Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company”)
today reported its financial results for the third quarter ended
September 30, 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 September 30, 2017 (dollar amounts in
thousands):
Three Months Ended September 30, 2017
(unaudited) Per Weighted
Earnings Earnings Share Core Earnings $ 11,917
$ 0.12 GAAP net income to common stockholders $ 10,554 $ 0.11
Comprehensive income $ 16,285 $ 0.17
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 the consolidated statements of comprehensive
income included in this earnings release.
Portfolio
At September 30, 2017, the composition of the Company’s
portfolio at fair value was as follows (dollar amounts in
thousands):
September 30, 2017 December 31,
2016 Dollar Amount Percentage Dollar
Amount Percentage Agency MBS: ARMS and hybrid
ARMs $ 2,291,063 35.5 % $ 2,926,204 49.4 % Fixed-rate Agency MBS
1,989,471 30.8 % 998,989 16.8 % TBA Agency MBS 761,333 11.8
% 606,008 10.2 % Total Agency MBS $ 5,041,867 78.1 % $
4,531,201 76.4 % Non-Agency MBS 728,075 11.3 % 641,246 10.8 %
Residential mortgage loans(1) 667,880 10.4 % 744,462 12.6 %
Residential real estate 14,185 0.2 % 14,262 0.2 %
Total Portfolio $ 6,452,007 100.0 % $ 5,931,171 100.0 % Total
Assets(2) $ 6,545,120 $ 6,001,784
_____________
(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 September 30, 2017, the allocation of the Company’s agency
mortgage-backed securities, or Agency MBS, was approximately 46%
adjustable-rate and hybrid adjustable-rate Agency MBS, 39%
fixed-rate Agency MBS, and 15% fixed-rate TBA Agency MBS as
detailed below (dollar amounts in thousands):
September 30, 2017 Fair value of Agency MBS
and TBA Agency MBS $ 5,041,867 Adjustable-rate Agency MBS
coupon reset (less than 1 year) 26 % Hybrid adjustable-rate Agency
MBS coupon reset (1-2 years) 2 % Hybrid adjustable-rate Agency MBS
coupon reset (2-3 years) 6 % Hybrid adjustable-rate Agency MBS
coupon reset (3-4 years) 1 % Hybrid adjustable-rate Agency MBS
coupon reset (4-5 years) 2 % Hybrid adjustable-rate Agency MBS
coupon reset (5-7 years) 6 % Hybrid adjustable-rate Agency MBS
coupon reset (Greater than 7 years) 3 % Total
adjustable-rate Agency MBS 46 % 15-year fixed-rate TBA
Agency MBS 15 % 15-year fixed-rate Agency MBS 26 % 20-year and
30-year fixed-rate Agency MBS 13 % Total MBS 100 %
At September 30, 2017, the key metrics of the Company’s Agency
MBS portfolio were as follows:
September 30, 2017 Weighted Average Agency MBS
Coupon: Adjustable-rate Agency MBS 3.40 % Hybrid adjustable-rate
Agency MBS 2.45 15-year fixed-rate Agency MBS 2.79 15-year
fixed-rate TBA Agency MBS 2.75 20-year and 30-year fixed-rate
Agency MBS 3.54 Total Agency MBS: 2.99 % Average Amortized
Cost: Adjustable-rate Agency MBS 102.89 % Hybrid adjustable-rate
Agency MBS 102.70 15-year fixed-rate Agency MBS 102.44 15-year
fixed-rate TBA Agency MBS 101.86 20-year and 30-year fixed-rate
Agency MBS 103.70 Total Agency MBS: 102.69 % Average asset
yield (weighted average coupon divided by average amortized cost)
2.91 % Unamortized premium $117.2 million Unamortized premium as a
percentage of par value 2.69 % Premium amortization expense on
Agency MBS for the third quarter 2017 $8.9 million
September 30, 2017 Constant prepayment rate (CPR) of
Agency MBS 20 % Constant prepayment rate (CPR) of adjustable-rate
and hybrid adjustable-rate Agency MBS 20 % Weighted average term to
next interest rate reset on Agency MBS 26 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
September 30, 2017 (dollar amounts in thousands):
Weighted Average Fair
Current Amortized Mortgage Loan
Type Value Principal Cost
Coupon Yield Prime $ 44,566 $ 52,816 81.31 % 4.81 %
5.79 % Alt-A 565,927 712,949 76.41 % 5.56 % 5.40 % Subprime 21,842
22,066 90.02 % 3.90 % 5.47 % Non-performing 75,026 75,197 98.96 %
4.92 % 5.72 % Agency Risk Transfer 20,714 23,750
80.86 % 3.88 % 6.19 % Total Non-Agency MBS $ 728,075 $ 886,778
