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IPO / M&AMortgage

Non-QM shop Angel Oak Mortgage prepares IPO

Lender booked $36M in sales for the 12 months that ended on March 31, 2021

It was barely a year ago that Angel Oak‘s mortgage lending companies and the rest of the non-QM lenders were holding on for dear life. Now, the Atlanta-based company is looking to raise $165 million as part of an initial public offering.

Angel Oak Mortgage, managed by Angel Oak Capital and Falcon I, is looking to boost its book of business with the capital raise, the lender said in an S-1 statement filed with the Securities and Exchange Commission late last week. The mortgage firm plans to buy non-QM mortgages from its affiliate companies, the firm said in the S-1.

In an update on Tuesday, Angel Oak Mortgage said it planned to sell 8.1 million shares priced between $20 and $21. If the stock trades at the midpoint of $20.50 a share, Angel Oak Mortgage would be valued at $537 million.

The Canada Pension Plan Investment Board has also agreed to purchase $40 million in shares in a private placement following the IPO. Once it debuts on the New York Stock Exchange, Angel Oak Mortgage would be classified as a real estate investment trust (REIT).

In its S-1, Angel Oak said it had roughly $535 million in total assets, “including an approximate $481.0 million portfolio of non-QM loans and other target assets, which were financed with several term securitizations as well as with in-place loan financing lines and repurchase facilities with a combination of global money center and large regional banks.”


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The lender noted its portfolio primarily consists of non-QM loans underwritten in-house.

Angel Oak Mortgage operates in both the retail and wholesale channels, but it focuses heavily on the broker space. In its S-1, Angel Oak said it sources loans through a network of about 3,600 brokers, roughly 20% of the 18,000-strong channel. About 90% of the company’s loans are through the broker channel.

While most of the mortgage industry experienced a perfect storm that resulted in record origination volume and profits, non-QM lenders such as Angel Oak faced a market with no liquidity. Some pivoted to work on agency loans while others shuttered their non-QM operations or went under. By the latter half of 2020, the non-QM market had begun to rebound.

“We’re seeing continued growth in 2021. I would say we’re back to pre-COVID levels and pre-Covid expectations of where this market is heading,” Tom Hutchins, executive vice president of production at Angel Oak Mortgage told HousingWire in late May.

Self-employed borrowers were particularly disadvantaged during the COVID-19 period, but Hutchens said the lender is seeing “huge growth” in the bank statement loan product for self-employed borrowers.

Angel Oak Mortgage booked roughly $36 million in sales for the 12 months that ended on March 31, 2021, the company said on its S-1. Its loan portfolio had an average FICO score of 715 and a weighted LTV ratio of 76%.

It sees a big opportunity ahead.

“With the continued demand for private capital loan products, including non-QM loans, we believe private capital volume should increase over time,” Angel Oak Capital said in the S-1. “During the 14 years prior to the ‘bubble years’ of 2004 to 2007, private capital volume typically accounted for approximately 10% of annual mortgage production.

“To the extent that private capital volume reverts to pre-‘bubble years’ levels of approximately 10%, we believe there is a market opportunity in excess of $150 billion for private capital volume based on annual residential first lien mortgage volume since 2009, which has generally remained at or above $1.5 trillion. Moreover, we believe Angel Oak Mortgage Lending’s position as a market leader in non-QM loan production will enable us to capitalize on our expectations of growth in private capital volume.”

The company will trade under the ticker symbol “AOMR.”

Managers of the IPO are listed as Wells Fargo Securities, BofA Securities, Morgan Stanley, UBS Investment Bank, B. Riley Securities, Nomura and Oppenheimer & Co.

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