Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company” or
“Anworth”) today reported its financial results for the third
quarter ended September 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 September 30, 2020:
Three Months Ended
September 30, 2020
(unaudited)
Per
Weighted
Earnings
Share
(in thousands)
Core earnings
$
3,606
$
0.04
GAAP net income to common stockholders
$
19,572
$
0.20
Comprehensive income
$
26,221
$
0.26
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 September 30, 2020 and June 30, 2020, the composition of our
portfolio at fair value was as follows:
September 30, 2020
June 30, 2020
Dollar Amount
Percentage
Dollar Amount
Percentage
(in thousands)
(unaudited)
Agency MBS:
ARMS and hybrid ARMs
$
575,163
19.2
%
$
652,321
23.4
%
Fixed-rate Agency MBS
1,034,598
34.6
1,175,456
42.1
TBA Agency MBS
727,472
24.3
259,502
9.3
Total Agency MBS
$
2,337,233
78.1
%
$
2,087,279
74.8
%
Non-Agency MBS
$
198,586
6.7
%
$
192,032
6.9
%
Residential mortgage loans
held-for-investment through consolidated securitization
trusts(1)
317,887
10.6
367,539
13.2
Residential mortgage loans
held-for-securitization
123,247
4.2
131,110
4.7
Residential real estate
12,827
0.4
13,051
0.4
Total Portfolio
$
2,989,780
100.0
%
$
2,791,011
100.0
%
Total Assets(2)
$
3,164,635
$
2,972,790
______________________
(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 September 30, 2020, the allocation of our agency
mortgage-backed securities (“Agency MBS”) was approximately 25%
adjustable-rate and hybrid adjustable-rate Agency MBS, 44%
fixed-rate Agency MBS, and 31% fixed-rate TBA Agency MBS. At June
30, 2020, the allocation of our 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, both
periods of which are detailed in the table below:
September 30,
June 30,
2020
2020
(dollar amounts in
thousands)
(unaudited)
Fair value of Agency MBS and TBA Agency
MBS
$
2,337,233
$
2,087,279
Adjustable-rate Agency MBS coupon reset
(less than 1 year)
16
%
20
%
Hybrid adjustable-rate Agency MBS coupon
reset (1-3 years)
6
6
Hybrid adjustable-rate Agency MBS coupon
reset (3-5 years)
—
1
Hybrid adjustable-rate Agency MBS coupon
reset (greater than 5 years)
3
4
Total adjustable-rate Agency MBS
25
%
31
%
15-year fixed-rate Agency MBS
2
2
20-year fixed-rate Agency MBS
7
9
30-year fixed-rate Agency MBS
35
46
30-year fixed-rate TBA Agency MBS
31
12
Total MBS
100
%
100
%
At September 30, 2020 and June 30, 2020, the summary statistics
of our Agency MBS and TBA Agency MBS were as follows:
September 30, 2020
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
3.16
%
$
102.02
$
104.06
Hybrid adjustable-rate Agency MBS
2.74
101.51
104.19
15-year fixed-rate Agency MBS
3.50
101.51
106.10
20-year fixed-rate Agency MBS
3.56
103.35
108.84
30-year fixed-rate Agency MBS
4.00
102.23
108.02
Total Agency MBS:
3.58
%
$
102.18
$
106.98
Average asset yield (weighted average
coupon divided by average amortized cost)
3.51
%
Unamortized premium
$
32.8
million
Unamortized premium as a percentage of par
value
2.18
%
Premium amortization expense on Agency MBS
for the respective quarter
$
9.1
million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
2.18
%
$
103.69
$
103.92
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
At September 30, 2020 and June 30, 2020, the constant prepayment
rate (“CPR”) and weighted average term to next interest rate reset
of our Agency MBS were as follows:
September 30,
June 30,
2020
2020
(unaudited)
Constant prepayment rate (CPR) of Agency
MBS
39
%
33
%
Constant prepayment rate (CPR) of
adjustable-rate and hybrid adjustable-rate Agency MBS
37
%
28
%
Weighted average term to next interest
rate reset on Agency MBS
21
months
23
months
The following tables summarize our fixed-rate Agency MBS at
September 30, 2020 and June 30, 2020:
September 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:
3.50%
$
127,722
$
102.59
$
107.92
3.50
%
26.5
4.00%
616,741
102.13
107.75
4.00
27.9
≥4.5%
82,968
102.41
110.27
4.82
25.7
$
827,431
$
102.23
$
108.02
4.00
%
27.5
15-Year to 20-Year Fixed-Rate Agency
MBS
207,167
103.00
108.33
3.55
15.8
Total Fixed-Rate Agency MBS
$
1,034,598
$
102.38
$
108.08
3.91
%
25.1
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:
3.50%
$
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
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 September
30, 2020 and June 30, 2020:
September 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)
$
104,180
$
165,885
5.23
%
$
62.80
Non-performing
1,000
1,000
5.00
100.00
Credit Risk Transfer
93,406
96,236
4.11
97.06
Total Non-Agency MBS
$
198,586
$
263,121
4.82
%
$
75.47
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
Residential Mortgage Loans Held-for-Investment
The following table summarizes our residential mortgage loans
held-for-investment at September 30, 2020 and June 30, 2020:
September 30,
June 30,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-investment through consolidated securitization trusts
$
317,887
$
367,539
Asset-backed securities issued by
securitization trusts
309,173
358,884
Retained interest in loans held in
securitization trusts
$
8,714
$
8,655
Residential Mortgage Loans Held-for-Securitization
The following table summarizes our residential mortgage loans
held-for-securitization at September 30, 2020 and June 30,
2020:
September 30,
June 30,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-securitization
$
123,247
$
131,110
Amount outstanding on warehouse line of
credit
$
101,722
$
104,620
At September 30, 2020 and June 30, 2020, our estimated fair
value (in thousands) of the residential mortgage loans
held-for-securitization was $121,639 and $122,364,
respectively.
