[November 02, 2018] |
|
Anworth Reports Third Quarter 2018 Financial Results
Anworth Mortgage Asset Corporation (NYSE: ANH) (the "Company") today
reported its financial results for the third quarter ended September 30,
2018.
Earnings
The following table summarizes the Company's core earnings, GAAP net
income to common stockholders, and comprehensive income (loss) for the
three months ended September 30, 2018:
|
|
Three Months Ended
|
|
|
September 30, 2018
|
|
|
(unaudited)
|
|
|
Earnings
|
|
Per
Weighted
Share
|
|
|
(in thousands)
|
|
|
Core earnings
|
|
$
|
11,639
|
|
|
$
|
0.12
|
|
GAAP net income to common stockholders
|
|
$
|
15,068
|
|
|
$
|
0.15
|
|
Comprehensive income (loss)
|
|
$
|
(4,271
|
)
|
|
$
|
(0.04
|
)
|
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 (loss) is shown
on the consolidated statements of comprehensive income, which is
included in this earnings release. Comprehensive income (loss) consists
of the net income to all stockholders (including the amounts paid to
preferred stockholders) and the change in other comprehensive income.
Portfolio
At September 30, 2018 and June 30, 2018, the composition of the
Company's portfolio at fair value was as follows (dollar amounts in
thousands):
|
|
September 30, 2018
|
|
June 30, 2018
|
|
|
Dollar Amount
|
|
Percentage
|
|
Dollar Amount
|
|
Percentage
|
|
|
(unaudited)
|
|
(unaudited)
|
Agency MBS:
|
|
|
|
|
|
|
|
|
ARMS and hybrid ARMs
|
|
$
|
1,676,433
|
|
28.2%
|
|
$
|
1,840,218
|
|
30.8%
|
Fixed-rate Agency MBS
|
|
|
2,148,536
|
|
36.2%
|
|
|
1,994,126
|
|
33.4%
|
TBA Agency MBS
|
|
|
756,470
|
|
12.7%
|
|
|
762,330
|
|
12.7%
|
Total Agency MBS
|
|
$
|
4,581,439
|
|
77.1%
|
|
$
|
4,596,674
|
|
76.9%
|
Non-Agency MBS
|
|
|
783,902
|
|
13.2%
|
|
|
779,995
|
|
13.1%
|
Residential mortgage loans(1)
|
|
|
562,484
|
|
9.5%
|
|
|
585,020
|
|
9.8%
|
Residential real estate
|
|
|
13,905
|
|
0.2%
|
|
|
13,987
|
|
0.2%
|
Total Portfolio
|
|
$
|
5,941,730
|
|
100.0%
|
|
$
|
5,975,676
|
|
100.0%
|
Total Assets(2)
|
|
$
|
6,050,034
|
|
|
|
$
|
6,079,377
|
|
|
____________________
|
(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 September 30, 2018, the allocation of the Company's agency
mortgage-backed securities ("Agency MBS") was approximately 37%
adjustable-rate and hybrid adjustable-rate Agency MBS, 47% fixed-rate
Agency MBS, and 16% fixed-rate TBA Agency MBS. At June 30, 2018, the
allocation of the Company's Agency MBS was approximately 39%
adjustable-rate and hybrid adjustable-rate Agency MBS, 44% fixed-rate
Agency MBS, and 17% fixed-rate TBA Agency MBS, both periods of which are
detailed below (dollar amounts in thousands):
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
(unaudited)
|
|
(unaudited)
|
Fair value of Agency MBS and TBA Agency MBS
|
|
$
|
4,581,439
|
|
|
$
|
4,596,674
|
|