79.07 % 5.38 % 5.48 %
Residential Mortgage Loans
The following table summarizes the Company’s residential
mortgage loans held-for-investment at September 30, 2017 (in
thousands):
Residential mortgage loans held-for-investment $ 667,880
Asset-backed securities issued by securitization trusts
658,513 Retained interest in loans held in securitization trust $
9,367
Residential Real Estate
At September 30, 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
September 30, 2017 Agency
Non-Agency Total MBS MBS
MBS (dollar amounts in thousands) Repurchase
Agreements: Outstanding repurchase agreement balance $ 3,865,000 $
477,848 $ 4,342,848 Average interest rate 1.32 % 2.68 % 1.47 %
Average maturity 31 days 13 days 29 days Average interest rate
after adjusting for interest rate swaps 1.57 % Average maturity
after adjusting for interest rate swaps 603 days
At September 30, 2017, the Company’s leverage multiple was
5.89x. 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 6.92x at
September 30, 2017.
Interest Rate Swaps and Eurodollar Futures Contracts
At September 30, 2017, the Company’s interest rate swap
agreements (“Swaps”) had the following notional amounts (in
thousands), weighted average fixed rates, and remaining terms:
September 30, 2017 Weighted
Average Remaining Remaining
Notional Fixed Term in Term in
Maturity Amount Rate Months
Years Less than 12 months $ 435,000 0.90 % 4 0.3 1
year to 2 years 475,000 1.46 21 1.7 2 years to 3 years 466,000 1.54
31 2.6 3 years to 4 years 350,000 1.64 43 3.6 4 years to 5 years
75,000 1.72 56 4.7 5 years to 7 years 305,000 1.90 73 6.0 7 years
to 10 years 175,000 2.07 105 8.8 $ 2,281,000 1.51 % 38 3.1
At September 30, 2017, the Company did not have any Eurodollar
Futures Contracts.
Effective Net Interest Rate Spread
September 30, 2017 Average asset yield,
including TBA dollar roll income 3.10 % Effective cost of funds
1.96 Effective net interest rate spread 1.14 %
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 September 15, 2017, the Company declared a quarterly common
stock dividend of $0.15 per share for the third quarter ended
September 30, 2017. Based upon the closing price of $6.01 on
September 30, 2017, the annualized dividend yield on the Company’s
common stock at September 30, 2017 was 9.98%.
Book Value per Common Share
At September 30, 2017, the Company’s book value was $6.04 per
share of common stock, which was unchanged from the prior
quarter.
The $0.15 quarterly dividend plus the no change in book value
per common share from the prior quarter resulted in a return on
equity to common stockholders of 2.48% for the quarter ended
September 30, 2017.
Stock Transactions
During the quarter ended September 30, 2017, the Company issued
an aggregate of 22,700 shares of its Series B Preferred Stock under
its At Market Issuance Sales Agreement, which provided net proceeds
to the Company of approximately $669 thousand. During the quarter
ended September 30, 2017, the Company issued an aggregate of
223,632 shares of its Series C Preferred Stock under its At Market
Issuance Sales Agreement, which provided net proceeds to the
Company of approximately $5.6 million.
Subsequent Events
From October 2, 2017 through November 1, 2017, the Company
issued an aggregate of 154,300 shares of its Series B Preferred
Stock at a weighted average price of $29.75 per share, resulting in
net proceeds to the Company of approximately $4.54 million. From
October 2, 2017 through November 1, 2017, the Company issued an
aggregate of 148,665 shares of its Series C Preferred Stock at a
weighted average price of $25.09 per share, resulting in net
proceeds to the Company of approximately $3.69 million.
From October 2, 2017 through November 1, 2017, there were three
transactions to convert an aggregate of 20,387 shares of Series B
Preferred Stock into an aggregate of 100,249 shares of common stock
at the then-current conversion rate of 4.9174.
