Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company” or
“Anworth”) today reported its financial results for the fourth
quarter ended December 31, 2019.
Earnings
The following table summarizes the Company’s core earnings, GAAP
net income to common stockholders, and comprehensive income for the
three months ended December 31, 2019:
Three Months Ended
December 31, 2019
(unaudited)
Per
Weighted
Earnings
Share
(in thousands)
Core earnings
$
6,781
$
0.07
GAAP net income to common stockholders
$
27,445
$
0.28
Comprehensive income
$
28,921
$
0.29
Core earnings is a non-GAAP financial measure, which is
explained and reconciled to GAAP net income 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 our consolidated statements of
comprehensive income, which is included in this earnings release.
Comprehensive income consists of net income to all stockholders
(including the amounts paid to preferred stockholders) and the
change in other comprehensive income.
Portfolio
At December 31, 2019 and September 30, 2019, the composition of
our portfolio at fair value was as follows:
December 31, 2019
September 30, 2019
Dollar Amount
Percentage
Dollar Amount
Percentage
(in thousands)
(unaudited)
Agency MBS:
ARMS and hybrid ARMs
$
789,468
15.7
%
$
1,009,254
20.7
%
Fixed-rate Agency MBS
2,720,583
54.1
2,096,384
43.0
TBA Agency MBS
253,516
5.0
456,387
9.4
Total Agency MBS
$
3,763,567
74.8
%
$
3,562,025
73.1
%
Non-Agency MBS
643,610
12.8
686,029
14.1
Residential mortgage loans(1)
458,348
9.1
483,648
9.9
Residential mortgage loans
held-for-securitization
152,922
3.0
129,014
2.6
Residential real estate
13,499
0.3
13,618
0.3
Total Portfolio
$
5,031,946
100.0
%
$
4,874,334
100.0
%
Total Assets(2)
$
5,191,616
$
5,038,148
______________________
(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 us.
(2)
Includes TBA Agency MBS.
Agency MBS
At December 31, 2019, the allocation of our agency
mortgage-backed securities (“Agency MBS”) was approximately 21%
adjustable-rate and hybrid adjustable-rate Agency MBS, 72%
fixed-rate Agency MBS, and 7% fixed-rate TBA Agency MBS. At
September 30, 2019, the allocation of our agency mortgage-backed
securities was approximately 28% adjustable-rate and hybrid
adjustable-rate Agency MBS, 59% fixed-rate Agency MBS, and 13%
fixed-rate TBA Agency MBS, both periods of which are detailed in
the table below:
December 31,
September 30,
2019
2019
(dollar amounts in
thousands)
(unaudited)
Fair value of Agency MBS and TBA Agency
MBS
$
3,763,567
$
3,562,025
Adjustable-rate Agency MBS coupon reset
(less than 1 year)
13
%
17
%
Hybrid adjustable-rate Agency MBS coupon
reset (1-3 years)
2
2
Hybrid adjustable-rate Agency MBS coupon
reset (3-5 years)
3
6
Hybrid adjustable-rate Agency MBS coupon
reset (greater than 5 years)
3
3
Total adjustable-rate Agency MBS
21
%
28
%
15-year fixed-rate Agency MBS
1
1
20-year fixed-rate Agency MBS
5
6
30-year fixed-rate Agency MBS
66
52
15-year fixed-rate TBA Agency MBS
—
—
30-year fixed-rate TBA Agency MBS
7
13
Total MBS
100
%
100
%
At December 31, 2019 and September 30, 2019, the summary
statistics of our Agency MBS and TBA Agency MBS were as
follows:
December 31, 2019
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
3.95
%
102.04
%
$
104.24
Hybrid adjustable-rate Agency MBS
2.78
102.11
101.67
15-year fixed-rate Agency MBS
3.50
101.81
103.92
20-year fixed-rate Agency MBS
3.56
103.96
104.65
30-year fixed-rate Agency MBS
3.56
102.33
$
103.75
Total Agency MBS:
3.54
%
102.35
%
Average asset yield (weighted average
coupon divided by average amortized cost)
3.46
%
Unamortized premium
$
79.4 million
Unamortized premium as a percentage of par
value
2.35
%
Premium amortization expense on Agency MBS
for the respective quarter
