Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company” or
“Anworth”) today reported its financial results for the first
quarter ended March 31, 2019.
Earnings
The following table summarizes the Company’s core earnings, GAAP
net loss to common stockholders, and comprehensive income for the
three months ended March 31, 2019:
Three Months Ended March 31, 2019
(unaudited) Earnings Per
Weighted
Share
(in thousands) Core Earnings $ 11,948 $ 0.12 GAAP net loss
to common stockholders $ (22,267 ) $ (0.23 ) Comprehensive income $
20,476 $ 0.21
Core earnings is a non-GAAP financial measure, which is
explained and reconciled to GAAP net loss to common stockholders in
the section entitled “Non-GAAP Financial Measures Related to
Operating Results” near the end of this earnings release.
Comprehensive income is shown on the consolidated statements of
comprehensive income, which is included in this earnings release.
Comprehensive income consists of the net loss to all stockholders
(including the amounts paid to preferred stockholders) and the
change in other comprehensive income.
Portfolio
At March 31, 2019 and December 31, 2018, the composition of the
Company’s portfolio at fair value was as follows:
March 31, 2019 December 31, 2018
Dollar Amount Percentage Dollar Amount
Percentage (in thousands) (unaudited)
Agency MBS: ARMS and hybrid ARMs $ 1,424,495 24.2 % $ 1,547,405
26.6 % Fixed-rate Agency MBS 2,320,596 39.3 % 2,001,314 34.3 % TBA
Agency MBS 721,391 12.0 % 906,016 15.6 % Total Agency
MBS $ 4,466,482 75.5 % $ 4,454,735 76.5 % Non-Agency MBS 768,597
13.0 % 795,203 13.7 % Residential mortgage loans(1) 535,077 9.1 %
549,016 9.4 % Residential mortgage loans held-for-securitization
129,583 2.2 % 11,660 0.2 % Residential real estate 13,752
0.2 % 13,782 0.2 % Total Portfolio $ 5,913,491 100.0 % $
5,824,396 100.0 % Total Assets(2) $ 6,063,120 $ 5,939,700
____________________ (1) Residential mortgage loans owned by
consolidated variable interest entities (“VIEs”) can only be used
to settle obligations and liabilities of the VIEs for which
creditors do not have recourse to the Company. (2) Includes TBA
Agency MBS.
Agency MBS
At March 31, 2019, the allocation of the Company’s agency
mortgage-backed securities (“Agency MBS”) was approximately 32%
adjustable-rate and hybrid adjustable-rate Agency MBS, 52%
fixed-rate Agency MBS, and 16% fixed-rate TBA Agency MBS. At
December 31, 2018, the allocation of the Company’s Agency MBS was
approximately 35% adjustable-rate and hybrid adjustable-rate Agency
MBS, 45% fixed-rate Agency MBS, and 20% fixed-rate TBA Agency MBS,
both periods of which are detailed below:
March 31,
2019
December 31,
2018
(dollar amounts in thousands) (unaudited) Fair value
of Agency MBS and TBA Agency MBS $ 4,466,482 $ 4,454,735
Adjustable-rate Agency MBS coupon reset (less than 1 year) 20 % 20
% Hybrid adjustable-rate Agency MBS coupon reset (1-3 years) 3 5
Hybrid adjustable-rate Agency MBS coupon reset (3-5 years) 6 7
Hybrid adjustable-rate Agency MBS coupon reset (greater than 5
years) 3 3 Total adjustable-rate Agency MBS 32
% 35 % 15-year fixed-rate Agency MBS 8 20 15-year fixed-rate
TBA Agency MBS - 10 20-year fixed-rate Agency MBS 8 8 30-year
fixed-rate Agency MBS 36 17 30-year fixed-rate TBA Agency MBS
16 10 Total MBS 100 % 100 %
At March 31, 2019 and December 31, 2018, the summary statistics
of the Company’s Agency MBS portfolio were as follows:
March 31,
2019
December 31,
2018
(unaudited) Weighted Average Agency MBS Coupon:
Adjustable-rate Agency MBS 4.34 % 4.09 % Hybrid adjustable-rate
