Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company”) today reported its financial results for the first quarter ended March 31, 2017.
Earnings
The following table summarizes the Company’s Core Earnings, GAAP net income to common stockholders and comprehensive income for the three months ended March 31, 2017 (dollar amounts in thousands):
| Three Months Ended March 31, 2017 | |||||||||
| (unaudited) | |||||||||
Earnings | Earnings | Per Weighted Share | |||||||
| Core Earnings | $ | 13,892 | $ | 0.15 | |||||
| GAAP net income to common stockholders | $ | 13,646 | $ | 0.14 | |||||
| Comprehensive income | $ | 27,932 | $ | 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” near the end of this earnings release. Comprehensive income is shown on the consolidated statements of comprehensive income included in this earnings release.
Portfolio
At March 31, 2017, the composition of the Company’s portfolio at fair value was as follows (dollar amounts in thousands):
March 31, 2017 | |||||||||
| Dollar Amount | Percentage | ||||||||
| Agency MBS: | |||||||||
| ARMS and hybrid ARMs | $ | 2,707,771 | 47.0 | % | |||||
| Fixed-rate Agency MBS | 963,009 | 16.7 | % | ||||||
| TBA Agency MBS | 615,631 | 10.7 | % | ||||||
| Total Agency MBS | $ | 4,286,411 | 74.4 | % | |||||
| Non-Agency MBS | 739,510 | 12.8 | % | ||||||
| Residential mortgage loans(1) | 723,777 | 12.6 | % | ||||||
| Residential real estate | 14,243 | 0.2 | % | ||||||
| Total Portfolio | $ | 5,763,941 | 100.0 | % | |||||
| Total Assets(2) | $ | 5,865,725 | |||||||
_____________
| (1) | Residential mortgage loans owned by 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. |
| (2) | Includes TBA Agency MBS. |
Agency MBS
At March 31, 2017, the allocation of the Company’s agency mortgage-backed securities, or Agency MBS, was approximately 64% adjustable-rate and hybrid adjustable-rate Agency MBS, 22% fixed-rate Agency MBS and 14% fixed-rate TBA Agency MBS as detailed below (dollar amounts in thousands):
| March 31, 2017 | ||||
| Fair value of Agency MBS and TBA Agency MBS | $ | 4,286,411 | ||
| Adjustable-rate Agency MBS coupon reset (less than 1 year) | 38 | % | ||
| Hybrid adjustable-rate Agency MBS coupon reset (1-2 years) | 2 | % | ||
| Hybrid adjustable-rate Agency MBS coupon reset (2-3 years) | 8 | % | ||
| Hybrid adjustable-rate Agency MBS coupon reset (3-4 years) | 6 | % | ||
| Hybrid adjustable-rate Agency MBS coupon reset (4-5 years) | 0 | % | ||
| Hybrid adjustable-rate Agency MBS coupon reset (5-7 years) | 10 | % | ||
| Total adjustable-rate Agency MBS | 64 | % | ||
| 15-year fixed-rate TBA Agency MBS | 14 | % | ||
| 15-year fixed-rate Agency MBS | 19 | % | ||
| 20-year and 30-year fixed-rate Agency MBS | 3 | % | ||
| Total MBS | 100 | % | ||
At March 31, 2017, the key metrics of the Company’s Agency MBS portfolio were as follows (dollar amounts in thousands):
| March 31, 2017 | |||
| Weighted Average Agency MBS Coupon: | |||
| Adjustable-rate Agency MBS | 3.11 | % | |
| Hybrid adjustable-rate Agency MBS | 2.44 | ||
| 15-year fixed-rate Agency MBS | 2.61 | ||
| 15-year fixed-rate TBA Agency MBS | 2.84 | ||
| 20-year and 30-year fixed-rate Agency MBS | 4.27 | ||
