes in market conditions. Description of Existing Financing Arrangements As of December 31, 2024, we were a party to three uncommitted loan financing lines for a total borrowing capacity in an aggregate amount of up to $1.1 billion.
Our proportionate share of 34.42% of the retained bonds and investments in MOAs was approximately $8.7 million, including a retained discount on issuance of approximately $2.7 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $63.4 million and retained cash of $10.7 million, which was used for operational purposes.
Our proportionate share of 34.42% of the retained bonds and investments in MOAs was approximately $8.7 million, including a retained discount on issuance of approximately $2.7 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $63.5 million and retained cash of $10.7 million, which was used for operational purposes.
The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023 (percentages are based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 4% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023.
The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024 (percentages are based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 4% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024.
(2) The whole pool RMBS presented as of December 31, 2023 were purchased from a broker to whom the Company owes approximately $392.0 million, payable upon the settlement date of the trade. See Part II, Item 8, Note 7 — Due to Broker in our audited consolidated financial statements included in this Annual Report on Form 10-K.
(2) The whole pool RMBS presented as of December 31, 2023 were purchased from a broker to whom the Company owed approximately $392 million, payable upon the settlement date of the trade. See Part II, Item 8, Note 7 — Due to Broker in our audited consolidated financial statements included in this Annual Report on Form 10-K.
We have consolidated the AOMT 2022-4 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of December 31, 2023 and December 31, 2022.
We have consolidated the AOMT 2023-4 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of December 31, 2024 and December 31, 2023.
As of December 31, 2023, the advance rates (when required) of our three active lenders ranged from 75% to 92%, depending on the asset type and loan delinquency status.
As of December 31, 2024, the advance rates (when required) of our three active lenders ranged from 75% to 92%, depending on the asset type and loan delinquency status.
Treasury securities. (2) Other assets and liabilities presented is calculated as a net liability substantially comprised of $392.0 million due to broker for our quarter-end purchase of certain Freddie Mac and Fannie Mae-issued Whole Pool Agency RMBS, and excluding the portion of “other assets” which includes our investment in a Majority-Owned Affiliates, which is considered a target asset.
(2) Other assets and liabilities presented is calculated as a net liability substantially comprised of $202.0 million due to broker for our quarter-end purchase of certain Freddie Mac and Fannie Mae-issued Whole Pool Agency RMBS, and excluding the portion of “other assets” which includes our investment in Majority-Owned Affiliates, which is considered a target asset.
We and our subsidiaries are also required to pay certain customary fees to Multinational Bank 1 and to reimburse Multinational Bank 1 for certain costs and expenses incurred in connection with its structuring, management, and ongoing administration of the master repurchase agreement. 77 Multinational Bank 2 Loan Financing Facility.
We and our subsidiaries are also required to pay certain customary fees to Multinational Bank 1 and to reimburse Multinational Bank 1 for certain costs and expenses incurred in connection with its structuring, management, and ongoing administration of the master repurchase agreement. Global Investment Bank 2 Loan Financing Facility.
In the transaction, AOMT 2023-4 issued approximately $259.4 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $197.3 million and retained cash of $35.7 million, which was used for new loan purchases and operational purposes.
In the transaction, AOMT 2023-4 issued approximately $284.5 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $197.3 million and retained cash of $35.7 million, which was used for new loan purchases and operational purposes.
(3) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs). These bonds, with a fair value of $110.5 million, are not reflected in the consolidated balance sheets, as the Company reflects the assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its consolidated balance sheets.
(3) A portion of repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs). These bonds, with a fair value of $163.9 million, are not reflected in the consolidated balance sheets, as the Company reflects the assets of the VIE (residential mortgage loans in securitization trusts - at fair value) on its consolidated balance sheets.
The interest rate on any outstanding balance under the master repurchase agreement that the applicable subsidiary is required to pay Multinational Bank 1 is generally in line with other similar agreements that the Company or one or more of its subsidiaries has entered into, where the interest rate is equal to the sum of (1) a pricing spread of, as of July 25, 2023, 2.10% and (2) the average SOFR for each U.S.
The interest rate on any outstanding balance under the master repurchase agreement that the applicable subsidiary is required to pay Multinational Bank 1 is generally in line with other similar agreements that the Company or one or more of its subsidiaries has entered into, where the interest rate is equal to the sum of (1) a pricing spread of 1.75% and (2) the average SOFR for each U.S.
For information on the fees that are payable to our Manager under the Management Agreement, see Part II, Item 8, Note 12 – Related Party Transactions in our audited consolidated financial statements included in this Annual Report on Form 10-K. Distributable Earnings were approximately $(28.1) million and $19.4 million for the years ended December 31, 2023 and 2022, respectively.
For information on the fees that are payable to our Manager under the Management Agreement, see Part II, Item 8, Note 12 – Related Party Transactions in our audited consolidated financial statements included in this Annual Report on Form 10-K. Distributable Earnings were approximately $7.0 million and $(28.1) million for the years ended December 31, 2024 and 2023, respectively.
Treasury Securities 149,927 149,013 914 0.4 % Investment in Majority-Owned Affiliates 16,232 — 16,232 6.3 % Total investment securities $ 638,217 $ 193,656 $ 444,561 173.6 % Total investment portfolio $ 2,239,324 $ 1,653,420 $ 585,904 228.8 % Target assets (1) $ 2,089,397 $ 1,653,420 $ 585,904 228.8 % Cash $ 41,625 $ — $ 41,625 16.2 % Other assets and liabilities (2) (371,423) — (371,423) (145.0) % Total $ 1,909,526 $ 1,653,420 $ 256,106 100.0 % (1) “Target assets” as defined by us excludes U.S.
