Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company” or
“Anworth”) today reported its financial results for the second
quarter ended June 30, 2020.
Earnings
The following table summarizes the Company’s core earnings, GAAP
net income to common stockholders, and comprehensive income for the
three months ended June 30, 2020:
Three Months Ended
June 30, 2020
(unaudited)
Per
Weighted
Earnings
Share
(in thousands)
Core earnings
$
1,607
$
0.02
GAAP net income to common stockholders
$
34,542
$
0.35
Comprehensive income
$
28,231
$
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 unaudited 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 June 30, 2020 and March 31, 2020, the composition of our
portfolio at fair value was as follows:
June 30, 2020
March 31, 2020
Dollar Amount
Percentage
Dollar Amount
Percentage
(in thousands)
(unaudited)
Agency MBS:
ARMS and hybrid ARMs
$
652,321
23.4
%
$
710,037
20.8
%
Fixed-rate Agency MBS
1,175,456
42.1
1,690,223
49.6
TBA Agency MBS
259,502
9.3
157,266
4.6
Total Agency MBS
$
2,087,279
74.8
%
$
2,557,526
75.0
%
Non-Agency MBS
192,032
6.9
281,686
8.3
Residential mortgage loans
held-for-investment through consolidated securitization
trusts(1)
367,539
13.2
416,571
12.2
Residential mortgage loans
held-for-securitization
131,110
4.7
141,645
4.1
Residential real estate
13,051
0.4
13,260
0.4
Total Portfolio
$
2,791,011
100.0
%
$
3,410,688
100.0
%
Total Assets(2)
$
2,972,790
$
3,705,183
_______________________
(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 June 30, 2020, the allocation of our agency mortgage-backed
securities (“Agency MBS”) was approximately 31% adjustable-rate and
hybrid adjustable-rate Agency MBS, 57% fixed-rate Agency MBS, and
12% fixed-rate TBA Agency MBS. At March 31, 2020, the allocation of
our Agency MBS was approximately 28% adjustable-rate and hybrid
adjustable-rate Agency MBS, 66% fixed-rate Agency MBS, and 6%
fixed-rate TBA Agency MBS, both periods of which are detailed in
the table below:
June 30,
March 31,
2020
2020
(dollar amounts in
thousands)
(unaudited)
Fair value of Agency MBS and TBA Agency
MBS
$
2,087,279
$
2,557,526
Adjustable-rate Agency MBS coupon reset
(less than 1 year)
20
%
17
%
Hybrid adjustable-rate Agency MBS coupon
reset (1-3 years)
6
3
Hybrid adjustable-rate Agency MBS coupon
reset (3-5 years)
1
4
Hybrid adjustable-rate Agency MBS coupon
reset (greater than 5 years)
4
4
Total adjustable-rate Agency MBS
31
%
28
%
15-year fixed-rate Agency MBS
2
2
20-year fixed-rate Agency MBS
9
7
30-year fixed-rate Agency MBS
46
57
30-year fixed-rate TBA Agency MBS
12
6
Total MBS
100
%
100
%
At June 30, 2020 and March 31, 2020, the summary statistics of
our Agency MBS and TBA Agency MBS were as follows:
June 30, 2020
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
3.47
%
102.16
%
$
103.91
Hybrid adjustable-rate Agency MBS
2.76
101.84
103.92
