Angel Oak Mortgage, Inc. (AOMR): Business Model Canvas [11-2024 Updated]

Welcome to the world of Angel Oak Mortgage, Inc. (AOMR), where innovative financing meets strategic investment. This company stands out by focusing on non-QM loans, catering to underserved markets and offering competitive risk-adjusted returns to its investors. Dive deeper into AOMR's business model canvas to explore how it leverages key partnerships, activities, and resources to create value while navigating the complexities of the mortgage industry.

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Key Partnerships

Collaborates with Angel Oak Capital for funding and expertise

Angel Oak Mortgage, Inc. partners with Angel Oak Capital to leverage their expertise in non-QM (Qualified Mortgage) loans. As of September 30, 2024, Angel Oak Mortgage's total assets were approximately $2.3 billion, with a significant portion allocated to non-QM loans. The collaboration allows AOMR to enhance its funding capabilities and optimize its loan portfolio management strategies.

Engages with financial institutions for securitization transactions

AOMR actively engages with various financial institutions for securitization transactions, which are crucial for its operational strategy. In March 2024, AOMR participated in the AOMT 2024-3 securitization, which had an approximate scheduled unpaid principal balance of $439.6 million. The company contributed loans with a scheduled unpaid principal balance of approximately $48.7 million to this securitization.

Securitization Transaction	Scheduled Unpaid Principal Balance (in millions)	AOMR Contribution (in millions)	Date
AOMT 2024-3	$439.6	$48.7	March 2024
AOMT 2024-4	$299.8	$0	April 2024
AOMT 2024-6	$479.6	$22.9	June 2024
AOMT 2024-10	$316.8	$0	October 2024

Partners with mortgage brokers for loan origination

Angel Oak Mortgage collaborates with a network of mortgage brokers to facilitate loan origination. This partnership is essential for expanding their market reach and enhancing loan volume. The weighted average loan coupon for newly originated non-QM residential mortgage loans was reported at 7.74% as of September 30, 2024.

Works with regulatory bodies to ensure compliance

AOMR maintains partnerships with regulatory bodies to ensure compliance with federal and state regulations. As part of its operations, the company adheres to guidelines set forth by the Consumer Financial Protection Bureau (CFPB) and other regulatory entities. Compliance is critical, especially given the nature of non-QM loans, which require careful scrutiny to meet regulatory standards.

Regulatory Body	Compliance Focus	Key Regulation
Consumer Financial Protection Bureau (CFPB)	Consumer protection laws	Qualified Mortgage Rule
Federal Housing Finance Agency (FHFA)	Conforming loan limits	Regulation of GSEs
State Regulatory Agencies	State-specific lending laws	State mortgage licensing

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Key Activities

Acquiring and investing in residential mortgage loans

As of September 30, 2024, Angel Oak Mortgage, Inc. had approximately $2.2 billion in residential mortgage loans, representing a significant portion of their investment portfolio. The company focused on acquiring newly originated, current market coupon non-QM residential mortgage loans, purchasing $264.8 million of such loans during the third quarter of 2024, with a weighted average coupon of 7.74%, a weighted average loan-to-value (LTV) of 70.0%, and a weighted average credit score of 754.

Conducting securitization transactions for funding

Angel Oak has been active in securitization transactions, with notable transactions in 2024. For instance, in October 2024, they completed the AOMT 2024-10 securitization, issuing approximately $316.8 million in face value of bonds, using the proceeds to repay approximately $260.4 million in outstanding debt and retaining cash of $39.4 million for new loan purchases and operational purposes. During the nine months ended September 30, 2024, the company incurred $1.6 million in securitization costs related to their transactions.

Managing investment portfolios and risk exposure

As of September 30, 2024, Angel Oak's investment portfolio included approximately $1.9 billion in total assets, with $1.5 billion in residential mortgage loans held in securitization trusts and $283.1 million in RMBS (Residential Mortgage-Backed Securities). The company's risk management strategy involves maintaining a diversified portfolio, with a focus on managing their exposure to interest rates and credit risk. The weighted average interest rate on their residential mortgage loans was reported at 7.73%. Additionally, the percentage of loans 90+ days delinquent was 1.9% as of September 30, 2024.

Performing due diligence and underwriting processes

Due diligence and underwriting are critical activities for Angel Oak Mortgage. For the three months ended September 30, 2024, the company incurred $254,000 in due diligence and transaction costs. Their underwriting processes include evaluating the creditworthiness of borrowers, assessing property values, and ensuring compliance with regulatory standards. The weighted average credit score of loans in their portfolio was 754, indicating a focus on high-quality borrowers.