$
7.0 million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
3.00
%
101.19
%
$
101.41
September 30, 2019
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
3.96
%
102.29
%
$
103.79
Hybrid adjustable-rate Agency MBS
2.71
102.25
101.66
15-year fixed-rate Agency MBS
3.50
101.82
103.67
20-year fixed-rate Agency MBS
3.56
104.09
104.91
30-year fixed-rate Agency MBS
3.85
102.39
$
104.40
Total Agency MBS:
3.69
%
102.46
%
Average asset yield (weighted average
coupon divided by average amortized cost)
3.60
%
Unamortized premium
$
73.0 million
Unamortized premium as a percentage of par
value
2.46
%
Premium amortization expense on Agency MBS
for the respective quarter
$
6.4 million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
3.00
%
101.42
%
$
101.53
At December 31, 2019 and September 30, 2019, the constant
prepayment rate (“CPR”) and weighted average term to next interest
rate reset of our Agency MBS were as follows:
December 31,
September 30,
2019
2019
(unaudited)
Constant prepayment rate (CPR) of Agency
MBS
25
%
21
%
Constant prepayment rate (CPR) of
adjustable-rate and hybrid adjustable-rate Agency MBS
32
%
28
%
Weighted average term to next interest
rate reset on Agency MBS
24 months
25 months
The following tables summarize our fixed-rate Agency MBS at
December 31, 2019 and September 30, 2019:
December 31, 2019
Weighted
Average
Weighted
Remaining
Market
Fair Market
Average
Term
Value
Cost
Price
Coupon
(Years)
(in thousands)
(unaudited)
30-Year Fixed-Rate Agency MBS:
3.00%
$
872,360
$
101.61
$
101.73
3.00
%
29.9
3.50%
599,568
103.09
103.72
3.50
29.1
4.00%
869,749
102.42
105.43
4.00
28.7
≥4.5%
136,103
103.12
106.55
4.71
27.1
$
2,477,780
$
102.33
$
103.75
3.56
%
29.1
15-Year to 20-Year Fixed-Rate Agency
MBS
242,803
103.53
104.50
3.55
16.5
Total Fixed-Rate Agency MBS
$
2,720,583
$
102.43
$
103.81
3.56
%
28.0
September 30, 2019
Weighted
Average
Weighted
Remaining
Market
Fair Market
Average
Term
Value
Cost
Price
Coupon
(Years)
(in thousands)
(unaudited)
30-Year Fixed-Rate Agency MBS:
3.00%
$
190,663
$
101.12
$
101.74
3.00
%
30.0
3.50%
365,477
102.75
103.44
3.50
28.8
4.00%
1,130,687
102.41
102.41
4.00
28.9
≥4.5%
153,332
103.03
106.92
4.70
27.4
$
1,840,159
$
102.39
$
104.40
3.85
%
28.9
15-Year to 20-Year Fixed-Rate Agency
MBS
256,225
103.63
104.66
3.56
16.7
Total Fixed-Rate Agency MBS
$
2,096,384
$
102.54
$
104.43
3.81
%
27.4
Non-Agency MBS
The following tables summarize our Non-Agency MBS at December
31, 2019 and September 30, 2019:
December 31, 2019
Weighted Average
Fair
Amortized
Current
Amortized
Fair Market
Portfolio Type
Value
Cost
Principal
Cost
Coupon
Yield
Price
(in thousands)
(unaudited)
Legacy Non-Agency MBS (pre-2008)
$
497,408
$
477,786
$
655,447
72.89
%
5.52
%
5.49
%
75.89
%
Non-performing
11,052
10,938
11,000
99.43
5.50
6.05
100.47
Credit Risk Transfer
135,150
124,852
135,489
92.15
4.20
5.80
99.75
Total Non-Agency MBS
$
643,610
$
613,576
$
801,936
76.51
%
5.30
%
5.56
%
80.26
%
September 30, 2019
Weighted Average
Fair
Amortized
Current
Amortized
Fair Market
Portfolio Type
Value
Cost
Principal
Cost
Coupon
Yield
Price
(in thousands)
(unaudited)
Legacy Non-Agency MBS (pre-2008)
$
518,812
$
495,165
$
674,394
73.42
%
5.59
%
5.54
%
76.93
%
Non-performing
26,430
26,199
26,360
99.39
5.33
5.94
100.27
Credit Risk Transfer
140,787
130,833
141,839
92.24
4.25
5.77
99.26
Total Non-Agency MBS
$
686,029
$
652,197
$
842,593
77.40
%
5.36
%
5.61
%
81.42
%
Residential Mortgage Loans Held-for-Investment
The following table summarizes our residential mortgage loans
held-for-investment at December 31, 2019 and September 30,
2019:
December 31,
September 30,
2019
2019
(in thousands)
(unaudited)
Residential mortgage loans
held-for-investment