Treasury Securities 149,927 149,013 914 0.4 % Investment in Majority-Owned Affiliates (1) 16,232 — 16,232 6.3 % Total investment securities $ 638,217 $ 193,656 $ 444,561 173.6 % Total investment portfolio $ 2,239,324 $ 1,653,420 $ 585,904 228.8 % Target assets (2) $ 2,089,397 $ 1,653,420 $ 585,904 228.8 % Cash $ 41,625 $ — $ 41,625 16.2 % Other assets and liabilities (3) (371,423) — (371,423) (145.0) % Total $ 1,909,526 $ 1,653,420 $ 256,106 100.0 % (1) Our Investment in Majority-Owned Affiliates is held at its amortized cost basis (2) “Target assets” as defined by us excludes U.S.
Commercial Mortgage Loans The following table provides additional information on the commercial mortgage loans in our portfolio as of December 31, 2023: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $239 - $3,161 $1,118 Interest rate 5.50% - 8.38% 6.24% Loan term 26.25 - 28.08 years 27.61 years LTV at loan origination 50.00% - 75.00% 58.10% The following table provides additional information on the commercial mortgage loans in our portfolio as of December 31, 2022: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $242 - $4,300 $1,656 Interest rate 5.50% - 8.38% 7.03% Loan term 0.42 - 27.18 years 7.68 years LTV at loan origination 46.70% - 75.00% 50.90% 74 The following charts illustrate the geographic location of the commercial mortgage loans in our portfolio that we owned directly as of December 31, 2023 and December 31, 2022 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Our Commercial Mortgage Loans as of December 31, 2023: Geographic Diversification of Our Commercial Mortgage Loans as of December 31, 2022: Numbers presented may not sum to 100% due to rounding. 75 CMBS In November 2020, we participated in a securitization transaction of a pool of small balance commercial mortgage loans consisting of mortgage loans secured by commercial properties pursuant to which we contributed to AOMT 2020-SBC1 commercial mortgage loans with a carrying value of approximately $31.2 million that we had accumulated and held on our balance sheet, and we received bonds from AOMT 2020-SBC1 with a fair value of approximately $8.9 million.
Commercial Mortgage Loans The following table provides additional information on the commercial mortgage loans in our portfolio as of December 31, 2024: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $237 - $3,161 $1,113 Interest rate 5.50% - 8.38% 6.24% Loan term 7.09 - 25.18 years 11.19 years LTV at loan origination 50.0% - 75.0% 58.10% The following table provides additional information on the commercial mortgage loans in our portfolio as of December 31, 2023: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $239 - $3,161 $1,118 Interest rate 5.50% - 8.38% 6.24% Loan term 26.25 - 28.08 years 27.61 years LTV at loan origination 50.00% - 75.00% 58.10% 74 The following charts illustrate the geographic location of the commercial mortgage loans in our portfolio that we owned directly as of December 31, 2024 and December 31, 2023 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Our Commercial Mortgage Loans as of December 31, 2024: Geographic Diversification of Our Commercial Mortgage Loans as of December 31, 2023: Numbers presented may not sum to 100% due to rounding. 75 CMBS In November 2020, we participated in a securitization transaction of a pool of small balance commercial mortgage loans consisting of mortgage loans secured by commercial properties pursuant to which we contributed to AOMT 2020-SBC1 commercial mortgage loans with a carrying value of approximately $31.2 million that we had accumulated and held on our balance sheet, and we received bonds from AOMT 2020-SBC1 with a fair value of approximately $8.9 million.
The agreement also sets forth events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction.
The agreement requires us to maintain various financial and other customary covenants. The agreement also sets forth events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross‑defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction.
Our proportionate share of 10.36% of the retained bonds and investments in majority owned affiliates (“MOAs”) was approximately $3.5 million, including a retained discount on issuance of approximately $1.4 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $30.9 million and retained cash of $3.6 million, which was used for operational purposes.
Our proportionate share of 10.36% of the retained bonds and investments in MOAs was approximately $3.9 million, including a retained discount on issuance of approximately $1.4 million. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $30.9 million and retained cash of $3.6 million, which was used for operational purposes.
Additionally, other assets includes $5.2 million of commercial loans and $6.6 million of CMBS. 62 As of December 31, 2022, our portfolio consisted of approximately $2.9 billion of residential mortgage loans, RMBS, and other target assets.
Additionally, other assets includes $5.2 million of commercial loans and $5.6 million of CMBS. 62 As of December 31, 2023, our portfolio consisted of approximately $2.1 billion of residential mortgage loans, RMBS, and other target assets.
We also have the ability to leverage currently unleveraged securities or whole loan assets, if we deem those actions advisable. Restricted Cash Restricted cash of approximately $2.9 million as of December 31, 2023 was comprised of: $2.5 million in interest rate futures margin collateral; and margin collateral for securities sold under agreements to repurchase of $0.3 million.
We also have the ability to leverage currently unleveraged securities or whole loan assets, if we deem those actions advisable. Restricted Cash Restricted cash of approximately $2.1 million as of December 31, 2024 was comprised of: $0.8 million in interest rate futures margin collateral; and margin collateral for securities sold under agreements to repurchase of $1.2 million.
Cash Availability Cash and cash equivalents Our cash balance as of December 31, 2023 was sufficient to meet our liquidity covenants under our financing facilities. We believe that we maintain sufficient cash to continue to meet margin calls on our financing facilities, should such margin calls occur.
Cash Availability Cash and cash equivalents Our cash balance as of December 31, 2024 was sufficient to meet our liquidity covenants under our financing facilities and our senior unsecured notes. We believe that we maintain sufficient cash to continue to meet margin calls on our financing facilities, should such margin calls occur.
