Angel Oak Mortgage REIT, Inc. Prices AOMT 2024-4, a $300 Million Standalone Securitization, Further Expanding Earnings and Releasing Capital for Additional Loan Purchases

Rhea-AI Summary

Angel Oak Mortgage REIT, Inc. announces the pricing of AOMT 2024-4, a $300 million securitization backed by non-QM loans, expected to drive earnings growth and yield expansion. The deal lowers funding costs by over 100 basis points, releasing $40 million in capital for future loan purchases.

Positive

• The pricing of AOMT 2024-4, a $300 million securitization backed by non-QM loans, is expected to drive earnings growth and yield expansion.
• The senior tranche of the securitization received an AAA rating from Fitch Ratings.
• The deal lowers the funding costs for the loans by over 100 basis points, releasing approximately $40 million in capital for future loan purchases.
• Angel Oak Mortgage REIT, Inc. intends to use the released capital to purchase additional high-quality current market coupon loans, improving net interest margin and positioning for future securitization transactions.
• The securitization will reduce the company's whole loan warehouse debt by $236 million, lowering the total recourse debt to equity ratio.
• AOMR plans to accelerate purchases of current market coupon loans with the capital released from the securitization, primarily through its affiliated mortgage originator.

Negative

• None.

Insights

Financial Analyst

The recent securitization by Angel Oak Mortgage REIT, involving a $300 million principal balance, is an astute financial maneuver that emphasizes the company's strategic focus on improving its net interest margin (NIM). By securing an AAA rating for the senior tranche from Fitch Ratings, the company not only solidifies the credibility of the securitization but also potentially lowers the cost of capital. The reduction of warehouse funding costs by over 100 basis points demonstrates a significant cost-saving initiative, which could enhance the company's profitability.

Additionally, the strategy to reinvest the capital into purchasing current market coupon non-QM loans could yield a higher return on investment, given the current interest rate climate. This move indicates a proactive approach to asset management and an effort to optimize the company's loan portfolio amidst fluctuating interest rates. The retained economics of the unsold tranches also suggest a confidence in the long-term value of these assets, which could be beneficial for the company's balance sheet and appeal to investors seeking growth and stability.

Market Research Analyst

Angel Oak Mortgage REIT's engagement in non-QM loans is a notable strategy within the U.S. mortgage market. Non-QM loans cater to a specific segment of borrowers who do not meet the strict lending standards of traditional qualified mortgages. With a weighted average original FICO score of 748, the portfolio indicates a focus on relatively creditworthy borrowers, which could mitigate risk. Moreover, the decision to target a weighted average loan coupon of 7.4% to 8.5% reflects an aggressive pursuit of higher yields in a competitive market landscape.

The company's intention to maintain a long-term recourse debt to equity ratio below 2.5x is a conservative financial posture that could reassure investors about the company's risk management practices. By balancing growth with financial prudence, Angel Oak Mortgage REIT is positioning itself to navigate through potential market volatilities while capitalizing on high-yielding opportunities.

Credit Analyst

From a credit perspective, the AAA rating assigned to the senior tranche of the securitization by Fitch Ratings is a strong endorsement of the quality of the underlying assets. This high rating is likely to attract institutional investors seeking investment-grade securities. The securitization also diversifies Angel Oak Mortgage REIT's funding sources and improves its liquidity profile by releasing capital tied up in whole loan warehouse debt.

The reduction in the company's total recourse debt to equity ratio as a result of the securitization is a positive credit factor. It reflects a lower leverage level, which could lead to improved creditworthiness and potentially lower borrowing costs in the future. By retaining the economics of the unsold tranches, Angel Oak Mortgage REIT demonstrates its commitment to the performance of the securitized assets, which may be viewed favorably by credit rating agencies and debt investors alike.

Securitization releases nearly $40 million of capital expected to be deployed into purchases of current market coupon loans and high-yielding assets to drive additional Net Interest Margin growth

ATLANTA--(BUSINESS WIRE)-- Angel Oak Mortgage REIT, Inc. (NYSE: AOMR), (the “Company,” “we,” and “our”), a leading real estate finance company focused on acquiring and investing in first-lien non-QM loans and other mortgage-related assets in the U.S. mortgage market, today announced the pricing of AOMT 2024-4, an approximately $300 million scheduled principal balance securitization backed by a pool of residential mortgage loans, the majority of which were originated by Angel Oak’s affiliated mortgage originators. The senior tranche received an AAA rating from Fitch Ratings.