15-year fixed-rate Agency MBS
3.50
101.72
105.33
20-year fixed-rate Agency MBS
3.56
103.76
107.46
30-year fixed-rate Agency MBS
4.00
102.51
107.50
Total Agency MBS:
3.66
%
102.44
%
$
106.58
Average asset yield (weighted average
coupon divided by average amortized cost)
3.57
%
Unamortized premium
$
41.9
million
Unamortized premium as a percentage of par
value
2.44
%
Premium amortization expense on Agency MBS
for the respective quarter
$
4.4
million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
2.40
%
102.92
%
$
103.80
March 31, 2020
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
3.78
%
101.91
%
$
102.70
Hybrid adjustable-rate Agency MBS
2.78
102.09
103.88
15-year fixed-rate Agency MBS
3.50
101.75
105.52
20-year fixed-rate Agency MBS
3.56
103.83
107.38
30-year fixed-rate Agency MBS
3.79
102.54
106.91
Total Agency MBS:
3.64
%
102.47
%
$
106.03
Average asset yield (weighted average
coupon divided by average amortized cost)
3.56
%
Unamortized premium
$
55.9
million
Unamortized premium as a percentage of par
value
2.47
%
Premium amortization expense on Agency MBS
for the respective quarter
$
6.5
million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
3.00
%
102.78
%
$
103.14
At June 30, 2020 and March 31, 2020, the constant prepayment
rate (“CPR”) and weighted average term to next interest rate reset
of our Agency MBS were as follows:
June 30,
March 31,
2020
2020
(unaudited)
Constant prepayment rate (CPR) of Agency
MBS
33
%
18
%
Constant prepayment rate (CPR) of
adjustable-rate and hybrid adjustable-rate Agency MBS
28
%
25
%
Weighted average term to next interest
rate reset on Agency MBS
23
months
25
months
The following tables summarize our fixed-rate Agency MBS at June
30, 2020 and March 31, 2020:
June 30, 2020
(unaudited)
Weighted
Average
Weighted
Remaining
Market
Fair Market
Average
Term
Value
Cost
Price
Coupon
(Years)
(in thousands)
30-Year Fixed-Rate Agency MBS:
3.00%
$
—
$
—
$
—
—
%
—
3.50%
143,539
103.00
107.68
3.50
26.8
4.00%
717,424
102.38
107.19
4.00
28.1
≥4.5%
92,576
102.74
109.70
4.80
26.0
$
953,539
$
102.51
$
107.50
4.00
%
27.8
15-Year to 20-Year Fixed-Rate Agency
MBS
221,917
103.36
107.05
3.55
16.0
Total Fixed-Rate Agency MBS
$
1,175,456
$
102.67
$
107.41
3.91
%
25.5
March 31, 2020
(unaudited)
Weighted
Average
Weighted
Remaining
Market
Fair Market
Average
Term
Value
Cost
Price
Coupon
(Years)
(in thousands)
30-Year Fixed-Rate Agency MBS:
3.00%
$
228,191
$
102.24
$
105.22
3.00
%
29.7
3.50%
292,842
103.38
106.34
3.50
28.3
4.00%
829,092
102.30
107.28
4.00
28.4
≥4.5%
103,145
102.75
109.36
4.78
26.4
$
1,453,270
$
102.54
$
106.91
3.79
%
28.4
15-Year to 20-Year Fixed-Rate Agency
MBS
236,953
103.43
107.02
3.55
16.3
Total Fixed-Rate Agency MBS
$
1,690,223
$
102.66
$
106.92
3.76
%
26.7
Non-Agency MBS
At March 31, 2020, our Non-Agency MBS were designated as trading
securities and are carried at fair value.