Key Metrics	Value (as of September 30, 2024)
Total Residential Mortgage Loans	$2.2 billion
Newly Originated Non-QM Loans Purchased	$264.8 million
Weighted Average Coupon	7.74%
Weighted Average LTV	70.0%
Weighted Average Credit Score	754
Securitization Issued (AOMT 2024-10)	$316.8 million
Outstanding Debt Repaid from Securitization	$260.4 million
Cash Retained for New Loans	$39.4 million
Percentage of Loans 90+ Days Delinquent	1.9%

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Key Resources

Proprietary mortgage origination platform

Angel Oak Mortgage, Inc. utilizes a proprietary mortgage origination platform that operates primarily through a wholesale channel, enabling a national origination footprint. This platform is crucial for sourcing non-qualified mortgage (non-QM) loans effectively.

Experienced management team and investment advisors

The company is externally managed and advised by Falcons I, LLC, a registered investment adviser. The management team possesses extensive experience in real estate finance and capital markets, which is essential for navigating the complexities of the mortgage industry.

Relationships with capital markets and financial institutions

As of September 30, 2024, Angel Oak had a total borrowing capacity of approximately $1.1 billion. The company maintains relationships with multiple lenders for its whole loan financing facilities. Recent amendments to these financing agreements have resulted in reduced interest rate spreads, enhancing financial flexibility.

Financing Facility	Lender	Total Borrowing Capacity (in millions)	Interest Rate Spread Range	Termination Date
Loan Financing Facility	Global Investment Bank 2	—	1.75% to 3.35%	—
Loan Financing Facility	Global Investment Bank 3	—	1.90% to 4.75%	November 1, 2025

Diverse portfolio of residential mortgage-backed securities

As of September 30, 2024, Angel Oak's portfolio included approximately $2.2 billion in residential mortgage loans, residential mortgage-backed securities (RMBS), and other target assets. The portfolio is diversified across various states, with significant concentrations in Florida and California. The company actively participates in securitizations to manage its RMBS portfolio.

Asset Type	Fair Value (in thousands)	Percentage of Total Portfolio
Residential mortgage loans	428,909	19.2%
Residential mortgage loans in securitization trusts	1,452,907	63.5%
RMBS	283,105	12.6%
U.S. Treasury securities	49,971	2.2%

The company has engaged in various securitization transactions, including the issuance of AOMT 2024-10 with a scheduled unpaid principal balance of approximately $316.8 million. These transactions are critical for managing liquidity and capitalizing on market opportunities.

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Value Propositions

Specializes in non-QM loans, targeting underserved markets

Angel Oak Mortgage, Inc. focuses on non-Qualified Mortgage (non-QM) loans, which cater to borrowers who may not meet the strict criteria of traditional mortgages. This specialization allows the company to address the needs of underserved markets, including self-employed individuals and those with non-traditional income sources. As of September 30, 2024, Angel Oak had a portfolio of approximately $2.2 billion in residential mortgage loans, with a significant portion being non-QM loans.

Offers competitive risk-adjusted returns to investors

Angel Oak Mortgage aims to deliver attractive risk-adjusted returns to its investors. For the nine months ended September 30, 2024, the company reported net income allocable to common stockholders of $43.8 million, translating to a basic earnings per share of $1.79. The company’s focus on non-QM loans, which typically offer higher yields due to their risk profile, enhances potential returns for investors.

Provides transparency in underwriting and investment processes

Transparency is a key element of Angel Oak's value proposition. The company maintains a clear and open underwriting process, which is essential for building trust with investors and borrowers alike. As part of its commitment to transparency, Angel Oak provides detailed financial disclosures, including unrealized gains and losses on its mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS). For example, as of September 30, 2024, net unrealized gains totaled approximately $48.5 million.

Leverages market expertise for strategic investment decisions

Angel Oak Mortgage leverages its extensive market expertise to make informed strategic investment decisions. The company actively participates in securitization transactions, which enhance liquidity and allow for better capital management. In October 2024, Angel Oak issued $316.8 million in bonds as part of the AOMT 2024-10 securitization, showcasing its active role in the market. The company also utilizes detailed market analysis to inform its loan purchasing strategies, which include a diverse range of residential mortgage loans with varying risk profiles.

Metric	Value
Portfolio Value (Residential Mortgage Loans)	$2.2 billion
Net Income Allocable to Common Stockholders (9M 2024)	$43.8 million
Basic Earnings per Share (9M 2024)	$1.79
Net Unrealized Gains (as of September 30, 2024)	$48.5 million
Total Securitization Issued (AOMT 2024-10)	$316.8 million
Weighted Average Coupon Rate on Non-QM Loans	7.74%

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Customer Relationships

Maintains direct engagement with investors and stakeholders

Angel Oak Mortgage, Inc. (AOMR) prioritizes maintaining direct engagement with its investors and stakeholders. As of September 30, 2024, the company has issued approximately $50 million in aggregate principal amount of its 9.500% Senior Notes due 2029, which enhances its capital structure and investor relations. The company regularly communicates with stakeholders through various channels, ensuring transparency and building trust.