(2) The whole pool RMBS presented as of December 31, 2022 were purchased from a broker to whom the Company owed approximately $1.0 billion, payable upon the settlement date of the trade. See Part II, Item 8, Note 7 — Due to Broker in our audited consolidated financial statements included in this Annual Report on Form 10-K.
(2) The whole pool RMBS presented as of December 31, 2024 were purchased from a broker to whom the Company owes approximately $202.0 million, payable upon the settlement date of the trade. See Part II, Item 8, Note 7 — Due to Broker in our audited consolidated financial statements included in this Annual Report on Form 10-K.
Our financing sources currently include payments of principal and interest we receive on our investment portfolio, unused borrowing capacity under our in‑place loan financing lines and repurchase facilities, and securitizations of our whole loans.
Our financing sources currently include payments of principal and interest we receive on our investment portfolio, unused borrowing capacity under our in‑place loan financing lines and repurchase facilities, securitizations of our whole loans, and our ATM Program (as defined below).
As the primary beneficiary we have consolidated the AOMT 2023-4 securitization, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheet as of the applicable balance sheet date.
As the primary beneficiary we have consolidated these securitizations, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheet as of the applicable balance sheet date.
Income Taxes During the year ended December 31, 2023, we recorded an income tax expense of approximately $1.2 million based on our income taxes arising from income associated with assets held in our TRS.
Income Taxes During the year ended December 31, 2024, we recorded an income tax expense of approximately $3.3 million based on our income taxes arising from income associated with assets held in our TRS.
We have consolidated the AOMT 2022-1 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of December 31, 2023 and December 31, 2022.
We have consolidated the AOMT 2024-10 securitization on our consolidated balance sheet, maintaining the residential mortgage loans held in the securitization trust and the related financing obligation thereto on our consolidated balance sheets as of December 31, 2024.
Certain information regarding the commercial mortgage loans underlying our portfolio of CMBS issued in the AOMT 2020-SBC1 securitization transaction is shown below as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 ($ in thousands) UPB of loans $112,302 $122,432 Number of loans 145 160 Weighted average loan coupon 7.5 % 7.4 % Average loan amount $774 $765 Weighted average LTV at loan origination and deal date 56.2 % 58.4 % The following table provides certain information with respect to the CMBS we received in connection with the AOMT 2020-SBC1 securitization transactions as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 CMBS Repurchase Debt Allocated Capital CMBS Repurchase Debt Allocated Capital (in thousands) Senior $ — $ — $ — $ — $ — $ — Mezzanine — — — — — — Subordinate 2,706 — 2,706 2,901 — 2,901 Interest only / excess 3,886 — 3,886 3,210 — 3,210 Total $ 6,592 $ — $ 6,592 $ 6,111 $ — $ 6,111 Liquidity and Capital Resources Overview Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund our investments and operating costs, make distributions to our stockholders, and satisfy other general business needs.
Certain information regarding the commercial mortgage loans underlying our portfolio of CMBS issued in the AOMT 2020-SBC1 securitization transaction is shown below as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 ($ in thousands) UPB of loans $101,686 $112,302 Number of loans 129 145 Weighted average loan coupon 8.1 % 7.5 % Average loan amount $788 $774 Weighted average LTV at loan origination and deal date 56.2 % 56.2 % The following table provides certain information with respect to the CMBS we received in connection with the AOMT 2020-SBC1 securitization transactions as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 CMBS Repurchase Debt Allocated Capital CMBS Repurchase Debt Allocated Capital (in thousands) Senior $ — $ — $ — $ — $ — $ — Mezzanine — — — — — — Subordinate 2,540 — 2,540 2,706 — 2,706 Interest only / excess 3,053 — 3,053 3,886 — 3,886 Total $ 5,593 $ — $ 5,593 $ 6,592 $ — $ 6,592 Liquidity and Capital Resources Overview Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund our investments and operating costs, make distributions to our stockholders, and satisfy other general business needs.
Angel Oak Mortgage Lending, an affiliated Angel Oak mortgage origination 53 platform, is a market leader in non‑QM loan production and, as of December 31, 2023, had originated over $18.6 billion in total non‑QM loan volume since its inception in 2011.
Angel Oak Mortgage Lending, an affiliated Angel Oak mortgage origination platform, is a market leader in non‑QM loan production and, as of December 31, 2024, had originated over $20.0 billion in total non‑QM loan volume since its inception in 2011.
Numbers presented may not sum to 100% due to rounding 66 Residential Mortgage Loans Held in Securitization Trusts The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023: ($ in thousands) UPB $1,334,963 Fair Value 1,221,067 Number of loans 3,112 Weighted average loan coupon 4.7% Average loan amount $429 Weighted average LTV at loan origination and deal date 68.0% Weighted average credit score at loan origination and deal date 742 Current 3-month constant prepayment rate (“CPR”) (1) 5.6% Percentage of loans 90+ days delinquent (based on UPB) 1.0% (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.
Numbers presented may not sum to 100% due to rounding 66 Residential Mortgage Loans Held in Securitization Trusts The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2024: ($ in thousands) UPB $1,781,311 Fair Value 1,696,995 Number of loans 4,183 Weighted average loan coupon 5.6% Average loan amount $427 Weighted average LTV at loan origination and deal date 67.0% Weighted average credit score at loan origination and deal date 743 Current 3-month conditional prepayment rate (“CPR”) (1) 7.4% Percentage of loans 90+ days delinquent (based on UPB) 2.0% (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.
For the year ended December 31, 2023, an increase in mark-to-market valuations on our portfolios of residential mortgage loans and loans in securitization trust were the primary drivers of the total unrealized gain, offset by realized and unrealized losses on whole pool agency residential mortgage-backed securities (“Whole Pool Agency RMBS”).
