Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company” or
“Anworth”) today reported its financial results for the fourth
quarter ended December 31, 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 December 31, 2020:
Three Months Ended
December 31, 2020
(unaudited)
Per
Weighted
Earnings
Share
(in thousands)
Core earnings
$
4,655
$
0.05
GAAP net income to common stockholders
$
21,122
$
0.21
Comprehensive income
$
16,195
$
0.16
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 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 December 31, 2020 and September 30, 2020, the composition of
our portfolio at fair value was as follows:
December 31, 2020
September 30, 2020
Dollar Amount
Percentage
Dollar Amount
Percentage
(in thousands)
(in thousands)
(unaudited)
Agency MBS:
ARMS and hybrid ARMs
$
511,628
17.3
%
$
575,163
19.2
%
Fixed-rate Agency MBS
1,112,726
37.7
1,034,598
34.6
TBA Agency MBS
730,617
24.8
727,472
24.3
Total Agency MBS
$
2,354,971
79.8
%
$
2,337,233
78.1
%
Non-Agency MBS
$
206,933
7.0
%
$
198,586
6.7
%
Residential mortgage loans
held-for-investment through consolidated securitization
trusts(1)
267,107
9.1
317,887
10.6
Residential mortgage loans
held-for-securitization
109,312
3.7
123,247
4.2
Residential real estate
12,750
0.4
12,827
0.4
Total Portfolio
$
2,951,073
100.0
%
$
2,989,780
100.0
%
Total Assets(2)
$
3,108,318
$
3,164,635
________________________________
(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 December 31, 2020, the allocation of our agency
mortgage-backed securities (“Agency MBS”) was approximately 22%
adjustable-rate and hybrid adjustable-rate Agency MBS, 47%
fixed-rate Agency MBS, and 31% fixed-rate TBA Agency MBS. At
September 30, 2020, the allocation of our 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,
both periods of which are detailed in the table below:
December 31,
September 30,
2020
2020
(dollar amounts in
thousands)
(unaudited)
Fair value of Agency MBS and TBA Agency
MBS
$
2,354,971
$
2,337,233
Adjustable-rate Agency MBS coupon reset
(less than 1 year)
14
%
16
%
Hybrid adjustable-rate Agency MBS coupon
reset (1-3 years)
5
6
Hybrid adjustable-rate Agency MBS coupon
reset (3-5 years)
—
—
Hybrid adjustable-rate Agency MBS coupon
reset (greater than 5 years)
3
3
Total adjustable-rate Agency MBS
22
%
25
%
15-year fixed-rate Agency MBS
1
2
20-year fixed-rate Agency MBS
7
7
30-year fixed-rate Agency MBS
39
35
30-year fixed-rate TBA Agency MBS
31
31
Total MBS
100
%
100
%
At December 31, 2020 and September 30, 2020, the summary
statistics of our Agency MBS and TBA Agency MBS were as
follows:
December 31, 2020
Weighted Average
Fair Market
Coupon
Cost
Price
(unaudited)
Agency MBS:
Adjustable-rate Agency MBS
2.80
%
$
101.99
$
103.76
Hybrid adjustable-rate Agency MBS
2.73
101.30
104.03
15-year fixed-rate Agency MBS
3.50
101.50
106.75
20-year fixed-rate Agency MBS
3.56
103.28
108.95
30-year fixed-rate Agency MBS
3.61
102.81
107.45
Total Agency MBS:
3.34
%
$
102.49
$
106.43
Average asset yield (weighted average
coupon divided by average amortized cost)
3.26
%
Unamortized premium
$
37.8
million
Unamortized premium as a percentage of par
value
2.49
%
Premium amortization expense on Agency MBS
for the respective quarter
$
4.6
million
TBA Agency MBS:
30-year fixed-rate TBA Agency MBS
2.14
%
$
103.40
$
104.37
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
At December 31, 2020 and September 30, 2020, the constant
prepayment rate (“CPR”) and weighted average term to next interest
rate reset of our Agency MBS were as follows:
December 31,
September 30,
2020
2020
(unaudited)
Constant prepayment rate (CPR) of Agency
MBS
40
%
39
%
Constant prepayment rate (CPR) of
adjustable-rate and hybrid adjustable-rate Agency MBS
35
%
37
%
Weighted average term to next interest
rate reset on Agency MBS
19
months
21
months
The following tables summarize our fixed-rate Agency MBS at
December 31, 2020 and September 30, 2020:
December 31, 2020
(unaudited)
Weighted
Average
Weighted
Remaining
Market
Fair Market
Average