Adjustable-rate Agency MBS coupon reset (less than 1 year)
|
|
|
21
|
%
|
|
|
23
|
%
|
Hybrid adjustable-rate Agency MBS coupon reset (1-2 years)
|
|
|
5
|
|
|
|
4
|
|
Hybrid adjustable-rate Agency MBS coupon reset (2-3 years)
|
|
|
1
|
|
|
|
3
|
|
Hybrid adjustable-rate Agency MBS coupon reset (3-4 years)
|
|
|
1
|
|
|
|
-
|
|
Hybrid adjustable-rate Agency MBS coupon reset (4-5 years)
|
|
|
6
|
|
|
|
6
|
|
Hybrid adjustable-rate Agency MBS coupon reset (5-7 years)
|
|
|
-
|
|
|
|
-
|
|
Hybrid adjustable-rate Agency MBS coupon reset (greater than 7 years)
|
|
|
3
|
|
|
|
3
|
|
Total adjustable-rate Agency MBS
|
|
|
37
|
%
|
|
|
39
|
%
|
15-year fixed-rate TBA Agency MBS
|
|
|
16
|
|
|
|
17
|
|
15-year fixed-rate Agency MBS
|
|
|
23
|
|
|
|
25
|
|
20-year and 30-year fixed-rate Agency MBS
|
|
|
24
|
|
|
|
19
|
|
Total fair value of Agency MBS and TBA Agency MBS
|
|
|
100
|
%
|
|
|
100
|
%
|
At September 30, 2018 and June 30, 2018, the summary statistics of the
Company's Agency MBS portfolio were as follows:
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
(unaudited)
|
|
(unaudited)
|
Weighted Average Agency MBS Coupon:
|
|
|
|
|
Adjustable-rate Agency MBS
|
|
3.88
|
%
|
|
3.71
|
%
|
Hybrid adjustable-rate Agency MBS
|
|
2.47
|
|
|
2.46
|
|
15-year fixed-rate Agency MBS
|
|
2.91
|
|
|
2.91
|
|
15-year fixed-rate TBA Agency MBS
|
|
3.57
|
|
|
3.67
|
|
20-year and 30-year fixed-rate Agency MBS
|
|
3.90
|
|
|
3.81
|
|
Total Agency MBS:
|
|
3.39
|
%
|
|
3.26
|
%
|
Average Amortized Cost:
|
|
|
|
|
Adjustable-rate Agency MBS
|
|
102.73
|
%
|
|
102.80
|
%
|
Hybrid adjustable-rate Agency MBS
|
|
102.59
|
|
|
102.65
|
|
15-year fixed-rate Agency MBS
|
|
102.24
|
|
|
102.27
|
|
15-year fixed-rate TBA Agency MBS
|
|
100.86
|
|
|
101.39
|
|
20-year and 30-year fixed-rate Agency MBS
|
|
103.37
|
|
|
103.56
|
|
Total Agency MBS:
|
|
102.44
|
%
|
|
102.55
|
%
|
Average asset yield (weighted average coupon divided by average
amortized cost)
|
|
3.31
|
%
|
|
3.18
|
%
|
Unamortized premium
|
|
$104.0 million
|
|
|
$104.9 million
|
|
Unamortized premium as a percentage of par value
|
|
2.44
|
%
|
|
2.55
|
%
|
Premium amortization expense on Agency MBS for the respective quarter
|
|
$7.5 million
|
|
|
$6.3 million
|
|
At September 30, 2018, the constant prepayment rate ("CPR") and weighted
average term to next interest rate reset of our Agency MBS were as
follows:
|
|
September 30,
2018
|
|
|
(unaudited)
|
Constant prepayment rate (CPR) of Agency MBS
|
|
16%
|
Constant prepayment rate (CPR) of adjustable-rate and hybrid
adjustable-rate Agency MBS
|
|
23%
|
Weighted average term to next interest rate reset on Agency MBS
|
|
25 months
|
Non-Agency MBS
Our Non-Agency MBS were either issued before 2008 or were recently
issued and are collateralized by currently non-performing residential