At September 30, 2020, approximately $1.5 million of the unpaid
principal balance (“UPB”) on this loan portfolio was 30-days
delinquent; approximately $6.4 million of the UPB was 60 days
delinquent; and approximately $8.6 million of the UPB was 90 days+
delinquent. Of these amounts, the percentages that are COVID-19
related are as follows: 30-day delinquent: 84%; 60-day delinquent:
72%; and 90 days+ delinquent: 93%. 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 September 30, 2020 and June 30, 2020, Anworth Properties Inc.
owned 82 and 83 single-family residential rental properties,
respectively, located in Southeastern Florida that were carried at
a total cost, net of accumulated depreciation, of $12.8 million and
$13.1 million, respectively. During the three months ended
September 30, 2020, we sold one property for a gain of
approximately $78 thousand.
MBS Portfolio Financing
September 30, 2020
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
1,365,000
$
99,593
$
1,464,593
Average interest rate
0.22
%
2.10
%
0.35
%
Average maturity
25
days
43
days
26
days
Average interest rate after adjusting for
interest rate swaps
1.44
%
Average maturity after adjusting for
interest rate swaps
1,091
days
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
Portfolio Leverage
At September 30, 2020, our leverage multiple was 3.4x. 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 5.0x at September 30, 2020. At June 30,
2020, our leverage multiple was 4.1x and the effective leverage was
4.7x.
Interest Rate Swaps
At September 30, 2020 and June 30, 2020, our interest rate swap
agreements (“swaps”) had the following notional amounts, weighted
average fixed rates, and remaining terms:
September 30, 2020
(unaudited)
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount
Rate
Months
Years
(in thousands)
Less than 12 months
$
50,000
1.86
%
1
0.1
1 year to 2 years
—
—
—
—
2 years to 3 years
—
—
—
—
3 years to 4 years
50,000
1.55
37
3.1
4 years to 5 years
250,000
1.84
60
5.0
5 years to 7 years
365,000
2.75
86
7.2
7 years to 10 years
50,000
3.22
99
8.3
$
765,000
2.34
%
70
5.8
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
Effective Net Interest Rate Spread
September 30,
June 30,
2020
2020
(unaudited)
Average asset yield, including TBA dollar
roll income
3.33
%
3.05
%
Effective cost of funds
2.04
2.09
Effective net interest rate spread
1.29
%
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 September 30, 2020, our book value was $3.04 per share of
common stock, which was an increase of $0.19 from $2.85 at June 30,
2020. The common stock dividend of $0.05 per share for the third
quarter ended September 30, 2020, plus the $0.19 increase in book
value, resulted in a return on book value per common share of 8.4%
for the three months ended September 30, 2020. The return on book
value per common share for the nine months ended September 30, 2020
was a negative (30.4)%.
Dividend
On September 16, 2020, we declared a quarterly common stock
dividend of $0.05 per share for the third quarter ended September
30, 2020. Based upon the closing price of $1.64 on September 30,
2020, the annualized dividend yield on our common stock at
September 30, 2020 was 12.2%.