Term
Value
Cost
Price
Coupon
(Years)
(in thousands)
30-Year Fixed-Rate Agency MBS:
2.00%
$
51,966
$
103.32
$
103.93
2.00
%
30.0
2.50%
167,049
104.95
105.49
2.50
29.9
3.50%
110,235
102.61
107.99
3.50
26.2
4.00%
519,435
102.16
107.92
4.00
27.6
≥4.5%
72,917
102.36
110.65
4.85
25.2
$
921,602
$
102.81
$
107.45
3.61
%
27.8
15-Year to 20-Year Fixed-Rate Agency
MBS
191,124
102.95
108.55
3.55
15.5
Total Fixed-Rate Agency MBS
$
1,112,726
$
102.84
$
107.64
3.60
%
25.7
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
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 December
31, 2020 and September 30, 2020:
December 31, 2020
(unaudited)
Weighted Average
Fair
Current
Fair Market
Portfolio Type
Value
Principal
Coupon
Price
(in thousands)
Legacy Non-Agency MBS (pre-2008)
$
101,149
$
161,648
5.21
%
$
62.57
Non-performing
9,860
10,000
6.35
98.60
Credit Risk Transfer
95,924
94,782
4.12
101.20
Total Non-Agency MBS
$
206,933
$
266,430
4.86
%
$
77.67
September 30, 2020
(unaudited)
Weighted Average
Fair
Current
Fair Market
Portfolio Type
Value
Principal
Coupon
Price
(in thousands)
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
Residential Mortgage Loans Held-for-Investment
The following table summarizes our residential mortgage loans
held-for-investment at December 31, 2020 and September 30,
2020:
December 31,
September 30,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-investment through consolidated securitization trusts
$
267,107
$
317,887
Asset-backed securities issued by
securitization trusts
258,414
309,173
Retained interest in loans held in
securitization trusts
$
8,693
$
8,714
Residential Mortgage Loans Held-for-Securitization
The following table summarizes our residential mortgage loans
held-for-securitization at December 31, 2020 and September 30,
2020:
December 31,
September 30,
2020
2020
(in thousands)
(unaudited)
Residential mortgage loans
held-for-securitization
$
109,312
$
123,247
Amount outstanding on warehouse line of
credit
$
90,185
$
101,722
At December 31, 2020 and September 30, 2020, our estimated fair
value (in thousands) of the residential mortgage loans
held-for-securitization was $110,112 and $121,639,
respectively.
At December 31, 2020, approximately $1.9 million of the unpaid
principal balance (“UPB”) on this loan portfolio was 30-days
delinquent; approximately $2.0 million of the UPB was 60-days
delinquent; and approximately $3.8 million of the UPB was 90-days+
delinquent. Of these amounts, the percentages that are COVID-19
related are as follows: 30-days delinquent: 58%; 60-days
delinquent: 100%; and 90-days+ delinquent: 77%. At September 30,
2020, approximately $1.5 million of the 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%.
Residential Properties Portfolio
At December 31, 2020 and September 30, 2020, Anworth Properties
Inc. owned 82 and 82 single-family residential rental properties,
respectively, located in Southeastern Florida, that were carried at
a total cost, net of accumulated depreciation, of $12.7 million and
$12.8 million, respectively.
MBS Portfolio Financing
December 31, 2020
Agency
Non-Agency
Total
MBS
MBS
MBS
(dollar amounts in
thousands)
(unaudited)
Repurchase Agreements:
Outstanding repurchase agreement
balance
$
1,365,000
$
105,620
$
1,470,620
Average interest rate
0.21
%
1.92
%
0.33
%
Average maturity
29
days
49
days
30
days
Average interest rate after adjusting for
interest rate swaps
1.38
%
Average maturity after adjusting for
interest rate swaps
1,047
days
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
Portfolio Leverage
At December 31, 2020, our leverage multiple was 3.4x. The
leverage multiple is calculated by dividing our repurchase
agreements and warehouse line of credit outstanding by the
aggregate of common stockholders’ equity plus preferred stock and
junior subordinated notes. The effective leverage, which includes
the effect of TBA dollar roll financing, was 4.9x at December 31,
2020. At September 30, 2020, our leverage multiple was 3.4x and the
effective leverage was 5.0x.