$
458,348
$
483,648
Asset-backed securities issued by
securitization trusts
448,987
474,285
Retained interest in loans held in
securitization trusts
$
9,361
$
9,363
Residential Mortgage Loans Held-for-Securitization
The following table summarizes our residential mortgage loans
held-for-securitization at December 31, 2019 and September 30,
2019:
December 31,
September 30,
2019
2019
(in thousands)
(unaudited)
Residential mortgage loans
held-for-securitization
$
152,922
$
129,014
Amount outstanding on warehouse line of
credit
$
133,811
$
112,252
Payable for purchased loans
$
5,545
$
—
Residential Properties Portfolio
At December 31, 2019 and September 30, 2019, Anworth Properties
Inc. owned 85 and 86 single-family residential rental properties,
respectively, located in Southeastern Florida that were carried at
a total cost, net of accumulated depreciation, of $13.5 million and
$13.6 million, respectively.
MBS Portfolio Financing
December 31, 2019
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
3,230,000
$
427,873
$
3,657,873
Average interest rate
1.97
%
2.80
%
2.07
%
Average maturity
30 days
11 days
28 days
Average interest rate after adjusting for
interest rate swaps
2.13
%
Average maturity after adjusting for
interest rate swaps
978 days
September 30, 2019
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
2,780,000
$
475,102
$
3,255,102
Average interest rate
2.29
%
3.12
%
2.41
%
Average maturity
33 days
18 days
31 days
Average interest rate after adjusting for
interest rate swaps
2.34
%
Average maturity after adjusting for
interest rate swaps
940 days
Portfolio Leverage
At December 31, 2019, our leverage multiple was 6.2x. The
leverage multiple is calculated by dividing our repurchase
agreements and credit line outstanding by the aggregate of common
stockholders’ equity plus preferred stock and junior subordinated
notes. The effective leverage, which includes the effect of TBA
dollar roll financing, was 6.64x at December 31, 2019. At September
30, 2019, our leverage multiple was 5.69x and the effective
leverage was 6.46x.
Interest Rate Swaps
At December 31, 2019 and September 30, 2019, our interest rate
swap agreements (“Swaps”) had the following notional amounts,
weighted average fixed rates, and remaining terms:
December 31, 2019
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount
Rate
Months
Years
(in thousands)
(unaudited)
Less than 12 months
$
541,000
1.70
%
7
0.6
1 year to 2 years
190,000
1.63
21
1.8
2 years to 3 years
335,000
1.65
34
2.8
3 years to 4 years
295,000
1.71
45
3.8
4 years to 5 years
550,000
2.18
61
4.7
5 years to 7 years
390,000
2.51
85
7.1
7 years to 10 years
200,000
2.94
103
8.6
$
2,501,000
2.02
%
48
4.0
September 30, 2019
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount
Rate
Months
Years
(in thousands)
(unaudited)
Less than 12 months
$
541,000
1.65
%
6
0.5
1 year to 2 years
275,000
1.61
16
1.3
2 years to 3 years
155,000
1.71
34
2.8
3 years to 4 years
205,000
1.78
47
3.9
4 years to 5 years
225,000
2.12
57
4.7
5 years to 7 years
425,000
2.41
74
6.2
7 years to 10 years
365,000
2.96
100
8.3
$
2,191,000
2.08
%
47
3.9
Effective Net Interest Rate Spread
December 31,
September 30,
2019
2019
(unaudited)
Average asset yield, including TBA dollar
roll income
3.46
%
3.62
%
Effective cost of funds
2.57
2.71
Effective net interest rate spread
0.89
%
0.91
%
Certain components of our 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 December 17, 2019, we declared a quarterly common stock
dividend of $0.09 per share for the fourth quarter ended December
31, 2019. Based upon the closing price of $3.52 on December 31,
2019, the annualized dividend yield on our common stock at December
31, 2019 was 10.2%.