mortgage loans that were originated before 2008. The following tables
summarize the Company's Non-Agency MBS at September 30, 2018 and June
30, 2018 (dollar amounts in thousands):
|
|
September 30, 2018
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Weighted Average
|
Mortgage Loan Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Contractual
Principal
|
|
Amortized
Cost
|
|
Coupon
|
|
Yield
|
Prime
|
|
$
|
37,939
|
|
$
|
36,332
|
|
$
|
45,662
|
|
79.57%
|
|
5.15%
|
|
6.27%
|
Alt-A
|
|
|
535,671
|
|
|
516,129
|
|
|
693,717
|
|
74.40%
|
|
5.68%
|
|
5.44%
|
Subprime
|
|
|
19,645
|
|
|
18,751
|
|
|
20,581
|
|
91.11%
|
|
4.30%
|
|
5.76%
|
Non-performing
|
|
|
116,651
|
|
|
116,737
|
|
|
116,995
|
|
99.78%
|
|
5.17%
|
|
5.38%
|
Agency Risk Transfer - RPL
|
|
|
57,439
|
|
|
56,196
|
|
|
62,050
|
|
90.57%
|
|
4.28%
|
|
5.61%
|
Agency Risk Transfer - New originations
|
|
|
16,557
|
|
|
16,410
|
|
|
17,832
|
|
92.03%
|
|
3.90%
|
|
5.64%
|
Total Non-Agency MBS
|
|
$
|
783,902
|
|
$
|
760,555
|
|
$
|
956,837
|
|
79.49%
|
|
5.44%
|
|
5.49%
|
|
|
June 30, 2018
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Weighted Average
|
Mortgage Loan Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Contractual
Principal
|
|
Amortized
Cost
|
|
Coupon
|
|
Yield
|
Prime
|
|
$
|
39,026
|
|
$
|
37,697
|
|
$
|
47,076
|
|
80.08%
|
|
5.07%
|
|
5.88%
|
Alt-A
|
|
|
544,950
|
|
|
520,465
|
|
|
696,716
|
|
74.70%
|
|
5.64%
|
|
5.32%
|
Subprime
|
|
|
19,972
|
|
|
18,924
|
|
|
20,821
|
|
90.89%
|
|
4.25%
|
|
5.74%
|
Non-performing
|
|
|
130,063
|
|
|
130,040
|
|
|
130,199
|
|
99.88%
|
|
5.20%
|
|
5.44%
|
Agency Risk Transfer
|
|
|
45,956
|
|
|
43,489
|
|
|
49,050
|
|
88.66%
|
|
4.16%
|
|
5.85%
|
Paydowns receivable
|
|
|
28
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
-
|
Total Non-Agency MBS
|
|
$
|
779,995
|
|
$
|
750,615
|
|
$
|
943,862
|
|
79.53%
|
|
5.45%
|
|
5.41%
|
Residential Mortgage Loans
The following table summarizes the Company's residential mortgage loans
held-for-investment at September 30, 2018 and June 30, 2018 (in
thousands):
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
(unaudited)
|
Residential mortgage loans held-for-investment
|
|
$
|
562,484
|
|
$
|
585,020
|
Asset-backed securities issued by securitization trusts
|
|
|
553,118
|
|
|
575,653
|
Retained interest in loans held in securitization trust
|
|
$
|
9,366
|
|
$
|
9,367
|
Residential Real Estate
At September 30, 2018 and June 30, 2018, Anworth Properties Inc. owned
87 and 88, respectively, single-family residential rental properties
located in Southeastern Florida that were carried at a total cost, net
of accumulated depreciation, of $13.9 million and $14.0 million,
respectively. During the three months ended September 30, 2018, we sold
one of our residential properties for a gain of approximately $30
thousand.