Interest Rate Swaps
At December 31, 2020 and September 30, 2020, our interest rate
swap agreements (“swaps”) had the following notional amounts,
weighted average fixed rates, and remaining terms:
December 31, 2020
(unaudited)
Weighted
Average
Remaining
Remaining
Notional
Fixed
Term in
Term in
Maturity
Amount(1)
Rate
Months
Years
(in thousands)
Less than 12 months
$
—
—
%
—
—
1 year to 2 years
—
—
—
—
2 years to 3 years
50,000
1.55
34
2.8
3 years to 4 years
100,000
1.63
47
3.9
4 years to 5 years
190,000
2.21
65
5.4
5 years to 7 years
375,000
2.77
86
7.2
7 years to 10 years
—
—
—
—
$
715,000
2.38
%
71
5.9
________________________________
(1)
This table does not include $162.5 million
in notional amount of OIS interest rate swaps that were received as
part of the transition from LIBOR to OIS rates.
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
Effective Net Interest Rate Spread
December 31,
September 30,
2020
2020
(unaudited)
Average asset yield, including TBA dollar
roll income
3.67
%
3.33
%
Effective cost of funds
2.05
2.04
Effective net interest rate spread
1.62
%
1.29
%
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 December 31, 2020, our book value was $3.13 per share of
common stock, which was an increase of $0.09 from $3.04 at
September 30, 2020. The common stock dividend of $0.05 per share
declared for the fourth quarter ended December 31, 2020, plus the
$0.09 increase in book value, resulted in a return on book value
per common share of 4.6% for the three months ended December 31,
2020 and a negative (27.2)% for the year ended December 31,
2020.
Dividend
On December 16, 2020, we declared a quarterly common stock
dividend of $0.05 per share for the fourth quarter ended December
31, 2020. Based upon the closing price of $2.71 on December 31,
2020, the annualized dividend yield on our common stock at December
31, 2020 was 7.4%.
Proposed Merger
On December 6, 2020, Anworth entered into an Agreement and Plan
of Merger (the “Merger Agreement”) with Ready Capital Corporation,
a Maryland corporation (“Ready Capital”), and RC Merger Subsidiary,
LLC, a Delaware limited liability company and a wholly owned
subsidiary of Ready Capital (“Merger Sub”), pursuant to which,
subject to the terms and conditions therein, Anworth will be merged
with and into Merger Sub, with Merger Sub continuing as the
surviving company (such transaction, the “Merger”).
Completion of the proposed Merger is subject to the satisfaction
of certain customary conditions, and is subject to the approval of
the stockholders of both Anworth and Ready Capital at respective
special meetings of stockholders to be held on March 17, 2021. We
cannot provide any assurance that the proposed Merger will close in
a timely manner or at all.
Conference Call
The Company will host a conference call on Wednesday, February
24, 2021 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss
our fourth quarter 2020 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. Replays of the call will be available for a
7-day period commencing at 4:00 PM Eastern Time on February 24,
2021. The dial-in number for the replay is (877) 344-7529 for U.S.
callers; international callers should dial (412) 317-0088; Canadian
callers should dial (855) 669-9658; and the conference number is
10152335. 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.
Important Additional Information about the Proposed Merger
and Where to Find It
In connection with the proposed Merger, Ready Capital has filed
with the U.S. Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-4 (File No. 333-251863), which was
declared effective by the SEC on February 9, 2021. The registration
statement includes a prospectus of Ready Capital and a joint proxy
statement of Anworth and Ready Capital. Stockholders of Anworth and
Ready Capital are advised to read the registration statement and
the joint proxy statement/prospectus (including all other relevant
documents that are filed or will be filed with the SEC, as well as
any amendments and supplements to these documents) carefully and in
their entirety because they contain important information about
Anworth, Ready Capital, the proposed Merger, and related matters.