Agency MBS 2.52 2.52 15-year fixed-rate Agency MBS 3.13 2.90
15-year fixed-rate TBA Agency MBS - 3.57 20-year fixed-rate Agency
MBS 3.70 3.69 30-year fixed-rate Agency MBS 4.05 4.04 30-year
fixed-rate TBA Agency MBS 4.32 4.35 Total Agency MBS: 3.84 % 3.54 %
Average Amortized Cost: Adjustable-rate Agency MBS 102.67 % 102.65
% Hybrid adjustable-rate Agency MBS 102.53 102.49 15-year
fixed-rate Agency MBS 102.06 102.28 15-year fixed-rate TBA Agency
MBS - 100.47 20-year fixed-rate Agency MBS 104.02 104.48 30-year
fixed-rate Agency MBS 102.73 102.90 30-year fixed-rate TBA Agency
MBS 103.06 102.49 Total Agency MBS: 102.79 % 102.47 % Average asset
yield (weighted average coupon divided by average amortized cost)
3.74 % 3.45 % Unamortized premium $99.7 million $95.2 million
Unamortized premium as a percentage of par value 2.79 % 2.47 %
Premium amortization expense on Agency MBS for the respective
quarter $5.9 million $7.4 million
At March 31, 2019 and December 31, 2018, the constant prepayment
rate (“CPR”) and weighted average term to next interest rate reset
of our Agency MBS were as follows:
March 31,
2019
December 31,
2018
(unaudited) Constant prepayment rate (CPR) of Agency MBS 13%
14% Constant prepayment rate (CPR) of adjustable-rate and hybrid
adjustable-rate Agency MBS 19% 21% Weighted average term to next
interest rate reset on Agency MBS 24 months 24 months
Non-Agency MBS
The following tables summarize the Company’s Non-Agency MBS at
March 31, 2019 and December 31, 2018:
March 31, 2019 Weighted
Average Portfolio Type Fair
Value
Amortized
Cost
Current
Principal
Amortized
Cost
Coupon Yield (in thousands)
(unaudited) Legacy Non-Agency MBS (pre-2008) $ 551,428 $
537,652 $ 719,254 74.75
%
5.59 % 5.56 % Non-performing 82,884 83,007 83,260 99.70 5.19 5.49
Credit Risk Transfer 134,285 130,210 141,839
91.80 4.30 5.81 Total Non-Agency MBS $ 768,597 $ 750,869 $ 944,353
79.51 % 5.35 % 5.60 %
December 31, 2018
Weighted Average Portfolio Type Fair
Value
Amortized
Cost
Current
Principal
Amortized
Cost
Coupon Yield (in thousands) (unaudited)
Legacy Non-Agency MBS (pre-2008) $ 561,940 $ 553,292 $ 738,210
74.95 % 5.56 % 5.57 % Non-performing 101,744 102,450 102,760 99.70
5.14 5.42 Credit Risk Transfer 131,519 129,898
141,839 91.58 4.30 5.72 Total Non-Agency MBS $ 795,203 $ 785,640 $
982,809 79.94 % 5.34 % 5.58 %
Residential Mortgage Loans Held-for-Investment
The following table summarizes the Company’s residential
mortgage loans held-for-investment at March 31, 2019 and December
31, 2018:
March 31, December 31, 2019
2018 (in thousands) (unaudited) Residential
mortgage loans held-for-investment $ 535,077 $ 549,016 Asset-backed
securities issued by securitization trusts 525,712
539,651 Retained interest in loans held in securitization trusts $
9,365 $ 9,365
Residential Mortgage Loans Held-for-Securitization
The following table summarizes the Company’s residential
mortgage loans held-for-securitization at March 31, 2019 and
December 31, 2018:
March 31, December 31, 2019
2018 (in thousands) (unaudited) Residential
mortgage loans held-for-securitization $ 129,583 $ 11,660 Amount
outstanding on warehouse line of credit $ 15,442 $ - Payable for
purchased loans $ 112,316 $ 11,660
Residential Properties Portfolio
At March 31, 2019 and December 31, 2018, Anworth Properties Inc.
owned 86 and 86 single-family residential rental properties,
respectively, located in Southeastern Florida that were carried at
a total cost, net of accumulated depreciation, of $13.8 million and
$13.8 million, respectively.