“AOMT 2024-4, our first standalone securitization of the year, is expected to drive meaningful earnings growth and yield expansion in both the near- and long-term while further improving the positioning of our portfolio to perform in changing rate environments,” said Sreeni Prabhu, Chief Executive Officer and President of Angel Oak Mortgage REIT, Inc. “With this securitization, we will lock in over 100 basis points of savings on the funding costs of the loans underlying the deal. We intend to use the capital released by the securitization to continue to purchase additional high quality current market coupon non-QM loans, compounding the positive impact to our net interest margin on a go-forward basis and positioning ourselves well for future accretive securitization transactions.”

Key Highlights and Updates

• AOMT 2024-4 includes a portfolio of 701 non-QM loans with a scheduled principal balance of $299.8 million with a weighted average loan coupon of 7.4%, a weighted average original loan-to-value ratio of 69.8%, and a weighted average original FICO score 748. The A1 through M1 tranches were sold, with the Company retaining the economics of the unsold tranches.
• The deal lowers the weighted average funding cost for the loans underlying the securitization by over 100 basis points compared to the warehouse funding cost prior to the securitization.
• With this securitization, the Company will reduce its whole loan warehouse debt by $236 million, reducing its total recourse debt to equity ratio in-kind. As new loans are purchased, recourse debt to equity will increase but is expected to remain below a recourse debt to equity ratio of 2.5x over the long-term.
• With the capital released from the securitization, AOMR intends to accelerate purchases of current market coupon loans, leveraging the Angel Oak ecosystem and purchasing new loans primarily through its affiliated mortgage originator. Recently-locked loans have an 8.0% – 8.5% weighted average coupon.

Forward Looking Statements
This press release contains certain forward-looking statements that are subject to various risks and uncertainties, including, without limitation, statements relating to the performance of the Company’s investments. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” or by the negative of these words and phrases or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe existing or future plans and strategies, contain projections of results of operations, liquidity and/or financial condition, or state other forward-looking information. The Company’s ability to predict future events or conditions, their impact or the actual effect of existing or future plans or strategies is inherently uncertain. Although the Company believes that such forward-looking statements are based on reasonable assumptions, actual results and performance in the future could differ materially from those set forth in or implied by such forward-looking statements. You are cautioned not to place undue reliance on these forward‐looking statements, which reflect the Company’s views only as of the date of this press release. Additional information concerning factors that could cause actual results and performance to differ materially from these forward-looking statements is contained from time to time in the Company’s filings with the Securities and Exchange Commission. Except as required by applicable law, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward‐looking statements. The Company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

About Angel Oak Mortgage REIT, Inc.
Angel Oak Mortgage REIT, Inc. is a real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market. The Company’s objective is to generate attractive risk-adjusted returns for its stockholders through cash distributions and capital appreciation across interest rate and credit cycles. The Company is externally managed and advised by an affiliate of Angel Oak Capital Advisors, LLC, which, collectively with its affiliates, is a leading alternative credit manager with market leadership in mortgage credit that includes asset management, lending, and capital markets. Additional information about the Company is available at www.angeloakreit.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240410364094/en/

Investors:

investorrelations@angeloakreit.com

855-502-3920

IR Agency Contact:

Nick Teves or Joseph Caminiti

Alpha IR Group

AOMR@alpha-ir.com

312-445-2870

Company Contact:

KC Kelleher, Angel Oak Mortgage REIT, Inc.

404-528-2684

kc.kelleher@angeloakcapital.com

Source: Angel Oak Mortgage REIT, Inc.

FAQ

What is the recent securitization announced by Angel Oak Mortgage REIT, Inc.?

Angel Oak Mortgage REIT, Inc. announced the pricing of AOMT 2024-4, a $300 million securitization backed by non-QM loans.

What is the expected impact of the securitization on earnings and yield?

The securitization is expected to drive earnings growth and yield expansion for Angel Oak Mortgage REIT, Inc.

How much capital was released as a result of the securitization?

Approximately $40 million in capital was released for future loan purchases due to the securitization.

What is the rating received by the senior tranche of the securitization?

The senior tranche of the securitization received an AAA rating from Fitch Ratings.

How much will the funding costs be lowered by the securitization?

The funding costs for the loans will be lowered by over 100 basis points as a result of the securitization.

What does Angel Oak Mortgage REIT, Inc. plan to do with the released capital?

Angel Oak Mortgage REIT, Inc. intends to use the released capital to purchase additional high-quality current market coupon loans.