Stockholders of Anworth and Ready Capital may obtain free copies of
the registration statement, the joint proxy statement/prospectus,
and all other documents filed or that will be filed with the SEC by
Anworth or Ready Capital at the SEC’s website at
http://www.sec.gov. Copies of documents filed with the SEC by
Anworth are available free of charge on Anworth’s website at
http://www.anworth.com. Copies of documents filed with the SEC by
Ready Capital are available free of charge on Ready Capital’s
website at http://www.readycapital.com.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made, except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act, or an exemption therefrom.
Participants in the Solicitation Relating to the
Merger
Anworth, its directors and executive officers, and certain other
affiliates of Anworth may be deemed to be “participants” in the
solicitation of proxies from the stockholders of Anworth in
connection with the proposed Merger. Information regarding Anworth,
its directors and executive officers and their respective ownership
of common stock of Anworth, and the respective interests of such
participants in the Merger can be found in the joint proxy
statement/prospectus for Anworth’s special meeting of stockholders,
filed by Anworth with the SEC on February 9, 2021. A free copy of
the joint proxy statement/prospectus may be obtained from the
sources described above.
Ready Capital and its directors and executive officers may also
be deemed to be participants in the solicitation of proxies from
the stockholders of Anworth in connection with the proposed Merger.
A list of the names of such directors and executive officers and
information regarding their interests in the proposed Merger are
included in the joint proxy statement/prospectus for the proposed
Merger.
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.
About Ready Capital Corporation
Ready Capital Corporation (NYSE: RC) is a multi-strategy real
estate finance company that originates, acquires, finances and
services small- to medium-sized balance commercial loans. Ready
Capital specializes in loans backed by commercial real estate,
including agency multifamily, investor and bridge as well as SBA
7(a) business loans. Headquartered in New York, New York, Ready
Capital employs over 400 lending professionals nationwide. Ready
Capital is externally managed and advised by Waterfall Asset
Management, LLC.
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; the risk that the
proposed Merger will not be consummated within the expected time
period or at all; the occurrence of any event, change or other
circumstances that could give rise to the termination of the Merger
Agreement; the inability to obtain stockholder approvals relating
to the Merger and issuance of shares in connection therewith or the
failure to satisfy the other conditions to completion of the
Merger; risks related to disruption of management attention from
our ongoing business operations due to the proposed Merger; the
effect of the announcement of the proposed Merger on our operating
results and business generally; and the outcome of any legal
proceedings relating to the Merger. Our Annual Report on Form 10-K,
the joint proxy statement/prospectus, and other SEC filings discuss
the most significant risk factors that may affect our business,
results of operations and financial condition and the proposed
Merger, copies of which are available on the SEC’s website at
www.sec.gov. 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)
December 31,
December 31,
2020
2019
(audited)
ASSETS
Available-for-sale Agency MBS at fair
value (including $1,354,149 and $2,764,330 pledged to
counterparties at December 31, 2020 and December 31, 2019,
respectively); amortized cost of $1,455,422 and $2,799,448 at
December 31, 2020 and December 31, 2019, respectively, net of
allowance for credit losses of $0 and $0 at December 31, 2020 and
December 31, 2019, respectively
$
1,519,652
$
2,853,131
Trading Agency MBS at fair value
(including $83,416 and $655,045 pledged to counterparties at
December 31, 2020 and December 31, 2019, respectively
104,702
656,920
Available-for-sale Non-Agency MBS at fair
value (including $0 and $535,135 pledged to counterparties at