MBS Portfolio Financing
March 31, 2019 Agency
MBS
Non-Agency
MBS
Total
MBS
(dollar amounts in thousands) (unaudited) Repurchase
Agreements: Outstanding repurchase agreement balance $ 3,215,000 $
545,634 $ 3,760,634 Average interest rate 2.68 % 3.60 % 2.81 %
Average maturity 33 days 18 days 31 days Average interest rate
after adjusting for interest rate swaps 2.32 % Average maturity
after adjusting for interest rate swaps 1,222 days
December 31, 2018 Agency
MBS
Non-Agency
MBS
Total
MBS
(dollar amounts in thousands) (unaudited) Repurchase
Agreements: Outstanding repurchase agreement balance $ 3,235,000 $
576,627 $ 3,811,627 Average interest rate 2.52 % 3.55 % 2.67 %
Average maturity 35 days 13 days 32 days Average interest rate
after adjusting for interest rate swaps 2.23 % Average maturity
after adjusting for interest rate swaps 1,217 days
Portfolio Leverage
At March 31, 2019, the Company’s leverage multiple was 6.05x.
The leverage multiple is calculated by dividing the Company’s
repurchase agreements and credit line outstanding by the aggregate
of common stockholders’ equity plus preferred stock and junior
subordinated notes. The Company’s effective leverage, which
includes the effect of TBA dollar roll financing, was 7.18x at
March 31, 2019. At December 31, 2018, the Company’s leverage
multiple was 6.16x and the effective leverage was 7.63x.
Interest Rate Swaps
At March 31, 2019 and December 31, 2018, the Company’s interest
rate swaps agreements (“Swaps”) had the following notional amounts,
weighted average fixed rates, and remaining terms:
March 31, 2019 Maturity Notional
Amount
Weighted
Average
Fixed
Rate
Remaining
Term in
Months
Remaining
Term in
Years
(in thousands) (unaudited) Less than 12 months $
650,000 1.61 % 6 0.5 1 year to 2 years 666,000 1.76 18 1.5 2 years
to 3 years 300,000 1.87 30 2.5 3 years to 4 years 270,000 2.09 44
3.7 4 years to 5 years 355,000 2.39 57 4.7 5 years to 7 years
525,000 2.48 75 6.3 7 years to 10 years 590,000 2.82 104 8.7
$ 3,356,000 2.13 % 47 3.9
December
31, 2018 Maturity Notional
Amount
Weighted
Average
Fixed
Rate
Remaining
Term in
Months
Remaining
Term in
Years
(in thousands) (unaudited) Less than 12 months $
725,000 1.60 % 7 0.6 1 year to 2 years 591,000 1.70 19 1.6 2 years
to 3 years 400,000 1.96 30 2.5 3 years to 4 years 220,000 1.92 43
3.6 4 years to 5 years 205,000 2.27 57 4.8 5 years to 7 years
475,000 2.41 73 6.1 7 years to 10 years 690,000 2.83 104 8.7
$ 3,306,000 2.10 % 47 3.9
Effective Net Interest Rate Spread
March 31,
2019
December 31,
2018
(unaudited) Average asset yield, including TBA dollar roll
income 3.66 % 3.56 % Effective cost of funds 2.52 2.52 Effective
net interest rate spread 1.14 % 1.04 %
Certain components of the effective net interest rate spread are
non-GAAP financial measures, which are explained and reconciled to
the nearest comparable GAAP financial measures in the section
entitled “Non-GAAP Financial Measures Related to Operating Results”
at the end of this earnings release.
Dividend
On March 14, 2019, the Company declared a quarterly common stock
dividend of $0.13 per share for the first quarter ended March 31,
2019. Based upon the closing price of $4.04 on March 31, 2019, the
annualized dividend yield on the Company’s common stock at March
31, 2019 was 12.9%.
Book Value per Common Share
At March 31, 2019, the Company’s book value was $4.76 per share
of common stock, which was an increase of $0.05 from $4.71 in the
prior quarter.
The $0.13 quarterly dividend plus the $0.05 increase in book
value per common share from the prior quarter resulted in a return
on book value per common share of 3.8% for the quarter ended March
31, 2019.