MBS Portfolio Financing
|
|
September 30, 2018
|
|
|
Agency
MBS
|
|
Non-Agency
MBS
|
|
Total
MBS
|
|
|
(dollar amounts in thousands)
|
|
|
(unaudited)
|
Repurchase Agreements:
|
|
|
|
|
|
|
Outstanding repurchase agreement balance
|
|
$
|
3,465,000
|
|
|
$
|
548,820
|
|
|
$
|
4,013,820
|
|
Average interest rate
|
|
|
2.22
|
%
|
|
|
3.38
|
%
|
|
|
2.38
|
%
|
Average maturity
|
|
|
33 days
|
|
|
|
16 days
|
|
|
|
31 days
|
|
Average interest rate after adjusting for interest rate swaps
|
|
|
|
|
|
|
2.14
|
%
|
Average maturity after adjusting for interest rate swaps
|
|
|
|
|
|
|
1,167 days
|
|
|
|
June 30, 2018
|
|
|
Agency
MBS
|
|
Non-Agency
MBS
|
|
Total
MBS
|
|
|
(dollar amounts in thousands)
|
|
|
(unaudited)
|
Repurchase Agreements:
|
|
|
|
|
|
|
Outstanding repurchase agreement balance
|
|
$
|
3,475,000
|
|
|
$
|
543,480
|
|
|
$
|
4,018,480
|
|
Average interest rate
|
|
|
2.07
|
%
|
|
|
3.35
|
%
|
|
|
2.24
|
%
|
Average maturity
|
|
|
39 days
|
|
|
|
14 days
|
|
|
|
35 days
|
|
Average interest rate after adjusting for interest rate swaps
|
|
|
|
|
|
|
1.97
|
%
|
Average maturity after adjusting for interest rate swaps
|
|
|
|
|
|
|
1,122 days
|
|
Portfolio Leverage
At September 30, 2018, the Company's leverage multiple was 6.09x. The
leverage multiple is calculated by dividing the Company's repurchase
agreements 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 7.24x at September 30, 2018. At June 30, 2018, the
Company's leverage multiple was 5.92x and the effective leverage was
7.04x.
Interest Rate Swaps
At September 30, 2018 and June 30, 2018, the Company's interest rate
swap agreements ("Swaps") had the following notional amounts, weighted
average fixed rates, and remaining terms (dollar amounts in thousands):
|
|
September 30, 2018
|
|
June 30, 2018
|
Maturity
|
|
Notional
Amount
|
|
Weighted
Average
Fixed
Rate
|
|
Remaining
Term in
Months
|
|
Remaining
Term in
Years
|
|
Notional
Amount
|
|
Weighted
Average
Fixed
Rate
|
|
Remaining
Term in
Months
|
|
Remaining
Term in
Years
|
|
|
(unaudited)
|
Less than 12 months
|
|
$
|
625,000
|
|
1.57
|
%
|
|
7
|
|
0.6
|
|
$
|
250,000
|
|
1.55
|
%
|
|
5
|
|
0.4
|
1 year to 2 years
|
|
|
591,000
|
|
4.65
|
|
|
18
|
|
1.5
|
|
|
766,000
|
|
1.62
|
|
|
16
|
|
1.4
|
2 years to 3 years
|
|
|
550,000
|
|
1.83
|
|
|
30
|
|
2.5
|
|
|
550,000
|
|
1.78
|
|
|
28
|
|
2.4
|
3 years to 4 years
|
|
|
150,000
|
|
1.95
|
|
|
42
|
|
3.5
|
|
|
300,000
|
|
1.87
|
|
|
39
|
|
3.3
|
4 years to 5 years
|
|
|
325,000
|
|
2.11
|
|
|
56
|
|
4.7
|
|
|
170,000
|
|
1.83
|
|
|
52
|
|
4.3
|
5 years to 7 years
|
|
|
450,000
|
|
2.43
|
|
|
75
|
|
6.3
|
|
|
485,000
|
|
2.32
|
|
|
73
|
|
6.1
|
7 years to 10 years
|
|
|
640,000
|
|
2.76
|
|
|
104
|
|
8.7
|
|
|
625,000
|
|
2.63
|
|
|
105
|
|
8.8
|
|
|
$
|
3,331,000
|
|
2.04
|
%
|
|
47
|
|
3.9
|
|
$
|
3,146,000
|
|
1.99
|
%
|
|
48
|
|
4.0
|
Effective Net Interest Rate Spread
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
(unaudited)
|
|
(unaudited)
|
Average asset yield, including TBA dollar roll income
|
|
3.48
|
%
|
|
3.31
|
%
|
Effective cost of funds
|
|
2.34
|
|
|
2.19
|
|
Effective net interest rate spread
|
|
1.14
|
%
|
|
1.12
|
%
|
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 September 14, 2018, the Company declared a quarterly common stock
dividend of $0.14 per share for the third quarter ended September 30,
2018. Based upon the closing price of $4.63 on September 28, 2018, the
annualized dividend yield on the Company's common stock at September 30,
2018 was 12.1%.