December 31, 2020 and December 31, 2019, respectively); amortized
cost of $0 and $613,576 at December 31, 2020 and December 31, 2019,
respectively, net of allowance for credit losses of $0 and $0 at
December 30, 2020 and December 31, 2019, respectively
—
643,610
Trading Non-Agency MBS at fair value
(including $166,140 and $0 pledged to counterparties at December
31, 2020 and December 31, 2019, respectively
206,933
—
Residential mortgage loans
held-for-securitization, net of allowance for credit losses of $56
and $0 at December 30, 2020 and December 31, 2019, respectively
109,312
152,922
Residential mortgage loans
held-for-investment through consolidated securitization trusts, net
of allowances for credit losses of $197 and $175 at December 31,
2020 and December 31, 2019, respectively(1)
267,107
458,348
Residential real estate
12,750
13,499
Cash and cash equivalents
34,050
8,236
Reverse repurchase agreements
—
15,000
Restricted cash
111,069
104,699
Interest receivable
6,554
16,398
Derivative instruments at fair value
6,974
5,833
Right to use asset-operating lease
718
1,256
Prepaid expenses and other assets
4,669
8,779
Total Assets
$
2,384,490
$
4,938,631
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accrued interest payable
$
4,130
$
16,757
Repurchase agreements
1,470,620
3,657,873
Warehouse line of credit
90,185
133,811
Asset-backed securities issued by
securitization trusts(1)
258,414
448,987
Junior subordinated notes
37,380
37,380
Derivative instruments at fair value
80,380
52,197
Derivative counterparty margin
5,257
367
Dividends payable on preferred stock
2,297
2,297
Dividends payable on common stock
4,962
8,897
Payable for purchased loans
—
5,545
Accrued expenses and other liabilities
1,653
1,312
Long-term lease obligation
718
1,256
Total Liabilities
$
1,955,996
$
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, 99,242 and 98,849 shares issued and
outstanding at December 31, 2020 and December 31, 2019,
respectively)
992
988
Additional paid-in capital
984,174
983,401
Accumulated other comprehensive income
consisting of unrealized gains and losses
54,480
65,984
Accumulated deficit
(725,770
)
(593,039
)
Total Stockholders' Equity
$
409,039
$
552,497
Total Liabilities and Stockholders'
Equity
$
2,384,490
$
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 December
31, 2020 and December 31, 2019, total assets of the consolidated
VIEs were $268 million and $460 million (including accrued interest
receivable of $0.9 million and $1.5 million), respectively (which
are recorded above in the line item, “Interest receivable”), and
total liabilities were $259 million and $450 million (including
accrued interest payable of $0.9 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)
Three Months
Year
Three Months
Year
Ended
Ended
Ended
Ended
December 31, 2020
December 31, 2019
(audited)
Interest and other income:
Interest-Agency MBS
$
7,698
$
46,520
$
19,990
$
90,173
Interest-Non-Agency MBS
2,440
15,673
8,614
38,038
Interest-securitized residential mortgage
loans
2,918
14,665
4,767
20,443
Interest-residential mortgage loans
held-for-securitization
1,193
6,034
1,618
4,314
Other interest income
9
193
253
1,427
14,258
83,085
35,242
154,395
Interest expense:
Interest expense on repurchase
agreements
1,245
24,879
18,489
92,737
Interest expense on asset-backed
securities
2,761
14,025
4,600
19,771
Interest expense on warehouse line of
credit
1,027
4,457
1,477
4,148
Interest expense on junior subordinated
notes
316
1,529
492
2,100
5,349
44,890
25,058
118,756
Net interest income
8,909
38,195
10,184
35,639
Provision for credit losses on loans
(50
)
(670
)
—
—
Net interest income after provision for
credit losses
8,859
37,525
10,184
35,639
Operating expenses:
Management fee to related party
(1,337
)
(5,591
)
(1,614
)
(6,699
)
Rental properties depreciation and
expenses
(783
)
(1,987
)
(372
)
(1,517
)
General and administrative expenses
(2,493
)
(5,934
)
(1,277
)
(5,090
)
Total operating expenses
(4,613
)
(13,512
)
(3,263
)
(13,306
)
Other income (loss):
Income-rental properties
452
1,707
441
1,800
Realized net gain (loss) on sales of
available-for-sale Agency MBS
—
15,805
1,338
(4,059
)
Net gain on Agency MBS held as trading
investments
789
3,629
544
11,249
Impairment charge on available-for-sale
Non-Agency MBS
—
—
(357
)
(2,108
)