Book Value per Common Share
At December 31, 2019, our book value was $4.60 per share of
common stock, which was an increase of $0.18 from $4.42 at
September 30, 2019.
The $0.09 quarterly dividend, plus the $0.18 increase in book
value per common share from the prior quarter, resulted in a return
on book value per common share of 6.1% for the three months ended
December 31, 2019 and 7.2% for the year ended December 31,
2019.
Subsequent Events
On January 1, 2020, the conversion rate of our Series B
Preferred Stock increased from 5.5379 to 5.5992 shares of our
common stock, based upon the common stock dividend of $0.09 per
share that was declared on December 17, 2019.
Conference Call
The Company will host a conference call on Wednesday, February
26, 2020 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss
our fourth 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 February 26, 2020. 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 10136439. The conference
call will also be webcast live over the Internet, which can be
accessed on our website at http://www.anworth.com through the
corresponding link located at the top of the home page.
Investors interested in participating in our Dividend
Reinvestment and Stock Purchase Plan (our “DRP Plan”), or receiving
a copy of the DRP Plan’s prospectus, may do so by contacting our
Plan Administrator, American Stock Transfer & Trust Company, at
877-248-6410. For more information about our Plan, interested
investors may also visit our Plan Administrator’s website at
http://www.amstock.com/investpower/new_dp.asp or our 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 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)
December 31,
December 31,
2019
2018
(audited)
ASSETS
Agency MBS at fair value (including
3,419,375 and $3,433,252 pledged to counterparties at December 31,
2019 and December 31, 2018, respectively)
$
3,510,051
$
3,548,719
Non-Agency MBS at fair value (including
$535,315 and $726,428 pledged to counterparties at December 31,
2019 and December 31, 2018, respectively)
643,610
795,203
Residential mortgage loans
held-for-securitization
152,922
11,660
Residential mortgage loans
held-for-investment through consolidated securitization
trusts(1)
458,348
549,016
Residential real estate
13,499
13,782
Cash and cash equivalents
8,236
3,165
Reverse repurchase agreements
15,000
20,000
Restricted cash
104,699
30,296
Interest receivable
16,398
16,872
Derivative instruments at fair value
5,833
46,207
Right to use asset-operating lease
1,256
1,794
Prepaid expenses and other assets
8,779
2,986
Total Assets
$
4,938,631
$
5,039,700
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accrued interest payable
$
16,757
$
24,828
Repurchase agreements
3,657,873
3,811,627
Warehouse line of credit
133,811
—
Asset-backed securities issued by
securitization trusts(1)
448,987
539,651
Junior subordinated notes
37,380
37,380
Derivative instruments at fair value
52,197
15,901
Derivative counterparty margin
367
—
Dividends payable on preferred stock
2,297
2,297
Dividends payable on common stock
8,897
12,803
Payable for purchased loans
5,545
11,660
Accrued expenses and other liabilities
1,312
654
Long-term lease obligation
1,256
1,794
Total Liabilities
$
4,366,679
$
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 December 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 December 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 December 31, 2019 and December 31, 2018,
respectively)
48,626
48,944
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 98,849 and 98,483 shares issued and
outstanding at December 31, 2019 and December 31, 2018,
respectively)
988
985
Additional paid-in capital
983,401
981,964
Accumulated other comprehensive (loss)
income consisting of unrealized gains and losses
65,984
(30,792
)
Accumulated deficit
(593,039
)
(485,988
)
Total Stockholders' Equity
$
552,497
$
561,650
Total Liabilities and Stockholders'
Equity
$
4,938,631
$
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 December
31, 2019 and December 31, 2018, total assets of the consolidated