The following tables summarize our Non-Agency MBS at June 30,
2020 and March 31, 2020:
June 30, 2020
(dollar amounts in
thousands)
(unaudited)
Weighted Average
Fair
Current
Fair Market
Portfolio Type
Value
Principal
Coupon
Price
Legacy Non-Agency MBS (pre-2008)
$
105,796
$
171,373
5.25
%
$
61.73
Non-performing
2,305
3,000
5.62
76.84
Credit Risk Transfer
83,931
96,625
4.11
86.86
Total Non-Agency MBS
$
192,032
$
270,998
4.85
%
$
70.86
March 31, 2020
(dollar amounts in
thousands
(unaudited)
Weighted Average
Fair
Current
Fair Market
Portfolio Type
Value
Principal
Coupon
Price
Legacy Non-Agency MBS (pre-2008)
$
204,777
$
360,905
5.58
%
$
56.74
Non-performing
2,355
3,000
5.62
78.50
Credit Risk Transfer
74,554
96,625
4.18
77.16
Total Non-Agency MBS
$
281,686
$
460,530
5.29
%
$
61.17
Residential Mortgage Loans Held-for-Investment
The following table summarizes our residential mortgage loans
held-for-investment at June 30, 2020 and March 31, 2020:
June 30,
March 31,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-investment through consolidated securitization trusts
$
367,539
$
416,571
Asset-backed securities issued by
securitization trusts
358,884
407,243
Retained interest in loans held in
securitization trusts
$
8,655
$
9,328
Residential Mortgage Loans Held-for-Securitization
The following table summarizes our residential mortgage loans
held-for-securitization at June 30, 2020 and March 31, 2020:
June 30,
March 31,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-securitization
$
131,110
$
141,645
Amount outstanding on warehouse line of
credit
$
104,620
$
116,221
At June 30, 2020 and March 31, 2020, our estimated fair value
(in thousands) of the residential mortgage loans
held-for-securitization was $122,364 and $126,809,
respectively.
At June 30, 2020, approximately $1.5 million of the unpaid
principal balance (“UPB”) on this loan portfolio was 30-days
delinquent; approximately $13.3 million of the UPB was 60 days
delinquent; and approximately $13.0 million of the UPB was 90 days+
delinquent. Of these amounts, the percentages that are COVID-19
related are as follows: 30-day delinquent: 65%; 60-day delinquent:
96%; and 90 days+ delinquent: 96%.
Residential Properties Portfolio
At June 30, 2010 and March 31, 2020, Anworth Properties Inc.
owned 83 and 84 single-family residential rental properties,
respectively, located in Southeastern Florida that were carried at
a total cost, net of accumulated depreciation, of $13.1 million and
$13.3 million, respectively. During the three months ended June 30,
2020, we sold one property for a gain of approximately $45
thousand.
MBS Portfolio Financing
June 30, 2020
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
1,595,000
$
102,181
$
1,697,181
Average interest rate
0.24
%
2.78
%
0.39
%
Average maturity
23
days
26
days
23
days
Average interest rate after adjusting for
interest rate swaps
1.24
%
Average maturity after adjusting for
interest rate swaps
983
days
March 31, 2020
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
2,203,224
$
269,910
$
2,473,134
Average interest rate
1.76
%
2.64
%
1.86
%
Average maturity
30
days
16
days
29
days
Average interest rate after adjusting for
interest rate swaps
2.15
%
Average maturity after adjusting for
interest rate swaps
859
days
Portfolio Leverage
At June 30, 2020, our leverage multiple was 4.1x. 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 4.7x at June 30, 2020. At March 31, 2020, our
leverage multiple was 6.1x and the effective leverage was 6.5x.
Interest Rate Swaps
At June 30, 2020 and March 31, 2020, our interest rate swap
agreements (“swaps”) had the following notional amounts, weighted
average fixed rates, and remaining terms:
June 30, 2020
(unaudited)
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount
Rate
Months
Years
(in thousands)
Less than 12 months
$
200,000
1.72
%
2
0.2
1 year to 2 years
—
—
—
—
2 years to 3 years
—
—
—
—
3 years to 4 years
50,000
1.55
40
3.3
4 years to 5 years
175,000
1.73
58
4.8
5 years to 7 years
440,000
2.63
87
7.3
7 years to 10 years
50,000
3.22
102
8.5
$
915,000
2.23
%
61
5.1
March 31, 2020
(unaudited)
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount
Rate
Months
Years
(in thousands)
Less than 12 months
$
316,000
1.69
%
4
0.3
1 year to 2 years
25,000
1.50
20
1.7
2 years to 3 years
55,000
1.48
31
2.6
3 years to 4 years
115,000
1.52
43
3.6
4 years to 5 years
225,000
1.73
60
4.7
5 years to 7 years
390,000
2.60
85
7.1
7 years to 10 years
150,000
2.97
102
8.5
$
1,276,000
2.10
%
55
4.6
Effective Net Interest Rate Spread
June 30,
March 31,
2020
2020
(unaudited)
Average asset yield, including TBA dollar
roll income
3.05
%
3.34
%
Effective cost of funds
2.09
2.38
Effective net interest rate spread
0.96
%
0.96
%
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.