Conference Call
The Company will host a conference call on Wednesday, November
4, 2020 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss
our third quarter results. The dial-in number for the conference
call is (833) 312-1359 for U.S. callers and international callers
should dial (236) 712-2459. Replays of the call will be available
for a 7-day period commencing at 4:00 PM Eastern Time on November
4, 2020. The dial-in number for the replay is (800) 585-8367 for
U.S. callers; international callers should dial (416) 621-4642; and
the conference number is 2199412. 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)
September 30,
December 31,
2020
2019
(audited)
ASSETS
Available-for-sale Agency MBS at fair
value (including $1,440,188 and $2,764,330 pledged to
counterparties at September 30, 2020 and December 31, 2019,
respectively); amortized cost of $1,537,549 and $2,799,448 at
September 30, 2020 and December 31, 2019, respectively, net of
allowance for credit losses of $0 and $0 at September 30, 2020 and
December 31, 2019, respectively
$
1,609,761
$
2,853,131
Trading Agency MBS at fair value
(including $0 and $655,045 pledged to counterparties at September
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
September 30, 2020 and December 31, 2019, respectively); amortized
cost of $0 and $613,576 at September 30, 2020 and December 31,
2019, respectively, net of allowance for credit losses of $0 and $0
at September 30, 2020 and December 31, 2019, respectively
—
643,610
Trading Non-Agency MBS at fair value
(including $161,184 and $0 pledged to counterparties at September
30, 2020 and December 31, 2019, respectively
198,586
—
Residential mortgage loans
held-for-securitization, net of allowance for credit losses of $56
and $0 at September 30, 2020 and December 31, 2019,
respectively
123,247
152,922
Residential mortgage loans
held-for-investment through consolidated securitization trusts, net
of allowances for credit losses of $147 and $175 at September 30,
2020 and December 31, 2019, respectively(1)
317,887
458,348
Residential real estate
12,827
13,499
Cash and cash equivalents
37,730
8,236
Reverse repurchase agreements
—
15,000
Restricted cash
123,991
104,699
Interest receivable
6,995
16,398
Derivative instruments at fair value
1,609
5,833
Right to use asset-operating lease
852
1,256
Prepaid expenses and other assets
5,287
8,779
Total Assets
$
2,438,772
$
4,938,631
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accrued interest payable
$
5,227
$
16,757
Repurchase agreements
1,464,593
3,657,873
Warehouse line of credit
101,722
133,811
Asset-backed securities issued by
securitization trusts(1)
309,173
448,987
Junior subordinated notes
37,380
37,380
Derivative instruments at fair value
88,723
52,197
Derivative counterparty margin
1,330
367
Dividends payable on preferred stock
2,297
2,297
Dividends payable on common stock
4,957
8,897
Payable for purchased loans
—
5,545
Accrued expenses and other liabilities
3,129
1,312
Long-term lease obligation
852
1,256
Total Liabilities
$
2,019,383
$
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 September 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 September 30, 2020 and December 31, 2019,
respectively)
48,626
48,626
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 99,140 and 98,849 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively)
991
988
Additional paid-in capital
984,006
983,401
Accumulated other comprehensive income
consisting of unrealized gains and losses
61,704
65,984
Accumulated deficit
(741,930
)
(593,039
)
Total Stockholders' Equity
$
399,934
$
552,497
Total Liabilities and Stockholders'
Equity
$
2,438,772
$
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 September 30, 2020 and December
31, 2019, total assets of the consolidated VIEs were $319 million
and $460 million (including accrued interest receivable of $1.1
million and $1.5 million), respectively (which are recorded above
in the line item, “Interest receivable”), and total liabilities
were $310 million and $450 million (including accrued interest
payable of $1.0 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
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
(unaudited)
Interest and other income:
Interest-Agency MBS
$
5,099
$
20,335
$
38,822
$
70,183
Interest-Non-Agency MBS
2,518
9,299
13,233
29,423
Interest-securitized residential mortgage
loans
3,408
5,049
11,747
15,676
Interest-residential mortgage loans
held-for-securitization
1,617
1,574
4,840
2,695
Other interest income
10
679
183
1,343
12,652
36,936
68,825
119,320
Interest expense:
Interest expense on repurchase
agreements
1,478
21,132
23,633
74,248
Interest expense on asset-backed
securities
3,258
4,880
11,265
15,172
Interest expense on warehouse line of
credit
1,039
1,381
3,430
2,671
Interest expense on junior subordinated
notes
332
520
1,213
1,608
6,107
27,913
39,541
93,699
Net interest income
6,545
9,023