| Total Agency MBS: | 2.84 | % | |
| Average Amortized Cost: | |||
| Adjustable-rate Agency MBS | 103.08 | % | |
| Hybrid adjustable-rate Agency MBS | 102.80 | ||
| 15-year fixed-rate Agency MBS | 102.90 | ||
| 15-year fixed-rate TBA Agency MBS | 101.10 | ||
| 20-year and 30-year fixed-rate Agency MBS | 103.31 | ||
| Total Agency MBS: | 102.69 | % | |
| Average asset yield (weighted average coupon divided by average amortized cost) | 2.77 | % | |
| Unamortized premium | $104.6 million | ||
| Unamortized premium as a percentage of par value | 2.69 | % | |
| Premium amortization expense on Agency MBS for the first quarter 2017 | $8.4 million | ||
| March 31, 2017 | |||
| Constant prepayment rate (CPR) of Agency MBS | 19 | % | |
| Constant prepayment rate (CPR) of adjustable-rate and hybrid adjustable-rate Agency MBS | 22 | % | |
| Weighted average term to next interest rate reset on Agency MBS | 23 months | ||
Non-Agency MBS
Our Non-Agency MBS were either issued before 2008 or were recently issued and collateralized by currently non-performing residential mortgage loans that were originated before 2008. The following table summarizes the Company’s Non-Agency MBS at March 31, 2017 (dollar amounts in thousands):
| Weighted Average | ||||||||||||||||
Mortgage Loan Type | Fair Value | Current Principal | Amortized Cost | Coupon | Yield | |||||||||||
| Prime | $ | 47,802 | $ | 57,328 | 81.38 | % | 4.73 | % | 5.63 | % | ||||||
| Alt-A | 503,079 | 635,823 | 77.74 | % | 5.47 | % | 5.55 | % | ||||||||
| Subprime | 31,681 | 32,871 | 92.82 | % | 4.15 | % | 5.30 | % | ||||||||
| Non-performing | 148,643 | 150,257 | 99.04 | % | 4.72 | % | 5.62 | % | ||||||||
| Agency Risk Transfer | 8,305 | 11,000 | 72.37 | % | 3.75 | % | 6.36 | % | ||||||||
| Total Non-Agency MBS | $ | 739,510 | $ | 887,279 | 82.07 | % | 5.23 | % | 5.57 | % | ||||||
Residential Mortgage Loans
The following table summarizes the Company’s residential mortgage loans held-for-investment at March 31, 2017 (in thousands):
| Residential mortgage loans held-for-investment | $ | 723,777 | |
| Asset-backed securities issued by securitization trusts | $ | 714,409 | |
| Retained interest in loans held in securitization trust | $ | 9,368 | |
Residential Real Estate
At March 31, 2017, Anworth Properties, Inc. owned 88 single-family residential rental properties located in Southeastern Florida that are carried at a total cost, net of accumulated depreciation, of $14.2 million.
MBS Portfolio Financing and Leverage
| March 31, 2017 | ||||||||||||
| Agency MBS | Non-Agency MBS | Total MBS | ||||||||||
| (dollar amounts in thousands) | ||||||||||||
| Repurchase Agreements: | ||||||||||||
| Outstanding repurchase agreement balance | $ | 3,295,000 | $ | 470,317 | $ | 3,765,317 | ||||||
| Average interest rate | 0.94 | % | 2.45 | % | 1.13 | % | ||||||
| Average maturity | 40 days | 17 days | 37 days | |||||||||
| Average interest rate after adjusting for interest rate swaps | 1.34 | % | ||||||||||
| Average maturity after adjusting for interest rate swaps | 465 days | |||||||||||
At March 31, 2017, the Company’s leverage multiple was 5.3x. 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 6.2x at March 31, 2017.