Book Value per Common Share
At September 30, 2018, the Company's book value was $5.12 per share of
common stock, which was a decrease of $0.21 from the book value of $5.33
for the prior quarter.
The $0.14 quarterly dividend, less the decrease in book value of $0.21,
resulted in a negative return on book value per common share of (1.3)%
for the three months ended September 30, 2018.
Subsequent Events
Effective October 1, 2018, the conversion rate of our Series B Preferred
Stock increased from 5.1021 shares of our common stock to 5.1740 shares
of our common stock, based upon the common stock dividend of $0.14 that
was declared on September 14, 2018.
On October 29, 2018, we acquired an aggregate of approximately $13
million of Non-QM residential mortgage loans that are scheduled to close
on November 30, 2018.
Conference Call
The Company will host a conference call on Monday, November 5, 2018 at
1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss its third
quarter 2018 financial 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 November 5, 2018. 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 10125962. 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 DRP 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
Anworth is an externally-managed mortgage real estate investment trust.
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 of Directors 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 management
services 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 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)
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
Agency MBS at fair value (including $3,662,490 and $4,073,852
pledged to counterparties at September 30, 2018 and December 31,
2017, respectively)
|
|
$
|
3,824,969
|
|
|
$
|
4,278,797
|
|
Non-Agency MBS at fair value (including $695,540 and $661,445
pledged to counterparties at September 30, 2018 and December 31,
2017, respectively)
|
|
|
783,902
|
|
|
|
760,825
|
|
Residential mortgage loans held-for-investment(1)
|
|
|
562,484
|
|
|
|
639,351
|
|
Residential real estate
|
|
|
13,905
|
|
|
|
14,143
|
|
Cash and cash equivalents
|
|
|
6,896
|
|
|
|
12,273
|
|
Restricted cash
|
|
|
-
|
|
|
|
11,157
|
|
Interest and dividends receivable
|
|
|
17,530
|
|
|
|
18,091
|
|
Derivative instruments at fair value
|
|
|
81,030
|
|
|
|
27,793
|
|
Prepaid expenses and other
|
|
|
2,848
|
|
|
|
3,111
|
|
Total Assets
|
|
$
|
5,293,564
|
|
|
$
|
5,765,541
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accrued interest payable
|
|
$
|
16,267
|
|
|
$
|
15,835
|
|
Repurchase agreements
|
|
|
4,013,820
|
|
|
|
4,365,695
|
|
Asset-backed securities issued by securitization trusts(1)
|
|
|
553,118
|
|
|
|
629,984
|
|
Junior subordinated notes
|
|
|
37,380
|
|
|
|
37,380
|
|
Derivative instruments at fair value
|
|
|
1,558
|
|
|
|
1,335
|
|
Dividends payable on preferred stock
|
|
|
2,292
|
|
|
|
2,272
|
|
Dividends payable on common stock
|
|
|
13,773
|
|
|
|
14,721
|
|
Derivative counterparty margin
|
|
|
28,865
|
|
|
|
-
|
|
Accrued expenses and other
|
|
|
5,118
|
|
|
|
897
|
|
Total Liabilities
|
|
$
|
4,672,191
|
|
|
$
|
5,068,119
|
|
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 September 30, 2018 and December 31, 2017, 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
September 30, 2018 and December 31, 2017, 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 $49,725,
respectively); 2,010 and 1,989 shares issued and outstanding at
September 30, 2018 and December 31, 2017, respectively)
|
|
|
48,944
|
|
|
|
48,420
|
|
Common Stock: par value $0.01 per share; authorized 200,000
shares, 98,381 shares issued and outstanding at September 30, 2018
and 98,137 shares issued and outstanding at December 31, 2017,
respectively)
|
|
|
984
|
|
|
|
981
|
|
Additional paid-in capital
|
|
|
981,499
|
|
|
|
980,243
|
|
Accumulated other comprehensive income consisting of unrealized
gains and losses
|
|
|
(41,096
|
)
|
|
|
17,021
|
|
Accumulated deficit
|
|
|
(434,950
|
)
|
|
|
(415,235
|
)
|
Total Stockholders' Equity
|
|
$
|
601,918
|
|
|
$
|
677,967
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
5,293,564
|
|
|
$
|
5,765,541
|
|
____________________
|
(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 September 30, 2018 and December 31,
2017, total assets of the consolidated VIEs were $564 million and
$641 million, respectively (including accrued interest receivable of
$1.9 million and $2.1 million, respectively) (which is recorded
above in the line item entitled "Interest and dividends
receivable"), and total liabilities were $555 million and $632
million, respectively (including accrued interest payable of $1.8
million and $2.0 million, respectively) (which is recorded above in
the line item entitled "Accrued interest payable").