Offers regular updates through financial reports and disclosures

AOMR provides regular updates via comprehensive financial reports and disclosures. For the third quarter of 2024, the company reported a net income allocable to common stockholders of $31.2 million, which translates to a basic earnings per share of $1.31. The company consistently shares detailed financial performance metrics, including net interest income of $9.0 million for the same period.

Provides personalized service through dedicated account managers

To enhance customer relationships, AOMR employs dedicated account managers who provide personalized services to investors. This approach not only fosters loyalty but also helps in understanding client needs more effectively. The company has a cash balance sufficient to meet its liquidity covenants, which supports its operational capabilities and client service initiatives.

Utilizes investor communication platforms for efficient outreach

AOMR utilizes advanced investor communication platforms to facilitate efficient outreach. As of September 30, 2024, the weighted average coupon of their residential whole loans portfolio was 7.73%, which reflects the company’s competitive positioning in the market. Additionally, the company has engaged in multiple securitization transactions, including the recent AOMT 2024-10 securitization, which issued approximately $316.8 million in face value of bonds.

Metric	Value (as of September 30, 2024)
Net Income Allocable to Common Stockholders	$31.2 million
Basic Earnings per Share	$1.31
Net Interest Income	$9.0 million
Cash Balance	Approximately $42.1 million
Weighted Average Coupon of Residential Whole Loans	7.73%
Recent Securitization (AOMT 2024-10)	$316.8 million

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Channels

Operates primarily through a wholesale mortgage lending channel

Angel Oak Mortgage, Inc. primarily engages in wholesale mortgage lending, focusing on non-QM (Qualified Mortgage) loans. As of September 30, 2024, the company reported a portfolio of approximately $2.2 billion in residential mortgage loans, RMBS, and other target assets.

Engages investors via public offerings and market announcements

Angel Oak actively engages investors through public offerings. As of September 30, 2024, the company had 6,973,959 shares of common stock available for sale under its at-the-market equity offering program, with 188,456 shares sold for proceeds of $2.3 million during the third quarter of 2024.

Utilizes digital platforms for investor relations and information sharing

The company leverages digital platforms to enhance investor relations and disseminate information. This includes regular updates on financial performance and market trends, which are crucial for maintaining investor confidence and transparency.

Participates in financial conferences to showcase investment opportunities

Angel Oak participates in various financial conferences to showcase its investment opportunities. These events facilitate direct interaction with potential investors and provide a platform for discussing the company's strategic initiatives and market outlook.

Channel Type	Description	Financial Metrics
Wholesale Mortgage Lending	Focus on non-QM loans; primary revenue source.	Portfolio Value: $2.2 billion as of September 30, 2024.
Public Offerings	Shares sold through at-the-market equity program.	Proceeds: $2.3 million from 188,456 shares sold in Q3 2024.
Digital Platforms	Used for investor relations and information sharing.	Regular financial updates to maintain transparency.
Financial Conferences	Direct engagement with investors.	Participation in key industry events to discuss strategy.

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Customer Segments

Institutional investors seeking alternative credit investments

Angel Oak Mortgage, Inc. targets institutional investors looking for alternative credit investments, particularly in non-QM (Qualified Mortgage) loan products. As of September 30, 2024, the company had approximately $1.88 billion in residential mortgage loans, with a significant portion allocated to securitizations aimed at institutional investors.

High-net-worth individuals interested in mortgage-backed securities

The company also serves high-net-worth individuals who are interested in mortgage-backed securities. In 2024, Angel Oak issued $50 million in aggregate principal amount of 9.500% Senior Notes due 2029, attracting interest from wealthier clients. In addition, their RMBS (Residential Mortgage-Backed Securities) portfolio is valued at approximately $283 million as of September 30, 2024.

Mortgage brokers looking for reliable funding sources

Mortgage brokers are another critical customer segment for Angel Oak. The company provides reliable funding sources for brokers, evidenced by their total securitization transactions, which amounted to approximately $316.8 million in scheduled unpaid principal balance as of October 2024. This accessibility to funding supports brokers in fulfilling the needs of their clients effectively.

Homebuyers needing access to non-QM loan products

Homebuyers seeking non-QM loan products represent a significant segment for Angel Oak. The weighted average coupon of their newly-originated non-QM loans was reported at 7.74%, with a weighted average loan-to-value (LTV) ratio of 70.0% and a weighted average credit score of 754. The company’s focus on non-QM loans positions it well to cater to homebuyers who may not qualify for traditional loans.