Interest Rate Swaps and Eurodollar Futures Contracts
At March 31, 2017, the Company’s interest rate swap agreements (“Swaps”) had the following notional amounts (in thousands), weighted average fixed rates and remaining terms:
| March 31, 2017 | |||||||||||||
| Maturity | Notional Amount | Weighted Average Fixed Rate | Remaining Term in Months | Remaining Term in Years | |||||||||
| Less than 12 months | $ | 575,000 | 0.87 | % | 6 | 0.5 | |||||||
| 1 year to 2 years | 235,000 | 0.98 | 15 | 1.3 | |||||||||
| 2 years to 3 years | 150,000 | 1.29 | 31 | 2.6 | |||||||||
| 3 years to 4 years | 166,000 | 1.45 | 43 | 3.6 | |||||||||
| 4 years to 5 years | 125,000 | 2.44 | 54 | 4.5 | |||||||||
| 5 years to 7 years | 420,000 | 2.73 | 72 | 6.0 | |||||||||
| $ | 1,671,000 | 1.56 | % | 34 | 2.8 | ||||||||
At March 31, 2017, the Company’s short position in Eurodollar Futures Contracts had the following notional amount (in thousands) and weighted average purchase price:
| March 31, 2017 | |||||||
| Eurodollars Futures Contracts - Expiration | Notional Amount | Weighted Average Purchase Price | |||||
| Less than 12 months | $ | 550,000 | $ | 99.00 | |||
Effective Net Interest Rate Spread
| March 31, 2017 | |||
| Average asset yield, including TBA dollar roll income | 3.03 | % | |
| Effective cost of funds | 1.68 | ||
| Effective net interest rate spread | 1.35 | % | |
Certain components of the effective net interest rate spread are non-GAAP financial measures and are explained and reconciled to the nearest comparable GAAP financial measures in the section entitled “Non-GAAP Financial Measures” at the end of this earnings release.
Dividend
On March 15, 2017, the Company declared a quarterly common stock dividend of $0.15 per share for the first quarter ended March 31, 2017. Based upon the closing price of $5.55 on March 31, 2017, the annualized dividend yield on the Company’s common stock at March 31, 2017 was 10.8%.
Book Value Per Common Share
At March 31, 2017, the Company’s book value was $6.09 per share of common stock, which was an increase of $0.14 from $5.95 in the prior quarter.
The $0.15 quarterly dividend and the $0.14 increase in book value per share resulted in a return on equity to common stockholders of 4.9% for the quarter ended March 31, 2017.
Stock Transactions
During the quarter ended March 31, 2017, the Company issued an aggregate of 197,519 shares of its Series C Preferred Stock under its At Market Issuance Sales Agreements, which provided net proceeds to the Company of approximately $4.85 million.
Subsequent Events
From April 3, 2017 through May 1, 2017, the Company issued an aggregate of 142,083 shares of Series C Preferred Stock at a weighted average price of $24.74 per share, resulting in net proceeds to us of approximately $3.5 million.
Conference Call
The Company will host a conference call on Wednesday, May 3, 2017 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss its first quarter 2017 results. The dial-in number for the conference call is 877-504-2731 for U.S. callers (international callers should dial 412-902-6640 and Canadian callers should dial 855-669-9657). When dialing in, participants should ask to be connected to the Anworth Mortgage earnings call. Replays of the call will be available for a 7-day period commencing at 3:00 PM Eastern Time on May 3, 2017. 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 10106070. The conference call will also be webcast live over the Internet, which can be accessed on the Company’s website at http://www.anworth.com through the corresponding link located at the top of the home page.
Investors interested in participating in the Company’s Dividend Reinvestment and Stock Purchase Plan (the “DRP Plan”) or receiving a copy of the DRP Plan’s prospectus may do so by contacting the Plan Administrator, American Stock Transfer & Trust Company, at 877-248-6410. For more information about the Plan, interested investors may also visit the Plan Administrator’s website at http://www.amstock.com/investpower/new_dp.asp or the Company’s website at http://www.anworth.com.