Conference Call
The Company will host a conference call on Friday, November 3,
2017 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss its
third 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
November 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 10113945. 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)
September 30, December 31,
2017 2016 (audited) ASSETS
Agency MBS at fair value (including
$4,055,409 and $3,707,062 pledged to counterparties at September
30, 2017 and December 31, 2016, respectively)
$ 4,280,534 $ 3,925,193
Non-Agency MBS at fair value (including
$618,259 and $525,169 pledged to counterparties at September 30,
2017 and December 31, 2016, respectively)
728,075 641,246 Residential mortgage loans held-for-investment(1)
667,880 744,462 Residential real estate 14,185 14,262 Cash and cash
equivalents 6,756 31,031 Restricted cash 22,884 12,390 Interest and
dividends receivable 18,007 16,203 Derivative instruments at fair
value 13,377 8,192 Receivables for MBS sold 25,727 - Prepaid
expenses and other 6,362 2,797 Total
Assets $ 5,783,787 $ 5,395,776
LIABILITIES AND
STOCKHOLDERS' EQUITY Liabilities: Accrued interest payable $
12,690 $ 11,850 Repurchase agreements 4,342,848 3,911,015
Asset-backed securities issued by securitization trusts(1) 658,513
728,683 Junior subordinated notes 37,380 37,380 Derivative
instruments at fair value 3,007 34,302 Dividends payable on
preferred stock 2,115 1,660 Dividends payable on common stock
14,677 14,358 Payables for MBS purchased 9,124 - Accrued expenses
and other 3,265 1,506 Total Liabilities
$ 5,083,619 $ 4,740,754
Series B Cumulative Convertible Preferred
Stock: par value $0.01 per share; liquidating preference $25.00 per
share ($16,163 and $25,241, respectively); 647 and 1,010 shares
issued and outstanding at September 30, 2017 and December 31, 2016,
respectively
$ 15,440 $ 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 September 30, 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
($45,091 and $12,146, respectively); 1,804 and 486 shares issued
and outstanding at September 30, 2017 and December 31, 2016,
respectively
43,815 11,321
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 97,844 shares issued and outstanding at
September 30, 2017 and 95,718 shares issued and outstanding at
December 31, 2016, respectively
978 957 Additional paid-in capital 978,588 966,714 Accumulated
other comprehensive income consisting of unrealized gains and
losses 29,256 8,648 Accumulated deficit (414,446 )
(403,079 ) Total Stockholders' Equity $ 684,728 $ 631,098
Total Liabilities and Stockholders' Equity $ 5,783,787
$ 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 September 30,
2017 and December 31, 2016, total assets of the consolidated VIEs
were $670 million and $747 million, respectively (including accrued
interest receivable of $2.2 million and $2.5 million,
respectively), and total liabilities were 661 million and $731
million, respectively (including accrued interest payable of 2.2
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 Nine Months
Ended September 30, September 30, 2017
2016 2017 2016 Interest and
other income: Interest-Agency MBS $ 19,892 $ 18,494 $ 52,765 $
49,948 Interest-Non-Agency MBS 9,352 8,766 28,659 27,185
Interest-residential mortgage loans 6,795 8,359 21,205 26,783 Other
interest income 25 11 83
35 36,064 35,630
102,712 103,951 Interest Expense: Interest
expense on repurchase agreements 15,242 8,615 37,073 26,973
Interest expense on asset-backed securities 6,626 7,918 20,593
24,932 Interest expense on junior subordinated notes 417
360 1,203 1,060
22,285 16,893 58,869
52,965 Net interest income 13,779
18,737 43,843 50,986
Operating Expenses: Management fee to related party (1,936 ) (1,943
) (5,634 ) (5,956 ) General and administrative expenses
(1,438 ) (1,493 ) (4,234 ) (4,751 ) Total
operating expenses (3,374 ) (3,436 ) (9,868 )
(10,707 ) Other income (loss): Income-rental properties 397
424 1,297 1,263 (Loss) gain on sales of MBS (2,276 ) 1,206 (2,168 )
(2,032 ) Impairment charge on Non-Agency MBS (762 ) - (2,399 ) -
Unrealized gain on Agency MBS held as trading investments 5,849
1,148 10,071 1,148 Gain on sales of residential mortgage loans