Subsequent Events
On April 1, 2019, the conversion rate of our Series B
Preferred Stock increased from 5.2588 to 5.3539 shares of our
common stock based upon the common stock dividend of $0.13 per
share that was declared on March 14, 2019.
On April 30, 2019, we settled on an aggregate of approximately
$74.5 million (including premium and accrued interest) of Non-QM
residential mortgage loans that we acquired during the quarter
ended March 31, 2019.
Conference Call
The Company will host a conference call on Monday, May 6, 2019
at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss its
first quarter 2019 results. The dial-in number for the conference
call is 877-504-2731 for U.S. callers (international callers should
dial 412-902-6640 and Canadian callers should dial 855-669-9657).
When dialing in, participants should ask to be connected to the
Anworth Mortgage earnings call. Replays of the call will be
available for a 7-day period commencing at 3:00 PM Eastern Time on
May 6, 2019. The dial-in number for the replay is 877-344-7529 for
U.S. callers (Canadian callers should dial 855-669-9658 and
international callers should dial 412-317-0088) and the conference
number is 10131180. The conference call will also be webcast live
over the Internet, which can be accessed on the Company’s website
at http://www.anworth.com through the corresponding link located at
the top of the home page.
Investors interested in participating in the Company’s Dividend
Reinvestment and Stock Purchase Plan (the “DRP Plan”) or receiving
a copy of the DRP Plan’s prospectus may do so by contacting the
Plan Administrator, American Stock Transfer & Trust Company, at
877-248-6410. For more information about the Plan, interested
investors may also visit the Plan Administrator’s website at
http://www.amstock.com/investpower/new_dp.asp or the Company’s
website at http://www.anworth.com.
About Anworth Mortgage Asset Corporation
We are an externally-managed mortgage real estate investment
trust (“REIT”). We invest primarily in mortgage-backed securities
that are either rated “investment grade” or are guaranteed by
federally sponsored enterprises, such as Fannie Mae or Freddie Mac.
We seek to generate income for distribution to our shareholders
primarily based on the difference between the yield on our mortgage
assets and the cost of our borrowings. We are managed by Anworth
Management LLC (our “Manager”), pursuant to a management agreement.
Our Manager is subject to the supervision and direction of our
Board and is responsible for (i) the selection, purchase, and sale
of our investment portfolio; (ii) our financing and hedging
activities; and (iii) providing us with portfolio management,
administrative, and other services and activities relating to our
assets and operations as may be appropriate. Our common stock is
traded on the New York Stock Exchange under the symbol “ANH.”
Anworth Mortgage Asset Corporation is a component of the Russell
2000® Index.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This news release may contain forward-looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based upon our current expectations and speak only
as of the date hereof. Forward-looking statements, which are based
on various assumptions (some of which are beyond our control) may
be identified by reference to a future period or periods or by the
use of forward-looking terminology, such as “may, ” “will, ”
“believe, ” “expect, ” “anticipate, ” “assume,” “estimate,”
“intend,” “continue, ” or other similar terms or variations on
those terms or the negative of those terms. Our actual results may
differ materially and adversely from those expressed in any
forward-looking statements as a result of various factors and
uncertainties, including but not limited to, changes in interest
rates; changes in the market value of our mortgage-backed
securities; changes in the yield curve; the availability of
mortgage-backed securities for purchase; increases in the
prepayment rates on the mortgage loans securing our mortgage-backed
securities; our ability to use borrowings to finance our assets
and, if available, the terms of any financing; risks associated
with investing in mortgage-related assets; changes in business
conditions and the general economy; implementation of or changes in
government regulations affecting our business; our ability to
maintain our qualification as a real estate investment trust for
federal income tax purposes; our ability to maintain an exemption
from the Investment Company Act of 1940, as amended; risks
associated with our home rental business; and the Manager’s ability
to manage our growth. Our Annual Report on Form 10-K and other SEC
filings discuss the most significant risk factors that may affect
our business, results of operations and financial condition. We
undertake no obligation to revise or update publicly any
forward-looking statements for any reason.