Comparatively. for the year ended December 31, 2023, an increase in mark-to-market valuations on our portfolios of residential mortgage loans and loans held in securitization trusts were the primary drivers of the total unrealized gain, offset by realized and unrealized losses on Whole Pool Agency RMBS.
Numbers presented may not sum to 100% due to rounding. 67 The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2022: ($ in thousands) UPB $1,151,332 Fair Value 1,027,442 Number of loans 2,664 Weighted average loan coupon 4.72% Average loan amount 434 Weighted average LTV at loan origination and deal date 69% Weighted average credit score at loan origination and deal date 743 Current 3-month CPR 5.0% Percentage of loans 90+ days delinquent (based on UPB) —% The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2022 (percentages are based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 4% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2022.
Numbers presented may not sum to 100% due to rounding. 67 The following table sets forth the information regarding the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023: ($ in thousands) UPB $1,334,963 Fair Value 1,221,067 Number of loans 3,112 Weighted average loan coupon 4.7% Average loan amount $429 Weighted average LTV at loan origination and deal date 68.0% Weighted average credit score at loan origination and deal date 742 Current 3-month CPR 5.6% Percentage of loans 90+ days delinquent (based on UPB) 1.0% The following chart illustrates the geographic distribution of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023 (percentages are based on the aggregate unpaid principal balance of such loans): Note: No state in “Other” represents more than a 4% concentration of the underlying collateral of our residential mortgage loans held in securitization trusts as of December 31, 2023.
Treasury Securities 86 — Total realized and unrealized gains (losses), net $ 25,963 $ (210,470) 60 For the years ended December 31, 2023 and 2022, total realized and unrealized gains (losses), net, were a gain of $26.0 million and a loss of $210.5 million, respectively.
Treasury Securities (86) 86 Total realized and unrealized gains (losses), net $ 14,533 $ 25,963 For the years ended December 31, 2024 and 2023, total realized and unrealized gains (losses), net, were a gain of $14.5 million and a gain of $26.0 million, respectively.
Certain information regarding the mortgage loans underlying our portfolio of RMBS issued in AOMT securitization transactions is set forth below as of December 31, 2023 and 2022 unless otherwise stated: As of December 31, 2023 AOMT 2019 Securitizations AOMT 2020 Securitizations AOMT 2023 Securitizations ($ in thousands) UPB of loans $331,376 $167,028 $1,192,450 Number of loans 1197 512 2288 Weighted average loan coupon 6.90 % 5.80 % 5.30 % Average loan amount $277 $326 $521 Weighted average LTV at loan origination and deal date 70 % 74 % 70 % Weighted average credit score at loan origination and deal date 707 720 733 Current 3-month CPR (1, 6) 14.3 % 5.4 % 4.3 % 90+ day delinquency (as a % of UPB) 9.0 % 3.0 % 1.6 % Weighted Average 90+ Delinquency (as a % of Original Balance) 1.5 % 1.1 % 1.3 % Weighted Average LTV of 90+ Delinquent Loans (FHFA HPI Estimate) (2) 50.8 % 74.1 % 72.8 % Fair value of first loss piece (3,5,6) $18,057 $21,389 $55,056 Investment thickness (4) 19.15 % 18.57 % 3.78 % (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.
(5) The fair value of the first loss pieces presented for AOMT 2023-1, AOMT 2023-5, AOMT 2023-7, AOMT 2024-3, AOMT 2024-6, and AOMT 2024-13 is the total at risk for the Majority-Owned Affiliates. 69 As of December 31, 2023 AOMT 2019 Securitizations AOMT 2020 Securitizations AOMT 2023 Securitizations ($ in thousands) UPB of loans $331,376 $167,028 $1,192,450 Number of loans 1197 512 2288 Weighted average loan coupon 6.90 % 5.80 % 5.30 % Average loan amount $277 $326 $521 Weighted average LTV at loan origination and deal date 70 % 74 % 70 % Weighted average credit score at loan origination and deal date 707 720 733 Current 3-month CPR (1, 6) 14.3 % 5.4 % 4.3 % 90+ day delinquency (as a % of UPB) 9.0 % 3.0 % 1.6 % Weighted Average 90+ Delinquency (as a % of Original Balance) 1.5 % 1.1 % 1.3 % Weighted Average LTV of 90+ Delinquent Loans (FHFA HPI Estimate) (2) 50.8 % 74.1 % 72.8 % Fair value of first loss piece (3,5) $18,057 $21,389 $13,003 Investment thickness (4) 19.15 % 18.57 % 3.78 % (1) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.
AOMT 2023-1, AOMT 2023-5, and AOMT 2023-7 were securitization transactions entered into with other Angel Oak affiliates, for which we are not considered to be a "primary beneficiary" of the applicable securitization vehicle.
AOMT 2024-3, AOMT 2024-6, and AOMT 2024-13 were securitization transactions entered into with other Angel Oak affiliates, for which we are not considered to be a "primary beneficiary" of the applicable securitization vehicle.
Pursuant to the initial agreement (prior to December 19, 2022, as further described below), we or our subsidiary could sell to Global Investment Bank 3, and later repurchase, up to $200.0 million aggregate borrowings on mortgage loans.
Pursuant to the initial agreement, we or our subsidiary could sell to Global Investment Bank 3, and later repurchase, up to $200.0 million aggregate borrowings on mortgage loans.
During the year ended December 31, 2022, we incurred an income tax benefit of approximately $3.5 million based on an expectation of a potential recovery of income taxes arising from losses associated with assets held in our TRS. 61 Our Portfolio As of December 31, 2023, our portfolio consisted of approximately $2.1 billion of residential mortgage loans, RMBS, and other target assets.