VIEs were $460 million and $551 million (including accrued interest
receivable of $1.5 million and $1.8 million), respectively (which
is recorded above in the line item “Interest receivable”), and
total liabilities were $450 million and $541 million (including
accrued interest payable of $1.4 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
Three
Months
Year
Months
Year
Ended
Ended
Ended
Ended
December 31, 2019
December 31, 2018
(unaudited)
(unaudited)
Interest and other income:
Interest-Agency MBS
$
19,990
$
90,173
$
23,208
$
95,656
Interest-Non-Agency MBS
8,614
38,038
10,445
40,733
Interest-securitized residential mortgage
loans
4,767
20,443
5,519
23,463
Interest-residential mortgage loans
held-for-securitization
1,618
4,314
—
—
Other interest income
253
1,427
29
120
35,242
154,395
39,201
159,972
Interest expense:
Interest expense on repurchase
agreements
18,489
92,737
25,362
90,511
Interest expense on asset-backed
securities
4,600
19,771
5,351
22,800
Interest expense on warehouse line of
credit
1,477
4,148
—
—
Interest expense on junior subordinated
notes
492
2,100
526
1,996
25,058
118,756
31,239
115,307
Net interest income
10,184
35,639
7,962
44,665
Operating expenses:
Management fee to related party
(1,614
)
(6,699
)
(2,060
)
(7,098
)
Rental properties depreciation and
expenses
(372
)
(1,517
)
(367
)
(1,525
)
General and administrative expenses
(1,277
)
(5,090
)
(1,248
)
(4,880
)
Total operating expenses
(3,263
)
(13,306
)
(3,675
)
(13,503
)
Other income (loss):
Income-rental properties
441
1,800
428
1,761
Realized net gain (loss) on sales of
available-for-sale MBS
1,338
(3,983
)
(999
)
(12,186
)
Realized net gain (loss) on sales of
Agency MBS held as trading investments
1,342
(5,787
)
(3,871
)
(11,429
)
Impairment charge on Non-Agency MBS
(357
)
(2,108
)
(971
)
(2,869
)
Unrealized gain (loss) on Agency MBS held
as trading investments
(798
)
17,036
9,674
(4,911
)
Gain on sale of residential properties
31
31
23
54
(Loss) gain on derivatives, net
20,824
(84,741
)
(44,504
)
(8,071
)
Recovery on Non-Agency MBS
—
—
—
1
Total other income (loss)
22,821
(77,752
)
(40,220
)
(37,650
)
Net income (loss)
$
29,742
$
(55,419
)
$
(35,933
)
$
(6,488
)
Dividends on preferred stock
(2,297
)
(9,189
)
(2,297
)
(9,189
)
Net income (loss) to common
stockholders
$
27,445
$
(64,608
)
$
(38,230
)
$
(15,677
)
Basic income (loss) per common share
$
0.28
$
(0.65
)
$
(0.39
)
$
(0.16
)
Diluted income (loss) per common share
$
0.27
$
(0.65
)
$
(0.39
)
$
(0.16
)
Basic weighted average number of shares
outstanding
98,823
98,739
98,444
98,314
Diluted weighted average number of shares
outstanding
103,141
98,739
98,444
98,314
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(in thousands, except for per
share amounts)
Three
Three
Months
Year
Months
Year
Ended
Ended
Ended
Ended
December 31, 2019
December 31, 2018
Net income (loss)
$
29,742
$
(55,419
)
$
(35,933
)
$
(6,488
)
Available-for-sale Agency MBS, fair value
adjustment
3,160
68,355
22,071
(43,348
)
Reclassification adjustment for (gain)
loss on sales of Agency MBS included in net income (loss)
(1,054
)
4,059
999
12,361
Available-for-sale Non-Agency MBS, fair
value adjustment
(3,548
)
20,547
(13,784
)
(20,463
)
Reclassification adjustment for (gain) on
sales of Non-Agency MBS included in net income (loss)
(285
)
(76
)
—
(175
)
Amortization of unrealized gains on
interest rate swaps remaining in other comprehensive income
906
3,891
1,019
4,025
Reclassification adjustment for interest
(income) on interest rate swaps included in net income (loss)
—
—
—
(212
)
Other comprehensive income (loss)
(821
)
96,776
10,305
(47,812
)
Comprehensive income (loss)
$
28,921
$
41,357
$
(25,628
)
$
(54,300
)
Non-GAAP Financial Measures Related to Operating
Results
In addition to our 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 our “Net income to common stockholders” for the
three months ended December 31, 2019 to core earnings for the same
period. Core earnings represents “Net income to common
stockholders” (which is the nearest comparable GAAP measure),