ANWORTH MORTGAGE ASSET CORPORATION AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in
thousands, except per share amounts)
March 31,
December 31,
2019
2018
(audited)
ASSETS Agency MBS at fair value (including $3,421,455 and
$3,433,252 pledged to counterparties at March 31, 2019
and December 31, 2018, respectively)
$ 3,745,091 $ 3,548,719 Non-Agency MBS at fair value (including
$700,391 and $726,428 pledged to counterparties at March 31, 2019
and December 31, 2018, respectively)
768,597 795,203 Residential mortgage loans held-for-securitization
129,583 11,660 Residential mortgage loans held-for-investment
through consolidated securitization trusts(1) 535,077 549,016
Residential real estate 13,752 13,782 Cash and cash equivalents
21,997 3,165 Reverse repurchase agreements — 20,000 Restricted cash
75,513 30,296 Interest and dividends receivable 17,539 16,872
Derivative instruments at fair value 27,396 46,207 Right to use
asset-operating lease 1,660 1,794 Prepaid expenses and other
5,524 2,986 Total Assets $ 5,341,729 $ 5,039,700
LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Accrued
interest payable $ 16,084 $ 24,828 Repurchase agreements 3,760,634
3,811,627 Warehouse line of credit 15,442 — Asset-backed securities
issued by securitization trusts(1) 525,712 539,651 Junior
subordinated notes 37,380 37,380 Derivative instruments at fair
value 36,261 15,901 Dividends payable on preferred stock 2,297
2,297 Dividends payable on common stock 12,813 12,803 Payable for
purchased MBS 227,997 — Payable for purchased loans 112,316 11,660
Derivative counterparty margin 5,238 — Accrued expenses and other
1,045 654 Long-term lease obligation 1,660 1,794
Total Liabilities $ 4,754,879 $ 4,458,595 Series B Cumulative
Convertible Preferred Stock: par value $0.01 per share; liquidating
preference $25.00 per
share ($19,494 and $19,494, respectively);
780 and 780 shares issued and outstanding at March 31, 2019 and
December 31, 2018, respectively)
$ 19,455 $ 19,455 Stockholders’ Equity: Series A Cumulative
Preferred Stock: par value $0.01 per share; liquidating preference
$25.00 per share
($47,984 and $47,984, respectively); 1,919
and 1,919 shares issued and outstanding at March 31, 2019
and December 31, 2018, respectively)
$ 46,537 $ 46,537 Series C Cumulative Preferred Stock: par value
$0.01 per share; liquidating preference $25.00 per share
($50,257 and $50,257, respectively); 2,010
and 2,010 shares issued and outstanding at March 31, 2019
and December 31, 2018, respectively)
48,944 48,944 Common Stock: par value $0.01 per share; authorized
200,000 shares, 98,565 and 98,483 shares issued and outstanding at
March 31, 2019
and December 31, 2018, respectively)
986 985 Additional paid-in capital 982,344 981,964 Accumulated
other comprehensive (loss) income consisting of unrealized gains
and losses 9,654 (30,792) Accumulated deficit (521,070)
(485,988) Total Stockholders’ Equity $ 567,395 $ 561,650
Total Liabilities and Stockholders’ Equity $ 5,341,729 $ 5,039,700
____________________ (1) The consolidated balance sheets
include assets of consolidated variable interest entities (“VIEs”)
that can only be used to settle obligations and liabilities of the
VIEs for which creditors do not have recourse to the Company. At
March 31, 2019 and December 31, 2018, total assets of the
consolidated VIEs were $537 million and $551 million (including
accrued interest receivable of $1.8 million and $1.8 million),
respectively (which is recorded above in the line item “Interest
and dividends receivable”), and total liabilities were $527 million
and $541 million (including accrued interest payable of $1.7
million and $1.7 million), respectively (which is recorded above in
the line item “Accrued interest payable”).