During the year ended December 31, 2023, we incurred an income tax expense of approximately $1.2 million based on our income taxes arising from income associated with assets held in our TRS. Our Portfolio As of December 31, 2024, our portfolio consisted of approximately $2.2 billion of residential mortgage loans, RMBS, and other target assets.
The table below sets forth a reconciliation of net income allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the years ended December 31, 2023 and 2022: December 31, 2023 December 31, 2022 ($ in thousands) Net income (loss) allocable to common stockholders $ 33,714 $ (187,847) Adjustments: Net unrealized (gains) losses on trading securities (484) — Net unrealized (gains) losses on derivatives 16,985 (13,054) Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation (15,890) 67,401 Net unrealized (gains) losses on residential loans (64,009) 146,347 Net unrealized (gains) losses on commercial loans (91) 844 Non-cash equity compensation expense 1,689 5,753 Distributable Earnings $ (28,086) $ 19,444 56 Distributable Earnings Return on Average Equity Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total common stockholders’ equity.
The table below sets forth a reconciliation of net income allocable to common stockholders, calculated in accordance with GAAP, to Distributable Earnings for the years ended December 31, 2024 and 2023: December 31, 2024 December 31, 2023 ($ in thousands) Net income (loss) allocable to common stockholders $ 28,750 $ 33,714 Adjustments: Net unrealized (gains) losses on trading securities 1,026 (484) Net unrealized (gains) losses on derivatives (2,849) 16,985 Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation (5,313) (15,890) Net unrealized (gains) losses on residential loans (16,598) (64,009) Net unrealized (gains) losses on commercial loans (27) (91) Non-cash equity compensation expense 2,041 1,689 Distributable Earnings $ 7,030 $ (28,086) 56 Distributable Earnings Return on Average Equity Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total common stockholders’ equity.
Residential Mortgage Loans The following table sets forth additional information on the residential mortgage loans in our portfolio as of December 31, 2023: Portfolio Range Portfolio Weighted Average ($ in thousands) Unpaid principal balance (“UPB”) $18 - $3,410 $492 Interest rate 2.99% - 12.50% 6.8% Maturity date 9/27/2048 - 11/27/2063 December 2053 FICO score at loan origination 624 - 825 748 LTV at loan origination 9.00% - 90.00% 69.4% DTI at loan origination 1.90% - 59.10% 30.9% Percentage of first lien loans N/A 100% Percentage of loans 90+ days delinquent (based on UPB) N/A 0.9% 63 The following table sets forth additional information on the residential mortgage loans in our portfolio as of December 31, 2022: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $59 - $3,441 $496 Interest rate 2.88% - 9.99% 4.8% Maturity date 9/21/2036 - 6/20/2062 February 2053 FICO score at loan origination 575 - 823 737 LTV at loan origination 8.00% - 95.00% 70.0% DTI at loan origination 1.20% - 59.10% 23.0% Percentage of first lien loans N/A 100% Percentage of loans 90+ days delinquent (based on UPB) N/A 0.9% The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 2023: The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 2022: 64 The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of December 31, 2023, based on the product profile, borrower profile and geographic location (percentages are based on the aggregate unpaid principal balance of such loans): Characteristics of Our Residential Mortgage Loans as of December 31, 2023: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2023.
Residential Mortgage Loans The following table sets forth additional information on the residential mortgage loans in our portfolio as of December 31, 2024: Portfolio Range Portfolio Weighted Average ($ in thousands) Unpaid principal balance (“UPB”) $75 - $2,995 $537 Interest rate 3.87%-11.88% 7.4% Maturity date 8/8/2039 - 9/26/2064 November 2054 FICO score at loan origination 628-822 752 LTV at loan origination 31.9%-90.0% 71.7% DTI at loan origination 1.94%-50.0% 31.2% Percentage of first lien loans N/A 96.7% Percentage of loans 90+ days delinquent (based on UPB) N/A —% 63 The following table sets forth additional information on the residential mortgage loans in our portfolio as of December 31, 2023: Portfolio Range Portfolio Weighted Average ($ in thousands) UPB $18-$3,410 $492 Interest rate 2.99%-12.50% 6.8% Maturity date 9/27/2048 - 11/27/2063 December 2053 FICO score at loan origination 624-825 748 LTV at loan origination 9.0%-90.0% 69.4% DTI at loan origination 1.9%-59.1% 30.9% Percentage of first lien loans N/A 100% Percentage of loans 90+ days delinquent (based on UPB) N/A 0.9% The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 2024: The following charts illustrate the distribution of the credit scores and interest rates by the number of loans in our residential mortgage loan portfolio as of December 31, 2023: 64 The following charts illustrate additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of December 31, 2024, based on the product profile, borrower profile and geographic location (percentages are based on the aggregate unpaid principal balance of such loans): Characteristics of Our Residential Mortgage Loans as of December 31, 2024: Note: No state in “Other” represents more than a 3% concentration of the residential mortgage loans in our portfolio that we owned directly as of December 31, 2024.
Pursuant to the agreement, we or our subsidiary may sell to Global Investment Bank 2, and later repurchase, up to $250.0 million aggregate borrowings on mortgage loans. The agreement, as amended previously, was set to terminate on February 2, 2024.
Pursuant to the agreement, we or our subsidiary may sell to Global Investment Bank 2, and later repurchase, up to $250.0 million aggregate borrowings on mortgage loans.
Net interest income for the years ended December 31, 2023 and 2022 was $28.9 million and $52.5 million, respectively.
Net interest income for the years ended December 31, 2024 and 2023 was $36.9 million and $28.9 million, respectively.
Management discusses the ongoing development and selection of the critical accounting policies as set forth below with the Audit Committee of our Board of Directors: Fair Value Measurements We report various investments at fair value, including certain eligible financial instruments elected to be accounted for under the fair value option.