About Anworth Mortgage Asset Corporation
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, or the Manager, pursuant a management agreement. The 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, including the consequences of actions by the U.S. government and other foreign governments to address the global financial crisis; implementation of or changes in government regulations affecting our business; our ability to maintain our qualification as a real estate investment trust for federal income tax purposes; our ability to maintain an exemption from the Investment Company Act of 1940, as amended; risks associated with our home rental business; and the Manager’s ability to manage our growth. Our Annual Report on Form 10-K and other SEC filings discuss the most significant risk factors that may affect our business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) | ||||||||
| March 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (audited) | ||||||||
| ASSETS | ||||||||
|
Agency MBS at fair value (including $3,508,865 and $3,707,062
pledged to counterparties
at March 31, 2017 and December 31, 2016, respectively) | $ | 3,670,780 | $ | 3,925,193 | ||||
|
Non-Agency MBS at fair value (including $613,001 and $525,169
pledged to counterparties
at March 31, 2017 and December 31, 2016, respectively) | 739,510 | 641,246 | ||||||
| Residential mortgage loans held-for-investment(1) | 723,777 | 744,462 | ||||||
| Residential real estate | 14,243 | 14,262 | ||||||
| Cash and cash equivalents | 52,040 | 31,031 | ||||||
| Restricted cash | 9,211 | 12,390 | ||||||
| Interest and dividends receivable | 16,125 | 16,203 | ||||||
| Derivative instruments at fair value | 13,075 | 8,192 | ||||||
| Receivables for MBS sold | 8,213 | - | ||||||
| Prepaid expenses and other | 3,120 | 2,797 | ||||||
| Total Assets | $ | 5,250,094 | $ | 5,395,776 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities: | ||||||||
| Accrued interest payable | $ | 10,120 | $ | 11,850 | ||||
| Repurchase agreements | 3,765,317 | 3,911,015 | ||||||
| Asset-backed securities issued by securitization trusts(1) | 714,409 | 728,683 | ||||||
| Junior subordinated notes | 37,380 | 37,380 | ||||||
| Derivative instruments at fair value | 18,793 | 34,302 | ||||||
| Dividends payable on preferred stock | 1,681 | 1,660 | ||||||
| Dividends payable on common stock | 14,337 | 14,358 | ||||||
| Payables for MBS purchased | 14,632 | - | ||||||
| Accrued expenses and other | 1,295 | 1,506 | ||||||
| Total Liabilities | $ | 4,577,964 | $ | 4,740,754 | ||||
|
Series B Cumulative Convertible Preferred Stock: par value $0.01 per
share; liquidating
preference $25.00 per share ($25,241 and $25,241, respectively); 1,010 and 1,010 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | $ | 23,924 | $ | 23,924 | ||||
| Stockholders' Equity: | ||||||||
|
Series A Cumulative Preferred Stock: par value $0.01 per share;
liquidating
preference $25.00 per share ($47,984 and $47,984, respectively); 1,919 and 1,919 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | $ | 46,537 | $ | 46,537 | ||||
|
Series C Cumulative Preferred Stock: par value $0.01 per share;
liquidating preference
$25.00 per share ($17,084 and $12,146, respectively); 683 and 486 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 16,175 | 11,321 | ||||||
|
Common Stock: par value $0.01 per share; authorized 200,000 shares,
95,582 shares
issued and outstanding at March 31, 2017 and 95,718 shares issued and outstanding at December 31, 2016, respectively | 956 | 957 | ||||||
| Additional paid-in capital | 967,056 | 966,714 | ||||||
| Accumulated other comprehensive income consisting of unrealized gains and losses | 21,179 | 8,648 | ||||||
| Accumulated deficit | (403,697 | ) | (403,079 | ) | ||||
| Total Stockholders' Equity | $ | 648,206 | $ | 631,098 | ||||
| Total Liabilities and Stockholders' Equity | $ | 5,250,094 | $ | 5,395,776 | ||||
_____________
| (1) | The consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations and liabilities of the VIEs for which creditors do not have recourse to the Company. At March 31, 2017 and December 31, 2016, total assets of the consolidated VIEs were $726 million and $747 million, respectively (including accrued interest receivable of $2.4 million and $2.5 million, respectively), and total liabilities were $717 million and $731 million, respectively (including accrued interest payable of $2.3 million and $2.4 million, respectively). |
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share amounts) (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| Interest and other income: | ||||||||