29,284
25,621
Provision for credit losses on loans
—
—
(620
)
—
Net interest income after provision for
credit losses
6,545
9,023
28,664
25,621
Operating expenses:
Management fee to related party
(1,356
)
(1,647
)
(4,254
)
(5,085
)
Rental properties depreciation and
expenses
(381
)
(423
)
(1,204
)
(1,146
)
General and administrative expenses
(1,098
)
(1,188
)
(3,441
)
(3,813
)
Total operating expenses
(2,835
)
(3,258
)
(8,899
)
(10,044
)
Other income (loss):
Income-rental properties
416
469
1,256
1,359
Realized net gain (loss) on sales of
available-for-sale Agency MBS
—
214
15,805
(5,488
)
Net gain on Agency MBS held as trading
investments
—
1,939
2,840
10,706
Impairment charge on available-for-sale
Non-Agency MBS
—
(1,145
)
(1,751
)
Net gain (loss) on Non-Agency MBS held as
trading investments
13,679
—
(20,617
)
—
Realized net (loss) on sales of
available-for-sale Non-Agency MBS
—
—
(55,390
)
—
Gain on sale of residential properties
78
—
201
—
Gain (loss) on derivatives, net
3,986
(24,734
)
(90,972
)
(105,565
)
Total other income (loss)
18,159
(23,257
)
(146,877
)
(100,739
)
Net income (loss)
$
21,869
$
(17,492
)
$
(127,112
)
$
(85,162
)
Dividends on preferred stock
(2,297
)
(2,297
)
(6,892
)
(6,892
)
Net income (loss) to common
stockholders
$
19,572
$
(19,789
)
$
(134,004
)
$
(92,054
)
Basic income (loss) per common share
$
0.20
$
(0.20
)
$
(1.35
)
$
(0.93
)
Diluted income (loss) per common share
$
0.19
$
(0.20
)
$
(1.35
)
$
(0.93
)
Basic weighted average number of shares
outstanding
99,108
98,739
98,995
98,638
Diluted weighted average number of shares
outstanding
103,788
98,739
98,995
98,638
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,
2020
2019
2020
2019
Net income (loss)
$
21,869
$
(17,492
)
$
(127,112
)
$
(85,162
)
Available-for-sale Agency MBS, fair value
adjustment
3,492
11,242
38,846
65,195
Reclassification adjustment for (gain)
loss on sales of Agency MBS included in net income (loss)
—
(445
)
(15,805
)
5,258
Available-for-sale Non-Agency MBS, fair
value adjustment
—
6,337
—
24,095
Reclassification adjustment due to
transfer from available-for-sale to trading for Non-Agency MBS
—
—
(85,424
)
—
Reclassification adjustment for loss on
sales of Non-Agency MBS included in net income
—
231
55,390
209
Amortization of unrealized gains on
interest rate swaps remaining in other comprehensive income
860
971
2,713
2,985
Other comprehensive income (loss)
4,352
18,336
(4,280
)
97,742
Comprehensive income (loss)
$
26,221
$
844
$
(131,392
)
$
12,580
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 September 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 September 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 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
September 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
September 30, 2020
(unaudited)
Amount
Per Share
(in thousands)
Net income to common stockholders
$
19,572
$
0.20
Adjustments to derive core earnings:
Net (gain) on Non-Agency MBS held as
trading securities(1)
(13,679
)
(0.14
)
Loss on interest rate swaps, net
341
—
(Gain) on derivatives-TBA Agency MBS,
net
(4,327
)
(0.04
)
(Gain) on sales of residential
properties
(78
)
—
Net settlement on interest rate swaps
after de-designation(2)
(4,076
)
(0.04
)
Dollar roll income on TBA Agency
MBS(3)
2,586
0.03
Premium amortization on MBS
9,075
0.09
Paydown expense(4)
(5,926
)
(0.06
)
Depreciation expense on residential rental
properties(5)
118
—
Core earnings
$
3,606
$
0.04
Basic weighted average number of shares
outstanding
99,108
___________________________
(1)
At March 31, 2020, we designated our Non-Agency MBS as trading
securities. The unrealized gain, 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 “Gain 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
September 30, 2020
(unaudited)
Annualized
Amount
Percentage
(in thousands)
Average Asset Yield, Including TBA Dollar
Roll Income:
Total interest income
$
12,652
2.24
%
Income-rental properties
416
0.07
Dollar roll income on TBA Agency
MBS(1)
2,586
0.46
Premium amortization on Agency MBS
9,075
1.61
Paydown expense on Agency MBS(2)
(5,926
)
(1.05
)
Total interest and other income and
average asset yield, including TBA dollar roll income
$
18,803
3.33
%
Effective Cost of Funds:
Total interest expense
$
6,107
1.22
%
Net settlement on interest rate Swaps
after de-designation(3)
4,076
0.82
Effective total interest expense and
effective cost of funds
$
10,183
2.04
%
Effective net interest rate spread
1.29
%
Average earning assets
$
2,260,253
Average borrowings
$
2,001,591
_____________________________
(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 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 “Gain on derivatives, net” on our
consolidated statements of operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005651/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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