In addition, the amount or timing of our reported earnings may be impacted by technical accounting issues and estimates. 83 Management discusses the ongoing development and selection of the critical accounting policies as set forth below with the Audit Committee of our Board of Directors: Fair Value Measurements We report various investments at fair value, including certain eligible financial instruments elected to be accounted for under the fair value option.
The following table sets forth certain characteristics of our short-term repurchase facilities as of December 31, 2023 and 2022: December 31, 2023 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) ($ in thousands) U.S.
The following table sets forth certain characteristics of our short-term repurchase facilities as of December 31, 2024 and 2023: 79 December 31, 2024 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) ($ in thousands) RMBS (1) $ 50,555 5.76 % 19 Total $ 50,555 5.76 % 19 December 31, 2023 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) ($ in thousands) U.S.
Prior to December 19, 2022 and subsequent to November 7, 2023, the loan financing line was marked‑to‑market at fair value, where Global Investment Bank 3 retained the right to determine the market value of the mortgage loan collateral in its sole good faith discretion and 78 in a commercially reasonable manner and was under no obligation to purchase the eligible mortgage loans we offered to sell to them.
The loan financing line is marked‑to‑market at fair value, where Global Investment Bank 3 retains the right to determine the market value of the mortgage loan collateral in its sole good faith discretion and in a commercially reasonable manner and is under no obligation to purchase the eligible mortgage loans we offer to sell to them.
We derecognized the mortgage loans sold in AOMT 2023-5 and recorded an investment in majority-owned affiliates located within “other assets” on our consolidated balance sheet as of December 31, 2023.
We derecognized the mortgage loans sold in AOMT 2024-6 and recorded investments in RMBS and majority-owned affiliates (which is located within “other assets” on our consolidated balance sheet) as of December 31, 2024.
Whole loans and securitization activity During the year ended December 31, 2023, we purchased $222.7 million of newly-originated, current market coupon non-QM residential mortgage loans, with a weighted average coupon of 8.37%, weighted average loan-to-value of 70.1% and weighted average credit score of 754.
Comparatively, during the year ended December 31, 2023, we purchased $222.7 million of non-QM residential mortgage loans, with a weighted average coupon of 8.37%, weighted average LTV of 70.1% and weighted average credit score of 754.
Due Diligence and Transaction Costs For the years ended December 31, 2023 and 2022, our due diligence and transaction costs were $0.3 million and $1.4 million, respectively. Our due diligence and transaction expenses decreased over the comparative period as we negotiated improved pricing and purchased fewer whole loans in the year ended December 31, 2023 as compared to 2022.
Due Diligence and Transaction Costs For the years ended December 31, 2024 and 2023, our due diligence and transaction costs were $0.8 million and $0.3 million, respectively. Our due diligence and transaction expenses increased over the comparative period as we purchased more whole loans in the year ended December 31, 2024 as compared to 2023.
Further, the principal amount paid by Global Investment Bank 3 for each eligible mortgage loan prior to the December 19, 2022 amendment and subsequent to the November 7, 2023 amendment is based on a percentage of the outstanding principal balance of the mortgage loan or the market value of the mortgage loan, whichever is less.
Further, the principal amount paid by Global Investment Bank 3 for each eligible mortgage loan is based on a percentage of the outstanding principal balance of the mortgage loan or the market value of the mortgage loan, whichever is less.
(4) Represents the average size of the subordinate securities we own as investments in each securitization relative to the average overall size of the securitization. 70 The following table provides certain information with respect to our RMBS portfolio received in AOMT securitization transactions and acquired from other third parties as of December 31, 2023: RMBS Repurchase Debt (1,3) Allocated Capital AOMT Third Party RMBS Total AOMT Third Party RMBS Total AOMT Third Party RMBS Total (in thousands) Mezzanine $ 10,972 $ — $ 10,972 $ 844 $ — $ 844 $ 10,119 $ — $ 10,119 Subordinate 55,665 — 55,665 19,812 — 19,812 35,845 — $ 35,845 Interest only / excess 13,059 — 13,059 1,871 — 1,871 6,890 — $ 6,890 Whole pool (2) — 392,362 392,362 — — — — 392,362 $ 392,362 Retained RMBS in VIEs (3) — — — 22,116 — 22,116 (22,116) — $ (22,116) Subtotal $ 79,696 $ 392,362 $ 472,058 $ 44,643 $ — $ 44,643 $ 30,738 $ 392,362 $ 423,100 Investment in Majority Owned Affiliates $ 16,232 $ — $ 16,232 $ — $ — $ — $ 16,232 $ — $ 16,232 Total $ 95,928 $ 392,362 $ 488,290 $ 44,643 $ — $ 44,643 $ 46,970 $ 392,362 $ 439,332 (1) Repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).
The following table provides certain information with respect to our RMBS portfolio received in AOMT securitization transactions and acquired from other third parties as of December 31, 2023: RMBS Repurchase Debt (1,3) Allocated Capital AOMT Third Party RMBS Total AOMT Third Party RMBS Total AOMT Third Party RMBS Total (in thousands) Mezzanine $ 10,972 $ — $ 10,972 $ 844 $ — $ 844 $ 10,128 $ — $ 10,128 Subordinate 55,665 — 55,665 19,812 — 19,812 35,853 — $ 35,853 Interest only / excess 13,059 — 13,059 1,871 — 1,871 11,188 — $ 11,188 Whole pool (2) — 392,362 392,362 — — — — 392,362 $ 392,362 Retained RMBS in VIEs (3) — — — 22,116 — 22,116 (22,116) — $ (22,116) Subtotal $ 79,696 $ 392,362 $ 472,058 $ 44,643 $ — $ 44,643 $ 35,053 $ 392,362 $ 427,415 Investment in Majority Owned Affiliates $ 16,232 $ — $ 16,232 $ — $ — $ — 16,232 $ — $ 16,232 Total $ 95,928 $ 392,362 $ 488,290 $ 44,643 $ — $ 44,643 $ 51,285 $ 392,362 $ 443,647 71 (1) Repurchase debt includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).