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except for per share amounts) Three Months Ended
March 31,
2019
2018
(unaudited) Interest and other income:
Interest-Agency MBS $ 25,711 $ 24,044 Interest-Non-Agency MBS
10,466 10,021 Interest-residential securitized mortgage loans 5,368
6,238 Interest-residential mortgage loans held-for-securitization
86 — Other interest income 19 28
41,650 40,331 Interest expense: Interest
expense on repurchase agreements 27,136 19,093 Interest expense on
asset-backed securities 5,200 6,070 Interest expense on warehouse
line of credit 234 — Interest expense on junior subordinated notes
547 447 33,117
25,610 Net interest income 8,533 14,721
Operating expenses: Management fee to related party (1,724 )
(1,737 ) Rental properties depreciation and expenses (355 ) (386 )
General and administrative expenses (967 ) (1,110 )
Total operating expenses (3,046 ) (3,233 ) Other
(loss): Income-rental properties 436 451 Realized net (loss) on
sales of available-for-sale MBS (6,147 ) (11,987 ) Realized (loss)
on sales of Agency MBS held as trading investments (7,363 ) (7,327
) Unrealized gain (loss) on Agency MBS held as trading investments
14,906 (8,890 ) (Loss) gain on derivatives, net (27,289 )
13,412 Total other (loss) (25,457 )
(14,341 ) Net (loss) $ (19,970 ) $ (2,853 ) Dividends on preferred
stock (2,297 ) (2,297 ) Net (loss) to common
stockholders $ (22,267 ) $ (5,150 ) Basic (loss) per common share $
(0.23 ) $ (0.05 ) Diluted (loss) per common share $ (0.23 ) $ (0.05
) Basic weighted average number of shares outstanding 98,537 98,185
Diluted weighted average number of shares outstanding 98,537 98,185
ANWORTH MORTGAGE ASSET CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (in thousands, except for per share amounts)
Three Months Ended March 31,
2019 2018
(unaudited) Net (loss) $ (19,970 ) $ (2,853 )
Available-for-sale Agency MBS, fair value adjustment 25,109 (35,481
) Reclassification adjustment for loss on sales of Agency MBS
included
in net (loss)
6,169 11,945 Available-for-sale Non-Agency MBS, fair value
adjustment 8,187 667 Reclassification adjustment for (gain) loss on
sales of Non-Agency MBS
included in net (loss)
(22 ) 42 Amortization of unrealized gains on interest rate swaps
remaining in
other comprehensive income
1,003 940 Reclassification adjustment for interest (income) on
interest rate swaps
included in net (loss)
- (194 ) Other comprehensive income (loss)
40,446 (22,081 ) Comprehensive income (loss) $
20,476 $ (24,934 )
Non-GAAP Financial Measures Related to Operating
Results
In addition to the Company’s operating results presented in
accordance with GAAP, the following tables include the following
non-GAAP financial measures: Core Earnings (including per common
share), total interest income and average asset yield, including
TBA dollar roll income, paydown expense on Agency MBS and effective
total interest expense and effective cost of funds. The first table
below reconciles the Company’s “net loss to common stockholders”
for the three months ended March 31, 2019 to “Core Earnings” for
the same period. Core Earnings represents “net loss to common
stockholders” (which is the nearest comparable GAAP measure),
adjusted for the items shown in the table below. The second table
below reconciles the Company’s total interest and other income for
the three months ended March 31, 2019 (which is the nearest
comparable GAAP measure) to the total interest income and average
asset yield, including TBA dollar roll income, and shows the
annualized amounts as a percentage of the Company’s average earning
assets and also reconciles the Company’s total interest expense
(which is the nearest comparable GAAP measure) to the effective
total interest expense and effective cost of funds and shows the
annualized amounts as a percentage of the Company’s average
borrowings.
The Company’s management believes that:
- these non-GAAP financial measures are
useful because they provide investors with greater transparency to
the information that the Company uses in its financial and
operational decision-making process;
- the inclusion of paydown expense on
Agency MBS is more indicative of the current earnings potential of
the Company’s investment portfolio, as it reflects the actual
principal paydowns which occurred during the period. Paydown
expense on Agency MBS is not dependent on future assumptions on
prepayments or the cumulative effect from prior periods of any
current changes to those assumptions, as is the case with the GAAP
measure, “Premium amortization on Agency MBS”;
- the adjustment for depreciation expense
on residential rental properties, as this is a non-cash item and is
added back by other companies to derive funds from operations;
and
- the presentation of these measures,
when analyzed in conjunction with the Company’s GAAP operating
results, allows investors to more effectively evaluate the
Company’s performance to that of its peers, particularly those that
have discontinued hedge accounting and those that have used similar
portfolio and derivative strategies.