Customer Segment	Key Characteristics	Relevant Financial Data
Institutional Investors	Seeking alternative credit investments	$1.88 billion in residential mortgage loans
High-Net-Worth Individuals	Interested in mortgage-backed securities	$50 million in Senior Notes issued
Mortgage Brokers	Looking for reliable funding sources	$316.8 million in securitization transactions
Homebuyers	Needing access to non-QM loan products	Weighted average coupon of 7.74%, LTV of 70.0%, credit score of 754

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Cost Structure

Operating expenses related to loan origination and servicing

For the nine months ended September 30, 2024, Angel Oak Mortgage incurred total operating expenses of $4.6 million, a decrease from $5.8 million for the same period in 2023. Operating expenses for the three months ended September 30, 2024, were $1.3 million compared to $1.4 million in the prior year.

Specific costs include:

• Operating expenses incurred with affiliates: $1.44 million for the nine months ended September 30, 2024, down from $1.67 million in 2023.
• Due diligence and transaction costs: $663 thousand for the nine months ended September 30, 2024, compared to $136 thousand in 2023.
• Stock compensation: $1.86 million for the nine months ended September 30, 2024, up from $1.2 million in 2023.

Costs associated with securitization transactions and compliance

Securitization costs totaled $1.6 million for the nine months ended September 30, 2024, related to transactions AOMT 2024-3, AOMT 2024-4, and AOMT 2024-6. This reflects a decrease from $2.3 million incurred during the same period in 2023.

Details of securitization transactions include:

• AOMT 2024-4: Approximately $299.8 million in scheduled unpaid principal balance.
• AOMT 2024-6: Approximately $479.6 million in scheduled unpaid principal balance.
• AOMT 2024-10: Approximately $316.8 million in scheduled unpaid principal balance issued in October 2024.

Management fees paid to affiliated entities

Management fees incurred with affiliates were $3.8 million for the nine months ended September 30, 2024, compared to $4.5 million in 2023. This reduction is attributed to a decrease in average equity as defined in the Management Agreement.

Breakdown of management fees includes:

• Management fee for the three months ended September 30, 2024: $1.2 million, down from $1.4 million in 2023.
• The decrease was influenced by the repurchase of 1,707,922 shares for approximately $20 million, impacting the calculation of equity for fee purposes.

Interest expenses on borrowed funds and capital raised

Interest expenses for the nine months ended September 30, 2024, amounted to $51.5 million, slightly up from $50.7 million in 2023. Interest expenses for the three months ended September 30, 2024, were $18.4 million compared to $16.5 million in the prior year.

Key components of interest expenses include:

• Notes payable: $2.83 million for the three months ended September 30, 2024.
• Non-recourse securitization obligations: $13.73 million for the three months ended September 30, 2024.
• Repurchase facilities expenses: $900 thousand for the three months ended September 30, 2024.

Expense Type	Q3 2024 (in $ millions)	Q3 2023 (in $ millions)	9M 2024 (in $ millions)	9M 2023 (in $ millions)
Operating Expenses	1.3	1.4	4.6	5.8
Securitization Costs	-	0.4	1.6	2.3
Management Fees	1.2	1.4	3.8	4.5
Interest Expenses	18.4	16.5	51.5	50.7

Angel Oak Mortgage, Inc. (AOMR) - Business Model: Revenue Streams

Interest income from residential mortgage loans

As of September 30, 2024, Angel Oak Mortgage reported interest income from residential mortgage loans totaling $78.6 million for the nine months ended. This represents an increase from $71.4 million during the same period in 2023. The net interest income was $27.1 million for the nine months ended September 30, 2024 .

Fees generated from securitization transactions

In 2024, the company participated in multiple securitization transactions, including AOMT 2024-10, which had an issuance of approximately $316.8 million. The fees generated from these transactions are part of the overall income derived from securitization activities. For the nine months ended September 30, 2024, securitization costs incurred were approximately $1.6 million .

Gains from the sale of mortgage-backed securities

Angel Oak Mortgage reported net realized gains from mortgage-backed securities (MBS) of approximately $28.8 million for the nine months ended September 30, 2024. This includes both realized and unrealized gains, with a significant unrealized gain of $48.5 million reported .

Dividends and distributions to shareholders from profits

For the nine months ended September 30, 2024, Angel Oak Mortgage paid dividends totaling $23.5 million to its shareholders. The net income allocable to common stockholders was reported at $43.8 million for the same period .

Revenue Stream	Financial Data (2024)
Interest Income from Residential Mortgage Loans	$78.6 million
Net Interest Income	$27.1 million
Fees from Securitization Transactions	$1.6 million (costs incurred)
Gains from Sale of Mortgage-Backed Securities	$28.8 million (realized)
Dividends Paid to Shareholders	$23.5 million
Net Income Allocable to Common Stockholders	$43.8 million

Updated on 16 Nov 2024

Resources:

1. Angel Oak Mortgage, Inc. (AOMR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Angel Oak Mortgage, Inc. (AOMR)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Angel Oak Mortgage, Inc. (AOMR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.