Total Realized and Unrealized Gains (Losses) The components of total realized and unrealized gains (losses), net for the years ended December 31, 2023 and 2022 are set forth as follows: December 31, 2023 December 31, 2022 (in thousands) Realized and unrealized gain (loss) on residential mortgage loans $ 26,564 $ (213,528) Realized and unrealized gain (loss) on residential loans held in securitization trusts, net of non-recourse securitization obligation 13,031 (71,526) Realized loss on RMBS (2,152) (10,820) Realized and unrealized gain (loss) on Whole Pool Agency RMBS (16,458) — Realized loss on CMBS (260) (1,520) Realized and unrealized gain (loss) on commercial mortgage loans 121 (1,296) Unrealized appreciation (depreciation) on interest rate futures (3,948) 2,939 Realized and unrealized gain (loss) on TBAs 3,486 17,411 Realized gain on interest rate futures 5,493 67,870 Realized and unrealized loss on U.S.
Total Realized and Unrealized Gains (Losses) The components of total realized and unrealized gains (losses), net for the years ended December 31, 2024 and 2023 are set forth as follows: 60 December 31, 2024 December 31, 2023 (in thousands) Realized and unrealized gain (loss) on residential mortgage loans $ 9,525 $ 26,564 Realized and unrealized gain (loss) on residential loans held in securitization trusts, net of non-recourse securitization obligation 887 13,031 Realized loss on RMBS (2,916) (2,152) Realized and unrealized gain (loss) on Whole Pool Agency RMBS (6,730) (16,458) Realized loss on CMBS (248) (260) Unrealized gain on commercial mortgage loans 28 121 Unrealized appreciation (depreciation) on interest rate futures 1,828 (3,948) Realized and unrealized gain (loss) on TBAs 6,397 3,486 Realized gain on interest rate futures 5,848 5,493 Unrealized loss on U.S.
On August 22, 2023, we participated in AOMT 2023-5, an approximately $260.6 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loans with a scheduled principal balance of approximately $93.8 million.
In June 2024, we participated in AOMT 2024-6, an approximately $479.6 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loans with a scheduled unpaid principal balance of approximately $22.9 million.
Our operating expenses decreased compared to the comparative period due to cost savings actions such as in-sourcing of key accounting functions, vendor contract negotiations, and a decrease in servicing fees associated with servicing our whole loans portfolios.
Expenses Operating Expenses For the years ended December 31, 2024 and 2023, our operating expenses were $6.0 million and $7.5 million, respectively. Our operating expenses decreased compared to the comparative period due to continued cost savings actions such as in-sourcing of key accounting functions, vendor contract negotiations, and a decrease in servicing fees associated with servicing our whole loans portfolios.
Cash Flows For the Years Ended December 31, 2023 December 31, 2022 (in thousands) Cash flows provided by (used in) operating activities $ 306,404 $ (331,127) Cash flow provided by (used in) investing activities $ (194,107) $ 664,333 Cash flows provided by (used in) financing activities $ (107,662) $ (345,654) Net increase (decrease) in cash and restricted cash $ 4,635 $ (12,448) Cash flows provided by operating activities of $306.4 million for the year ended December 31, 2023 as compared to $331.1 million in outflows for the year ended December 31, 2022 were primarily due to net income for the year ended December 31, 2023, compared to a net loss for 2022, along with activity related to the securitization of residential mortgage loans during the year ended December 31, 2023.
Cash Flows For the Years Ended December 31, 2024 December 31, 2023 (in thousands) Cash flows provided by (used in) operating activities $ (221,433) $ 306,404 Cash flow provided by (used in) investing activities $ 120,839 $ (194,107) Cash flows provided by (used in) financing activities $ 98,991 $ (107,662) Net increase (decrease) in cash and restricted cash $ (1,603) $ 4,635 Cash outflows used in operating activities of $221.4 million for the year ended December 31, 2024 as compared to $306.4 million in inflows for the year ended December 31, 2023 were primarily due to the significant increase in loans purchased for the year ended December 31, 2024, compared to a net gain for 2023, along with activity related to the securitization of residential mortgage loans during the year ended December 31, 2024.
We expect quarter-to-quarter GAAP earnings volatility from our business activities. This volatility can occur for a variety of reasons, particularly changes in the fair values of consolidated assets and liabilities. In addition, the amount or timing of our reported earnings may be impacted by technical accounting issues and estimates.
We expect quarter-to-quarter GAAP earnings volatility from our business activities. This volatility can occur for a variety of reasons, particularly changes in the fair values of consolidated assets and liabilities.
A description of each loan financing line is set forth as follows: Multinational Bank 1 Loan Financing Facility. On April 13, 2022, we and two of our subsidiaries entered into a master repurchase agreement with a multinational bank (“Multinational Bank 1”). Our subsidiaries are each considered a “Seller” under this agreement.
Our minimum liquidity requirement as of December 31, 2024 was $10.0 million. A description of each loan financing line is set forth as follows: Multinational Bank 1 Loan Financing Facility. On April 13, 2022, we and two of our subsidiaries entered into a master repurchase agreement with a multinational bank (“Multinational Bank 1”).