Book Value per Common Share
At June 30, 2020, our book value was $2.85 per share of common
stock, which was an increase of $0.16 from $2.69 at March 31, 2020.
The common stock dividend of $0.05 per share for the first quarter
ended March 31, 2020 was declared in the second quarter ended June
30, 2020. That dividend of $0.05 per share, plus the $0.05 common
stock dividend for the second quarter, plus the $0.16 increase in
book value, resulted in a return on book value per common share of
9.7% for the three months ended June 30, 2020. The return on book
value per common share for the six months ended June 30, 2020 was a
negative (35.8)%.
Dividend
On June 16, 2020, we declared a quarterly common stock dividend
of $0.05 per share for the second quarter ended June 30, 2020.
Based upon the closing price of $1.70 on June 30, 2020, the
annualized dividend yield on our common stock at June 30, 2020 was
11.8%.
Subsequent Events
On July 23, 2020, we renewed our warehouse line of credit
relating to the residential mortgage loans held-for-securitization
for an amount of $300 million and a term of one year.
Conference Call
The Company will host a conference call on Tuesday, August 4,
2020 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss our
second quarter 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 August 4, 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
10146887. 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; the scope and duration
of the COVID-19 (coronavirus) pandemic, including actions taken by
governmental authorities to contain the spread of the virus, and
the impact on our business and the general economy; 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 our 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)
June 30,
December 31,
2020
2019
(audited)
ASSETS
Available-for-sale Agency MBS at fair
value (including $1,679,841 and $2,764,330 pledged to
counterparties at June 30, 2020 and December 31, 2019,
respectively); amortized cost of $1,756,857 and $2,799,448 at June
30, 2020 and December 31, 2019, respectively, net of allowance for
credit losses of $0 and $0 at June 30, 2020 and December 31, 2019,
respectively
$
1,827,777
$
2,853,131
Trading Agency MBS at fair value
(including $0 and $655,045 pledged to counterparties at June 30,
2020 and December 31, 2019, respectively
—
656,920
Available-for-sale Non-Agency MBS at fair
value (including $0 and $535,135 pledged to counterparties at June
30, 2020 and December 31, 2019, respectively); amortized cost of $0
and $613,576 at June 30, 2020 and December 31, 2019, respectively,
net of allowance for credit losses of $0 and $0 at June 30, 2020
and December 31, 2019, respectively
—
643,610
Trading Non-Agency MBS at fair value
(including $164,741 and $0 pledged to counterparties at June 30,
2020 and December 31, 2019, respectively
192,032
—
Residential mortgage loans
held-for-securitization, net of allowance for credit losses of $56
and $0 at June 30, 2020 and December 31, 2019, respectively
131,110
152,922
Residential mortgage loans
held-for-investment through consolidated securitization trusts, net
of allowances for credit losses of $147 and $175 at June 30, 2020
and December 31, 2019, respectively(1)
367,539
458,348
Residential real estate
13,051
13,499
Cash and cash equivalents
29,508
8,236
Reverse repurchase agreements
—
15,000
Restricted cash
137,088
104,699
Interest receivable
7,856
16,398
Derivative instruments at fair value
2,205
5,833
Right to use asset-operating lease
987
1,256
Prepaid expenses and other assets
6,345
8,779
Total Assets
$
2,715,498
$
4,938,631
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accrued interest payable
$
5,187
$
16,757
Repurchase agreements
1,697,181
3,657,873
Warehouse line of credit
104,620
133,811
Asset-backed securities issued by
securitization trusts(1)
358,854
448,987
Junior subordinated notes
37,380
37,380