| Interest-Agency MBS | $ | 17,103 | $ | 20,765 | ||||
| Interest-Non-Agency MBS | 9,568 | 9,281 | ||||||
| Interest-residential mortgage loans | 7,351 | 9,313 | ||||||
| Other interest income | 26 | 12 | ||||||
| 34,048 | 39,371 | |||||||
| Interest Expense: | ||||||||
| Interest expense on repurchase agreements | 10,411 | 9,398 | ||||||
| Interest expense on asset-backed securities | 7,075 | 8,599 | ||||||
| Interest expense on junior subordinated notes | 384 | 346 | ||||||
| 17,870 | 18,343 | |||||||
| Net interest income | 16,178 | 21,028 | ||||||
| Operating Expenses: | ||||||||
| Management fee to related party | (1,821 | ) | (2,044 | ) | ||||
| General and administrative expenses | (1,484 | ) | (1,568 | ) | ||||
| Total operating expenses | (3,305 | ) | (3,612 | ) | ||||
| Other income (loss): | ||||||||
| Income-rental properties | 449 | 410 | ||||||
| Loss on sales of MBS | (68 | ) | (3,239 | ) | ||||
| Impairment charge on Non-Agency MBS | (732 | ) | - | |||||
| Unrealized gain on Agency MBS held as trading investments | 122 | - | ||||||
| Gain on sales of residential mortgage loans held-for-investment | 378 | - | ||||||
| Gain (loss) on derivatives, net | 2,378 | (34,843 | ) | |||||
| Recovery on Non-Agency MBS | 1 | 1 | ||||||
| Total other income (loss) | 2,528 | (37,671 | ) | |||||
| Net income (loss) | $ | 15,401 | $ | (20,255 | ) | |||
| Dividends on preferred stock | (1,755 | ) | (1,636 | ) | ||||
| Net income (loss) to common stockholders | $ | 13,646 | $ | (21,891 | ) | |||
| Basic earnings (loss) per common share | $ | 0.14 | $ | (0.22 | ) | |||
| Diluted earnings (loss) per common share | $ | 0.14 | $ | (0.22 | ) | |||
| Basic weighted average number of shares outstanding | 95,705 | 97,704 | ||||||
| Diluted weighted average number of shares outstanding | 100,544 | 97,704 | ||||||
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands, except for per share amounts) (unaudited) | |||||||
| Three Months Ended | |||||||
| March 31, | |||||||
| 2017 | 2016 | ||||||
| Net income (loss) | $ | 15,401 | $ | (20,255 | ) | ||
| Available-for-sale Agency MBS, fair value adjustment | 2,335 | 24,385 | |||||
|
Reclassification adjustment for loss on sales of Agency MBS
included in net income (loss) | 68 | 3,239 | |||||
| Available-for-sale Non-Agency MBS, fair value adjustment | 9,514 | (22,333 | ) | ||||
| Unrealized gains on swap agreements | 540 | 3,369 | |||||
|
Reclassification adjustment for interest expense on swap agreements
included in net income (loss) | 74 | 202 | |||||
| Other comprehensive income | 12,531 | 8,862 | |||||
| Comprehensive income (loss) | $ | 27,932 | $ | (11,393 | ) | ||
Non-GAAP Financial Measures
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 quarter ended March 31, 2017 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 quarter ended March 31, 2017 (which is the nearest comparable GAAP measure) to the total interest income and average asset yield, including TBA dollar roll income, and shows the annualized amounts as a percentage of the Company’s average earning assets and also reconciles the Company’s total interest expense (which is the nearest comparable GAAP measure) to the effective total interest expense and effective cost of funds and shows the annualized amounts as a percentage of the Company’s average borrowings.
The Company’s management believes that these non-GAAP financial measures are useful because they provide investors with greater transparency to the information that the Company uses in its financial and operational decision-making process. Management believes the inclusion of paydown expense on Agency MBS is more indicative of the current earnings potential of the Company’s investment portfolio, as it reflects the actual principal paydowns which occurred during the period. Paydown expense on Agency MBS is not dependent on future assumptions on prepayments or the cumulative effect from prior periods of any current changes to those assumptions, as is the case with the GAAP measure, “Premium amortization on Agency MBS.” Management also believes that the adjustment for an impairment charge on Non-Agency MBS is more reflective of current Core Earnings, as this charge represents future loss expectations. Management also believes the presentation of these measures, when analyzed in conjunction with the Company’s GAAP operating results, allows investors to more effectively evaluate and compare 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 quarter ended March 31, 2017. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
Core Earnings
| Three Months Ended March 31, 2017 | ||||||||