The following table sets forth information with respect to our RMBS ending balances, at fair value, as of December 31, 2023: Senior Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value $ — $ 1,958 $ 49,578 $ 10,424 $ 993,378 $ 1,055,338 Acquisitions: Retained bonds received in securitizations — 9,831 4,880 3,530 — 18,241 Third party securities — — — — 1,741,864 1,741,864 Effect of principal payments / called deals — (869) — — (2,339,028) (2,339,897) IO and excess servicing prepayments — — — (1,396) — (1,396) Changes in fair value, net — 52 1,207 501 (3,852) (2,092) Ending fair value $ — $ 10,972 $ 55,665 $ 13,059 $ 392,362 $ 472,058 The following table sets forth information with respect to our RMBS ending balances, at fair value, as of December 31, 2022: Senior Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value $ 3,076 $ 2,178 $ 90,350 $ 17,975 $ 372,055 $ 485,634 Acquisitions: Third party securities — — — — 3,151,406 3,151,406 Effect of principal payments / called deals (3,041) (171) (29,612) (169) (2,533,834) (2,566,827) IO and excess servicing prepayments — — 2,256 (21,256) — (19,000) Changes in fair value, net (35) (49) (13,416) 13,874 3,751 4,125 Ending fair value $ — $ 1,958 $ 49,578 $ 10,424 $ 993,378 $ 1,055,338 72 The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2023 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Loans Underlying Our Portfolio of RMBS Issued in AOMT Securitization Transactions (as of December 31, 2023) No state in “Other” represents more than a 4% concentration of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2023.
The following table sets forth information with respect to our RMBS ending balances, at fair value, as of December 31, 2024: Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value $ 10,972 $ 55,665 $ 13,059 $ 392,362 $ 472,058 Acquisitions: Retained bonds received in securitizations 2,420 14,757 1,838 — 19,015 Third party securities — — — 938,430 938,430 Effect of principal payments / called deals (1,080) — — (1,125,653) (1,126,733) IO and excess servicing prepayments — — (1,974) — (1,974) Changes in fair value, net 423 3,127 (415) (3,688) (553) Ending fair value $ 12,735 $ 73,549 $ 12,508 $ 201,451 $ 300,243 The following table sets forth information with respect to our RMBS ending balances, at fair value, as of December 31, 2023: Mezzanine Subordinate Interest Only Whole Pool Total (in thousands) Beginning fair value $ 1,958 $ 49,578 $ 10,424 $ 993,378 $ 1,055,338 Acquisitions: Retained bonds received in securitizations 9,831 4,880 3,530 — 18,241 Third party securities — — — 1,741,864 1,741,864 Effect of principal payments / called deals (869) — — (2,339,028) (2,339,897) IO and excess servicing prepayments — — (1,396) — (1,396) Changes in fair value, net 52 1,207 501 (3,852) (2,092) Ending fair value $ 10,972 $ 55,665 $ 13,059 $ 392,362 $ 472,058 72 The following chart illustrates the geographic diversification of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2024 (percentages are based on the aggregate unpaid principal balance of such loans): Geographic Diversification of Loans Underlying Our Portfolio of RMBS Issued in AOMT Securitization Transactions (as of December 31, 2024) No state in “Other” represents more than a 4% concentration of the loans underlying our portfolio of RMBS issued in AOMT securitization transactions as of December 31, 2024.
We are externally managed and advised by our Manager, Falcons I, LLC, a registered investment adviser under the Investment Advisers Act of 1940 and an affiliate of Angel Oak Capital, a leading alternative credit manager with market leadership in mortgage credit that includes asset management, lending and capital markets.
Our objective is to generate attractive risk-adjusted returns for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles. 53 We are externally managed and advised by our Manager, Falcons I, LLC, a registered investment adviser under the Investment Advisers Act of 1940 and an affiliate of Angel Oak Capital, a leading alternative credit manager with market leadership in mortgage credit that includes asset management, lending, and capital markets.
Whole loan financing facilities activity We continuously evaluate our lender base and may enter into new agreements and / or exit agreements as we deem prudent, in accordance with our core financial strategy of purchasing whole loans and financing them until securitized. See Liquidity and Capital Resources, for a full description of our financing arrangements.
We may decide to enter into similar securitization transactions in the future. Whole loan financing facilities activity We continuously evaluate our lender base and may enter into new agreements and / or exit agreements as we deem prudent, in accordance with our core financial strategy of purchasing whole loans and financing them until securitized.
Treasury Securities $ 149,013 5.57 % 10 RMBS (1) $ 44,643 7.04 % 16 Total $ 193,656 5.91 % 11 December 31, 2022 Repurchase Agreements Amount Outstanding Weighted Average Interest Rate Weighted Average Remaining Maturity (Days) ($ in thousands) AOMT RMBS 52,544,000 6.07 % 13 Total $ 52,544,000 6.07 % 13 81 (1) A portion of repurchase debt outstanding as of December 31, 2023 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).
Treasury Securities $ 149,013 5.57 % 10 AOMT RMBS (1) 44,643 7.04 % 16 Total $ 193,656 5.91 % 11 (1) A portion of repurchase debt outstanding as of December 31, 2024 and Decmber 31, 2023 includes borrowings against retained bonds received from on-balance sheet securitizations (i.e., consolidated VIEs).
In the transaction, AOMT 2022-4 issued approximately $177.6 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $152.2 million and retained cash of $2.3 million, which was used for operational purposes.
In the transaction, AOMT 2024-10 issued approximately $316.8 million in face value of bonds. We used the proceeds of the securitization transaction to repay outstanding debt of approximately $260.4 million and retained cash of $39.4 million, which was used for new loan purchases and operational purposes.
In January 2023, we participated in AOMT 2023-1, an approximately $580.0 million scheduled principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loans with a scheduled unpaid principal balance of approximately $241.3 million.
In March 2024, we participated in AOMT 2024-3, a $439.6 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, to which we contributed loans with a scheduled unpaid principal balance of approximately $48.7 million.

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