Derivative instruments at fair value
93,317
52,197
Derivative counterparty margin
2,056
367
Dividends payable on preferred stock
2,297
2,297
Dividends payable on common stock
4,952
8,897
Payable for purchased loans
—
5,545
Payable for terminated swaps
6,227
—
Accrued expenses and other liabilities
2,193
1,312
Long-term lease obligation
987
1,256
Total Liabilities
$
2,315,251
$
4,366,679
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, 2020 and December 31, 2019,
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 June 30, 2020 and December 31, 2019,
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 June 30, 2020 and December 31, 2019,
respectively)
48,626
48,626
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 99,047 and 98,849 shares issued and
outstanding at June 30, 2020 and December 31, 2019,
respectively)
990
988
Additional paid-in capital
983,832
983,401
Accumulated other comprehensive income
consisting of unrealized gains and losses
57,352
65,984
Accumulated deficit
(756,545
)
(593,039
)
Total Stockholders' Equity
$
380,792
$
552,497
Total Liabilities and Stockholders'
Equity
$
2,715,498
$
4,938,631
_______________________
(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 June 30, 2020 and December 31,
2019, total assets of the consolidated VIEs were $369 million and
$460 million (including accrued interest receivable of $1.3 million
and $1.5 million), respectively (which are recorded above in the
line item, “Interest receivable”), and total liabilities were $360
million and $450 million (including accrued interest payable of
$1.2 million and $1.4 million), respectively (which are 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)
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
(unaudited)
Interest and other income:
Interest-Agency MBS
$
12,466
$
24,137
$
33,723
$
49,848
Interest-Non-Agency MBS
2,595
9,659
10,715
20,125
Interest-securitized residential mortgage
loans
3,948
5,259
8,339
10,627
Interest-residential mortgage loans
held-for-securitization
1,403
1,036
3,223
1,122
Other interest income
—
20
174
39
20,412
40,111
56,174
81,761
Interest expense:
Interest expense on repurchase
agreements
4,877
25,979
22,155
53,116
Interest expense on asset-backed
securities
3,781
5,091
8,007
10,291
Interest expense on warehouse line of
credit
979
1,057
2,391
1,290
Interest expense on junior subordinated
notes
410
542
881
1,088
10,047
32,669
33,434
65,785
Net interest income
10,365
7,442
22,740
15,976
Provision for credit losses on loans
(564
)
—
(620
)
—
Net interest income after provision for
credit losses
9,801
7,442
22,120
15,976
Operating expenses:
Management fee to related party
(1,371
)
(1,713
)
(2,899
)
(3,438
)
Rental properties depreciation and
expenses
(380
)
(367
)
(823
)
(723
)
General and administrative expenses
(1,254
)
(1,033
)
(2,342
)
(2,001
)
Total operating expenses
(3,005
)
(3,113
)
(6,064
)
(6,162
)
Other income (loss):
Income-rental properties
384
453
839
890
Realized net gain (loss) on sales of
available-for-sale MBS
10,095
444
15,805
(5,703
)
Realized net gain (loss) on sales of
Agency MBS held as trading investments
—
234
3,981
(7,128
)
Impairment charge on Non-Agency MBS
—
(606
)
—
(606
)
Net gain (loss) on Non-Agency MBS held as
trading investments
25,687
—
(89,686
)
—
Unrealized gain (loss) on Agency MBS held
as trading investments
—
989
(1,141
)
15,895
Gain on sale of residential properties
45
—
123
—
(Loss) on derivatives, net
(6,168
)
(53,543
)
(94,958
)
(80,832
)
Total other income (loss)
30,043
(52,029
)
(165,037
)
(77,484
)
Net income (loss)
$
36,839
$
(47,700
)
$
(148,981
)
$
(67,670
)
Dividends on preferred stock
(2,297
)
(2,297
)
(4,595
)
(4,595
)
Net income (loss) to common
stockholders
$
34,542
$
(49,997
)
$
(153,576
)
$
(72,265
)
Basic income (loss) per common share
$
0.35
$
(0.51
)
$
(1.55
)
$
(0.73
)
Diluted income (loss) per common share
$
0.34
$
(0.51
)
$
(1.55
)
$
(0.73
)