held-for-investment - 716 378 749 (Loss) gain on derivatives, net
(945 ) 9,493 (2,989 ) (34,737 ) Recovery on Non-Agency MBS 1
1 2 3 Total other
income (loss) 2,264 12,988 4,192
(33,606 ) Net income $ 12,669 $ 28,289
$ 38,167 $ 6,673 Dividends on preferred stock
(2,115 ) (1,651 ) (5,895 ) (4,923 ) Net income
to common stockholders $ 10,554 $ 26,638 $ 32,272
$ 1,750 Basic earnings per common share $ 0.11 $ 0.28
$ 0.34 $ 0.02 Diluted earnings per common share $ 0.11 $ 0.27 $
0.33 $ 0.02 Basic weighted average number of shares outstanding
97,547 95,881 96,323 96,644 Diluted weighted average number of
shares outstanding 100,702 100,590 99,998 96,644
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, 2017
2016 2017 2016 Net income $
12,669 $ 28,289 $ 38,167 $ 6,673
Available-for-sale Agency MBS, fair value adjustment (6,352 )
(3,955 ) (8,763 ) 33,511
Reclassification adjustment for loss
(gain) on sales of Agency MBS included in net income
2,341 (1,206 ) 2,233 2,032 Available-for-sale Non-Agency MBS, fair
value adjustment 7,114 10,225 25,447 (5,156 )
Reclassification adjustment for (gain) on
sales of Non-Agency MBS included in net income
(65 ) - (65 ) - Unrealized gains on swap agreements 395 784 1,385
5,718
Reclassification adjustment for interest
expense on swap agreements included in net income
183 87 371 395
Other comprehensive income 3,616 5,935
20,608 36,500 Comprehensive
income $ 16,285 $ 34,224 $ 58,775 $ 43,173
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 quarter ended September 30, 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 September 30, 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;
- 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”;
- 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, as this is a non-cash item and is
added back by other companies to derive funds from operations;
and
- the presentation of these measures,
when analyzed in conjunction with 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 quarter
ended September 30, 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 September 30, 2017
Amount Per Share (in thousands) Net
income to common stockholders $ 10,554 $ 0.11 Adjustments to derive
core earnings: Loss on sales of MBS 2,276 0.02 Impairment charge on
Non-Agency MBS(1) 762 0.01 Unrealized gain on Agency MBS held as
trading investments (5,849 ) (0.06 ) Gain on interest rate swaps
(1,529 ) (0.02 ) Loss on derivatives-TBA Agency MBS, net 2,475 0.03
Recovery on Non-Agency MBS (1 ) —
Amortization of other comprehensive income
on de-designated interest rate swaps(2)
183 — Periodic net settlement on interest rate swaps after
de-designation(3) (1,359 ) (0.01 ) Dollar roll income on TBA Agency
MBS(4) 2,842 0.03 Premium amortization on Agency MBS 8,933 0.09
Paydown expense on Agency MBS(5) (7,487 ) (0.08 ) Depreciation
expense on residential rental properties 117 —
Core earnings $ 11,917 $ 0.12 Basic weighted
average number of shares outstanding 97,547
_____________
(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 September 30, 2017
Annualized Amount Percentage
(in thousands) Average Asset Yield, Including TBA Dollar
Roll Income: Total interest income $ 36,064 2.74 % Income-rental
properties 397 0.03 % Dollar roll income on TBA Agency MBS(1) 2,842
0.22 % Premium amortization on Agency MBS 8,933 0.68 % Paydown
expense on Agency MBS(2) (7,487 ) -0.57 % Total interest and
other income and average asset yield, including TBA dollar roll
income $ 40,749 3.10 % Effective Cost of Funds: Total
interest expense $ 22,285 1.87 % Periodic net settlement on
interest rate Swaps after de-designation(3) 1,359 0.11 %
Amortization of other comprehensive income on de-designated
Swaps(4) (183 ) -0.02 % Effective total interest expense and
effective cost of funds $ 23,461 1.96 % Effective net
interest rate spread 1.14 % Average earning assets $ 5,266,355
Average borrowings $ 4,776,609
_____________
(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/20171102005178/en/
Anworth Mortgage Asset CorporationJohn T. Hillman1299 Ocean
Avenue, Second FloorSanta Monica, CA 90401(310) 255-4438 or (310)
255-4493Email: jhillman@anworth.comWeb site:
http://www.anworth.com
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