adjusted for the items shown in the table below. The second table
below reconciles our total interest and other income for the three
months ended December 31, 2019 (which is the nearest comparable
GAAP measure) to our total interest income and average asset yield,
including TBA dollar roll income, and shows the annualized amounts
as a percentage of our average earning assets, and also reconciles
our total interest expense (which is the nearest comparable GAAP
measure) to our effective total interest expense and effective cost
of funds and shows the annualized amounts as a percentage of our
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
we use in our financial and operational decision-making
process;
- the inclusion of paydown expense on Agency MBS is more
indicative of the current earnings potential of our 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 our GAAP operating results, allows investors to
more effectively evaluate our performance to that of our 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 our operating results for the three months ended
December 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
December 31, 2019
Amount
Per Share
(in thousands)
(unaudited)
Net income to common stockholders
$
27,445
$
0.28
Adjustments to derive core earnings:
(Gain) on sales of MBS
(2,680
)
(0.03
)
Impairment charge on Non-Agency MBS(1)
357
—
Unrealized loss on Agency MBS held as
trading investments
798
0.01
Unrealized (gain) on interest rate swaps,
net
(21,240
)
(0.21
)
Loss on derivatives-TBA Agency MBS,
net
416
0.01
(Gain) on sales of residential
properties
(31
)
—
Net settlement on interest rate swaps
after de-designation(2)
109
—
Dollar roll income on TBA Agency
MBS(3)
1,035
0.01
Premium amortization on MBS
7,033
0.07
Paydown expense(4)
(6,581
)
(0.07
)
Depreciation expense on residential rental
properties(5)
120
—
Core earnings
$
6,781
$
0.07
Basic weighted average number of shares
outstanding
98,823
(1)
Impairment charge on Non-Agency MBS
represents the amount applied against current GAAP earnings when
future loss expectations exceed previously existing expectations.
When future loss expectations become less than previously existing
loss expectations, the difference would be amortized into earnings
over the life of the security.
(2)
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.”
(3)
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
our consolidated statements of operations.
(4)
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.
(5)
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
December 31, 2019
Annualized
Amount
Percentage
(in thousands)
(unaudited)
Average Asset Yield, Including TBA Dollar
Roll Income:
Total interest income
$
35,242
3.31
%
Income-rental properties
441
0.04
Dollar roll income on TBA Agency
MBS(1)
1,035
0.10
Premium amortization on Agency MBS
7,033
0.66
Paydown expense on Agency MBS(2)
(6,581
)
(0.62
)
Less: Other income
(253
)
(0.03
)
Total interest and other income and
average asset yield, including TBA dollar roll income
$
36,917
3.46
%
Effective Cost of Funds:
Total interest expense
$
25,058
2.58
%
Net settlement on interest rate Swaps
after de-designation(3)
(109
)
(0.01
)
Effective total interest expense and
effective cost of funds
$
24,949
2.57
%
Effective net interest rate spread
0.89
%
Average earning assets
$
4,264,155
Average borrowings
$
3,890,679
______________________
(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) gain on derivatives, net” that is shown on our
consolidated 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
three-month period.
(3)
Net settlement on interest rate swaps after de-designation
include all subsequent net payments made or received 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.”
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200225005934/en/
Anworth Mortgage Asset Corporation John T. Hillman 1299 Ocean
Avenue, 2nd Floor Santa Monica, CA 90401 (310) 255-4438 or (310)
255-4493 Email: jhillman@anworth.com Web site:
http://www.anworth.com
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