Basic weighted average number of shares
outstanding
98,977
98,635
98,769
98,586
Diluted weighted average number of shares
outstanding
103,525
98,635
98,769
98,586
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(in thousands, except for per
share amounts)
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss)
$
36,839
$
(47,700
)
$
(148,981
)
$
(67,670
)
Available-for-sale Agency MBS, fair value
adjustment
523
28,822
35,354
53,953
Reclassification adjustment for (gain)
loss on sales of Agency MBS included in net (loss)
(10,095
)
(444
)
(15,805
)
5,703
Available-for-sale Non-Agency MBS, fair
value adjustment
—
9,571
—
17,758
Reclassification adjustment due to
transfer from available-for-sale to trading for Non-Agency MBS
—
—
(85,424
)
—
Reclassification adjustment for loss
(gain) on sales of Non-Agency MBS included in net income (loss)
—
—
55,390
(22
)
Amortization of unrealized gains on
interest rate swaps remaining in other comprehensive income
964
1,011
1,853
2,014
Other comprehensive (loss) income
(8,608
)
38,960
(8,632
)
79,406
Comprehensive income (loss)
$
28,231
$
(8,740
)
$
(157,613
)
$
11,736
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 June 30, 2020 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 June 30, 2020 (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
June 30, 2020. 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
June 30, 2020
(unaudited)
Amount
Per Share
(in thousands)
Net income to common stockholders
$
34,542
$
0.35
Adjustments to derive core earnings:
Realized net (gain) on sales of Agency
MBS
(10,095
)
(0.10
)
Realized net (gain) on sales of Non-Agency
MBS
(320
)
—
Unrealized (loss) on Non-Agency MBS held
as trading securities(1)
(25,367
)
(0.26
)
Loss on interest rate swaps, net
8,652
0.09
(Gain) on derivatives-TBA Agency MBS,
net
(2,484
)
(0.03
)
(Gain) on sales of residential
properties
(45
)
—
Net settlement on interest rate swaps
after de-designation(2)
(2,698
)
(0.03
)
Dollar roll income on TBA Agency
MBS(3)
316
0.01
Premium amortization on MBS
4,382
0.05
Paydown expense(4)
(5,696
)
(0.06
)
Depreciation expense on residential rental
properties(5)
119
—
Deferred payments on
modifications/forbearance agreements(6)
301
—
Core earnings
$
1,607
$
0.02
Basic weighted average number of shares
outstanding
98,977
_______________________
(1)
At March 31, 2020, we designated our Non-Agency MBS as trading
securities. The unrealized loss at that time, instead of being
recorded in AOCI, as had been previously done, is now recognized
through earnings.
(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.
(6)
The trustee reports these as losses in the securitization trusts,
but these payments are due upon liquidation or maturity.
Effective Net Interest Rate Spread
Three Months Ended
June 30, 2020
(unaudited)
Annualized
Amount
Percentage
(in thousands)
Average Asset Yield, Including TBA Dollar
Roll Income:
Total interest income
$
20,412
3.15
%
Income-rental properties
384
0.06
Dollar roll income on TBA Agency
MBS(1)
316
0.04
Premium amortization on Agency MBS
4,382
0.68
Paydown expense on Agency MBS(2)
(5,696
)
(0.88
)
Total interest and other income and
average asset yield, including TBA dollar roll income
$
19,798
3.05
%
Effective Cost of Funds:
Total interest expense
$
10,047
1.65
%
Net settlement on interest rate Swaps
after de-designation(3)
2,698
0.44
Effective total interest expense and
effective cost of funds
$
12,745
2.09
%
Effective net interest rate spread
0.96
%
Average earning assets
$
2,594,005
Average borrowings
$
2,435,679
_______________________
(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) 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 included in “(Loss) on derivatives, net” on our consolidated
statements of operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200803005659/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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