|
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands, except for per share amounts)
|
(unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
Interest and other income:
|
|
|
|
|
|
|
|
|
Interest-Agency MBS
|
|
$
|
23,578
|
|
|
$
|
19,892
|
|
|
$
|
72,449
|
|
|
$
|
52,765
|
|
Interest-Non-Agency MBS
|
|
|
10,377
|
|
|
|
9,352
|
|
|
|
30,287
|
|
|
|
28,659
|
|
Interest-residential mortgage loans
|
|
|
5,750
|
|
|
|
6,795
|
|
|
|
17,944
|
|
|
|
21,205
|
|
Other interest income
|
|
|
20
|
|
|
|
25
|
|
|
|
92
|
|
|
|
83
|
|
|
|
|
39,725
|
|
|
|
36,064
|
|
|
|
120,772
|
|
|
|
102,712
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Interest expense on repurchase agreements
|
|
|
24,027
|
|
|
|
15,242
|
|
|
|
65,149
|
|
|
|
37,073
|
|
Interest expense on asset-backed securities
|
|
|
5,581
|
|
|
|
6,626
|
|
|
|
17,449
|
|
|
|
20,593
|
|
Interest expense on junior subordinated notes
|
|
|
519
|
|
|
|
417
|
|
|
|
1,470
|
|
|
|
1,203
|
|
|
|
|
30,127
|
|
|
|
22,285
|
|
|
|
84,068
|
|
|
|
58,869
|
|
Net interest income
|
|
|
9,598
|
|
|
|
13,779
|
|
|
|
36,704
|
|
|
|
43,843
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Management fee to related party
|
|
|
(1,636
|
)
|
|
|
(1,936
|
)
|
|
|
(5,039
|
)
|
|
|
(5,634
|
)
|
Rental properties depreciation and expenses
|
|
|
(366
|
)
|
|
|
(340
|
)
|
|
|
(1,158
|
)
|
|
|
(1,013
|
)
|
General and administrative expenses
|
|
|
(1,197
|
)
|
|
|
(1,098
|
)
|
|
|
(3,631
|
)
|
|
|
(3,221
|
)
|
Total operating expenses
|
|
|
(3,199
|
)
|
|
|
(3,374
|
)
|
|
|
(9,828
|
)
|
|
|
(9,868
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
Income-rental properties
|
|
|
436
|
|
|
|
397
|
|
|
|
1,333
|
|
|
|
1,297
|
|
Realized net gain (loss) on sales of available-for-sale MBS
|
|
|
799
|
|
|
|
(2,276
|
)
|
|
|
(11,188
|
)
|
|
|
(2,168
|
)
|
Realized loss on sales of Agency MBS held as trading investments
|
|
|
(231
|
)
|
|
|
-
|
|
|
|
(7,558
|
)
|
|
|
-
|
|
Impairment charge on Non-Agency MBS
|
|
|
(141
|
)
|
|
|
(762
|
)
|
|
|
(1,898
|
)
|
|
|
(2,399
|
)
|
Unrealized (loss) gain on Agency MBS held as trading investments
|
|
|
(3,017
|
)
|
|
|
5,849
|
|
|
|
(14,584
|
)
|
|
|
10,071
|
|
Gain on sales of residential mortgage loans held-for-investment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
378
|
|
Gain on sale of residential properties
|
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
Gain (loss) on derivatives, net
|
|
|
13,090
|
|
|
|
(945
|
)
|
|
|
36,433
|
|
|
|
(2,989
|
)
|
Recovery on Non-Agency MBS
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Total other income
|
|
|
10,966
|
|
|
|
2,264
|
|
|
|
2,569
|
|
|
|
4,192
|
|
Net income
|
|
$
|
17,365
|
|
|
$
|
12,669
|
|
|
$
|
29,445
|
|
|
$
|
38,167
|
|
Dividends on preferred stock
|
|
|
(2,297
|
)
|
|
|
(2,115
|
)
|
|
|
(6,892
|
)
|
|
|
(5,895
|
)
|
Net income to common stockholders
|
|