| Amount | Per Share | |||||||
| (in thousands) | ||||||||
| Net income to common stockholders | $ | 13,646 | $ | 0.14 | ||||
| Adjustments to derive core earnings: | ||||||||
| Loss on sales of Agency MBS | 68 | - | ||||||
| Impairment charge on Non-Agency MBS(1) | 732 | 0.01 | ||||||
| Unrealized gain on Agency MBS held as trading investments | (122 | ) | - | |||||
| Gain on sales of residential mortgage loans held-for-investment | (378 | ) | - | |||||
| (Gain) on interest rate swaps, net | (473 | ) | - | |||||
| Gain on derivatives-TBA Agency MBS, net | (1,629 | ) | (0.02 | ) | ||||
| Gain on derivatives-Eurodollar Futures Contracts | (276 | ) | - | |||||
| Recovery on Non-Agency MBS | (1 | ) | - | |||||
| Amortization of other comprehensive income on de-designated swaps(2) | 74 | - | ||||||
| Periodic net settlement on interest rate Swaps after de-designation(3) | (2,420 | ) | (0.03 | ) | ||||
| Gain from expiration of Eurodollar Futures Contracts | 396 | - | ||||||
| Dollar roll income on TBA Agency MBS(4) | 2,751 | 0.03 | ||||||
| Premium amortization on Agency MBS | 8,368 | 0.09 | ||||||
| Paydown expense(5) | (6,844 | ) | (0.07 | ) | ||||
| Core earnings | $ | 13,892 | $ | 0.15 | ||||
| Basic weighted average number of shares outstanding | 95,705 | |||||||
_____________
| (1) | Impairment charge on Non-Agency MBS represents the amount charged 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) | This amount represents the amortization of the balance remaining in “accumulated other comprehensive income” as a result of the Company’s discontinuation of hedge accounting in August 2014 and is recorded in its statements of operations as a portion of interest expense in accordance with GAAP. | |
| (3) | Periodic net settlements on interest rate swaps after de-designation include all subsequent net payments made on interest rate swaps which were de-designated as hedges in August 2014 and are recorded in “Gain on interest rate swaps, net.” | |
| (4) | 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 (loss) on derivatives, net” that is shown on the Company’s statements of operations. | |
| (5) | 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. |
Effective Net Interest Rate Spread
| Three Months Ended | |||||||
| March 31, 2017 | |||||||
Amount | Annualized Percentage | ||||||
| (in thousands) | |||||||
| Average Asset Yield, Including TBA Dollar Roll Income: | |||||||
| Total interest income | $ | 34,048 | 2.66 | % | |||
| Income-rental properties | 449 | 0.04 | % | ||||
| Dollar roll income on TBA Agency MBS(1) | 2,751 | 0.21 | % | ||||
| Premium amortization on Agency MBS | 8,368 | 0.65 | % | ||||
| Paydown expense on Agency MBS(2) | (6,844 | ) | -0.53 | % | |||
| Total interest and other income and average asset yield, including TBA dollar roll income | $ | 38,772 | 3.03 | % | |||
| Effective Cost of Funds: | |||||||
| Total interest expense | $ | 17,870 | 1.50 | % | |||
| Periodic net settlement on interest rate Swaps after de-designation(3) | 2,420 | 0.20 | % | ||||
| Amortization of other comprehensive income on de-designated Swaps(4) | 74 | 0.01 | % | ||||
| Gain on expiration of Eurodollar Futures Contracts | (396 | ) | -0.03 | % | |||
| Effective total interest expense and effective cost of funds | $ | 19,968 | 1.68 | % | |||
| Effective net interest rate spread | 1.35 | % | |||||
| Average earning assets | $ | 5,125,786 | |||||
| Average borrowings | $ | 4,767,026 | |||||
_____________
| (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 (loss) on derivatives, net” that is shown on the Company’s statements of operations. | |
| (2) | Paydown expense on Agency MBS represents the proportional expense of Agency MBS purchase premiums relative to the Agency MBS principal payments and prepayments which occurred during the quarter. | |
| (3) | Periodic net settlements on interest rate swaps after de-designation include all subsequent net payments made on interest rate swaps which were de-designated as hedges in August 2014 and are recorded in “Gain on interest rate swaps, net.” | |
| (4) | This amount represents the amortization of the balance remaining in “accumulated other comprehensive income” as a result of the Company’s discontinuation of hedge accounting in August 2014 and is recorded in its statements of operations as a portion of interest expense in accordance with GAAP. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170502006556/en/
Contacts:
John T. Hillman
1299 Ocean
Avenue, Second Floor
Santa Monica, CA 90401
(310) 255-4438 or
(310) 255-4493
jhillman@anworth.com
http://www.anworth.com