These non-GAAP financial measures should not be used as a
substitute for the Company’s operating results for the three months
ended March 31, 2019. An analysis of any non-GAAP financial measure
should be used in conjunction with results presented in accordance
with GAAP.
Core Earnings
Three Months Ended
March 31, 2019
Amount Per Share (in thousands)
(unaudited) Net (loss) to common stockholders $ (22,267 ) $
(0.23 ) Adjustments to derive core earnings: Loss on sales of MBS
13,510 0.14 Unrealized (gain) loss on Agency MBS held as trading
investments (14,906 ) (0.15 ) Unrealized loss (gain) on interest
rate swaps, net 33,718 0.34 (Gain) loss on derivatives-TBA Agency
MBS, net (6,429 ) (0.06 ) Net settlement on interest rate swaps
after de-designation(1) 4,862 0.05 Dollar roll income on TBA Agency
MBS(2) 1,975 0.02 Premium amortization on MBS 5,886 0.06 Paydown
expense(3) (4,520 ) (0.05 ) Depreciation expense on residential
rental properties(4) 119 - Core
earnings $ 11,948 $ 0.12 Basic weighted average
number of shares outstanding 98,537
____________________ (1) Net settlement on interest rate
swaps after de-designation includes all subsequent net payments
made on interest rate swaps which were de-designated as hedges in
August 2014 and also on any new interest rate swaps entered into
after that date. These amounts are recorded in “Unrealized loss on
interest rate swaps, net.” (2) Dollar roll income on TBA Agency MBS
is the income resulting from the price discount typically obtained
by extending the settlement of TBA Agency MBS to a later date. This
is a component of the “Loss on derivatives, net” that is included
in the Company’s statements of operations. (3) Paydown expense on
Agency MBS represents the proportional expense of Agency MBS
purchase premiums relative to the Agency MBS principal payments and
prepayments which occurred during the quarter. (4) Depreciation
expense is added back in the core earnings calculation, as it is a
non-cash item, and it is similarly added back in other companies’
calculation of core earnings or funds from operations.
Effective Net Interest Rate Spread
Three Months Ended March 31, 2019
Amount
Annualized
Percentage
(in thousands) (unaudited) Average Asset
Yield, Including TBA Dollar Roll Income: Total interest income $
41,650 3.35 % Income-rental properties 436 0.04 Dollar roll income
on TBA Agency MBS(1) 1,975 0.16 Premium amortization on Agency MBS
5,886 0.47 Paydown expense on Agency MBS(2) (4,520 ) (0.36 )
Total interest and other income and average asset yield, including
TBA dollar roll income $ 45,427 3.66 % Effective Cost
of Funds: Total interest expense $ 33,117 2.96 % Net settlement on
interest rate Swaps after de-designation(3) (4,862 ) (0.44 )
Effective total interest expense and effective cost of funds $
28,255 2.52 % Effective net interest rate spread 1.14
% Average earning assets $ 4,966,309 Average
borrowings $ 4,481,309 ____________________ (1)
Dollar roll income on TBA Agency MBS is the income resulting from
the price discount typically obtained by extending the settlement
of TBA Agency MBS to a later date. This is a component of the “Loss
on derivatives, net” that is shown on the Company’s statements of
operations. (2) Paydown expense on Agency MBS represents the
proportional expense of Agency MBS purchase premiums relative to
the Agency MBS principal payments and prepayments which occurred
during the quarter. (3) Net settlement on interest rate swaps after
de-designation includes all subsequent net payments made on
interest rate swaps which were de-designated as hedges in August
2014 and are recorded in “Loss on interest rate swaps, net.”
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version on businesswire.com: https://www.businesswire.com/news/home/20190503005418/en/
Anworth Mortgage Asset CorporationJohn T. Hillman1299 Ocean
Avenue, 2nd FloorSanta Monica, CA 90401(310) 255-4438 or (310)
255-4493Email: jhillman@anworth.comWeb site:
http://www.anworth.com
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