$
|
15,068
|
|
|
$
|
10,554
|
|
|
$
|
22,553
|
|
|
$
|
32,272
|
|
Basic earnings per common share
|
|
$
|
0.15
|
|
|
$
|
0.11
|
|
|
$
|
0.23
|
|
|
$
|
0.34
|
|
Diluted earnings per common share
|
|
$
|
0.15
|
|
|
$
|
0.11
|
|
|
$
|
0.23
|
|
|
$
|
0.33
|
|
Basic weighted average number of shares outstanding
|
|
|
98,353
|
|
|
|
97,547
|
|
|
|
98,270
|
|
|
|
96,323
|
|
Diluted weighted average number of shares outstanding
|
|
|
102,331
|
|
|
|
100,702
|
|
|
|
102,199
|
|
|
|
99,998
|
|
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands, except for per share amounts)
|
(unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
Net income
|
|
$
|
17,365
|
|
|
$
|
12,669
|
|
|
$
|
29,445
|
|
|
$
|
38,167
|
|
Available-for-sale Agency MBS, fair value adjustment
|
|
|
(16,091
|
)
|
|
|
(6,352
|
)
|
|
|
(65,419
|
)
|
|
|
(8,763
|
)
|
Reclassification adjustment for (gain) loss on sales of Agency MBS
included in net income
|
|
|
(583
|
)
|
|
|
2,341
|
|
|
|
11,362
|
|
|
|
2,233
|
|
Available-for-sale Non-Agency MBS, fair value adjustment
|
|
|
(5,788
|
)
|
|
|
7,114
|
|
|
|
(6,679
|
)
|
|
|
25,447
|
|
Reclassification adjustment for gain on sales of Non-Agency MBS
included in net income
|
|
|
(217
|
)
|
|
|
(65
|
)
|
|
|
(175
|
)
|
|
|
(65
|
)
|
Amortization of unrealized gains on interest rate swaps remaining
in other comprehensive income
|
|
|
1,043
|
|
|
|
395
|
|
|
|
3,006
|
|
|
|
1,385
|
|
Reclassification adjustment for interest (income) expense on
interest rate swaps included in net income
|
|
|
-
|
|
|
|
183
|
|
|
|
(212
|
)
|
|
|
371
|
|
Other comprehensive (loss) income
|
|
|
(21,636
|
)
|
|
|
3,616
|
|
|
|
(58,117
|
)
|
|
|
20,608
|
|
Comprehensive (loss) income
|
|
$
|
(4,271
|
)
|
|
$
|
16,285
|
|
|
$
|
(28,672
|
)
|
|
$
|
58,775
|
|
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 income to common stockholders" for the three months ended September
30, 2018 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 the Company's total interest
and other income for the three months ended September 30, 2018 (which is
the nearest comparable GAAP measure) to the total interest income and
average asset yield, including TBA dollar roll income and paydown
expense on Agency MBS, 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 MBS";
-
the adjustment for an impairment charge on Non-Agency MBS is more
reflective of current core earnings, as this charge represents future
loss expectations;
-
the adjustment for depreciation expense on residential rental
properties is a non-cash item and is added back by other companies to
derive core earnings or 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 September 30,
2018. 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
|
|
|
September 30, 2018
|
|
|
Amount
|
|
Per Share
|
|
|
(in thousands)
|
|
|
|
|
(unaudited)
|
Net income to common stockholders
|
|
$
|
15,068
|
|
|
$
|
0.15
|
|
Adjustments to derive core earnings:
|
|
|
|
|
Gain on sales of MBS
|
|
|
(568
|
)
|
|
|
-
|
|
Unrealized loss on Agency MBS held as trading investments
|
|
|
3,017
|
|
|
|
0.03
|
|
Impairment charge on Non-Agency MBS(1)
|
|
|
141
|
|
|
|
-
|
|
Gain on interest rate swaps, net
|
|
|
(15,910
|
)
|
|
|
(0.16
|
)
|
Loss on derivatives-TBA Agency MBS, net
|
|
|
2,820
|
|
|
|
0.03
|
|
Net settlement on interest rate swaps after de-designation(2)
|
|
|
3,055
|
|
|
|
0.03
|
|
Dollar roll income on TBA Agency MBS(3)
|
|
|
2,436
|
|
|
|
0.02
|
|
Premium amortization on Agency MBS
|
|
|
7,489
|
|
|
|
0.08
|
|
Paydown expense(4)
|
|
|
(5,998
|
)
|
|
|
(0.06
|
)
|
Gain on sale of residential rental properties
|
|
|
(30
|
)
|
|
|
-
|
|
Depreciation expense on residential rental properties(5)
|
|
|
119
|
|
|
|
-
|
|
Core earnings
|
|
$
|
11,639
|
|
|
$
|
0.12
|
|
Basic weighted average number of shares outstanding
|
|
|
98,353
|
|
|
|
____________________
|
(1)
|
|
Impairment charge on Non-Agency MBS represents the amount applied
against current GAAP earnings when future loss expectations exceed
previously existing loss 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 settlements 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 "Gain 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 "Gain on
derivatives, net" that is shown on the Company's 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 three-month
period.
|
(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
|
|
|
September 30, 2018
|
|
|
(unaudited)
|
|
|
Amount
|
|
Annualized
Percentage
|
|
|
(in thousands)
|
|
|
Average Asset Yield, Including TBA Dollar Roll Income:
|
|
|
|
|
Total interest income
|
|
$
|
39,725
|
|
|
3.14%
|
Income-rental properties
|
|
|
436
|
|
|
0.03%
|
Dollar roll income on TBA Agency MBS(1)
|
|
|
2,436
|
|
|
0.19%
|
Premium amortization on Agency MBS
|
|
|
7,489
|
|
|
0.59%
|
Paydown expense on Agency MBS(2)
|
|
|
(5,998
|
)
|
|
-0.47%
|
Total interest and other income and average asset yield, including
TBA dollar roll income
|
|
$
|
44,088
|
|
|
3.48%
|
Effective Cost of Funds:
|
|
|
|
|
Total interest expense
|
|
$
|
30,127
|
|
|
2.60%
|
Periodic net settlement on interest rate Swaps after de-designation(3)
|
|
|
(3,055
|
)
|
|
-0.26%
|
Effective total interest expense and effective cost of funds
|
|
$
|
27,072
|
|
|
2.34%
|
Effective net interest rate spread
|
|
|
|
1.14%
|
Average earning assets
|
|
$
|
5,062,438
|
|
|
|
Average borrowings
|
|
$
|
4,641,228
|
|
|
|
____________________
|
(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 "Gain 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 three-month
period.
|
(3)
|
|
Net settlements 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 "Gain on interest rate swaps, net."
|
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