Net gain (loss) on Non-Agency MBS held as
trading investments
5,080
(15,537
)
—
—
Realized net (loss) gain on sales of
available-for-sale Non-Agency MBS
—
(55,390
)
—
76
Gain on sale of residential properties
—
201
31
31
Gain (loss) on derivatives, net
12,852
(78,121
)
20,824
(84,741
)
Total other income (loss)
19,173
(127,706
)
22,821
(77,752
)
Net income (loss)
$
23,419
$
(103,693
)
$
29,742
$
(55,419
)
Dividends on preferred stock
(2,297
)
(9,189
)
(2,297
)
(9,189
)
Net income (loss) to common
stockholders
$
21,122
$
(112,882
)
$
27,445
$
(64,608
)
Basic income (loss) per common share
$
0.21
$
(1.14
)
$
0.28
$
(0.65
)
Diluted income (loss) per common share
$
0.21
$
(1.14
)
$
0.27
$
(0.65
)
Basic weighted average number of shares
outstanding
99,208
99,048
98,823
98,684
Diluted weighted average number of shares
outstanding
104,033
99,048
103,141
98,684
ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(in thousands, except for per
share amounts)
(unaudited)
Three Months
Year
Three Months
Year
Ended
Ended
Ended
Ended
December 31, 2020
December 31, 2019
Net income (loss)
$
23,419
$
(103,693
)
$
29,742
$
(55,419
)
Available-for-sale Agency MBS, fair value
adjustment
(7,841
)
31,005
3,160
68,355
Reclassification adjustment for (gain)
loss on sales of Agency MBS included in net income (loss)
—
(15,805
)
(1,054
)
4,059
Available-for-sale Non-Agency MBS, fair
value adjustment
—
—
(3,548
)
20,547
Reclassification adjustment due to
transfer from available-for-sale to trading for Non-Agency MBS
—
(85,424
)
—
—
Reclassification adjustment for loss
(gain) on sales of Non-Agency MBS included in net income (loss)
—
55,390
(285
)
(76
)
Amortization of unrealized gains on
interest rate swaps remaining in other comprehensive income
617
3,330
906
3,891
Other comprehensive (loss) income
(7,224
)
(11,504
)
(821
)
96,776
Comprehensive income (loss)
$
16,195
$
(115,197
)
$
28,921
$
41,357
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 December 31, 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 December 31, 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
processes;
- 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 upon 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”;
- expenses related to the Merger Agreement are added back, as
they are not indicative of our earnings potential; 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
December 31, 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
December 31, 2020
(unaudited)
Amount
Per Share
(in thousands)
Net income to common stockholders
$
21,122
$
0.21
Adjustments to derive core earnings:
Net (gain) on Agency MBS held as trading
investments
(789
)
(0.01
)
Net (gain) on Non-Agency MBS held as
trading securities
(5,080
)
(0.05
)
(Gain) on interest rate swaps, net
(4,014
)
(0.04
)
(Gain) on derivatives-TBA Agency MBS,
net
(8,838
)
(0.09
)
Net settlement on interest rate swaps
after de-designation(1)
(3,908
)
(0.04
)
Dollar roll income on TBA Agency
MBS(2)
5,076
0.05
Premium amortization on MBS
4,643
0.05
Paydown expense(3)
(5,459
)
(0.06
)
Depreciation expense and non-recurring
expenses on residential rental properties
533
0.01
Expenses related to the Merger
Agreement(4)
1,369
0.02
Core earnings
$
4,655
$
0.05
Basic weighted average number of shares
outstanding
99,208
________________________________
(1)
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 are recorded in “(Gain) on interest rate swaps, net.”
(2)
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 “Gain (loss) on derivatives, net” that is shown on
the Company’s consolidated financial statements.
(3)
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.
(4)
Expenses related to the Merger Agreement
are added back, as they are not indicative of our earnings
potential.
Effective Net Interest Rate Spread
Three Months Ended
December 31, 2020
(unaudited)
Annualized
Amount
Percentage
(in thousands)
Average Asset Yield, Including TBA Dollar
Roll Income:
Total interest income
$
14,258
2.76
%
Income-rental properties
452
0.09
Dollar roll income on TBA Agency
MBS(1)
5,076
0.98
Premium amortization on Agency MBS
4,643
0.90
Paydown expense on Agency MBS(2)
(5,459
)
(1.06
)
Total interest and other income and
average asset yield, including TBA dollar roll income
$
18,970
3.67
%
Effective Cost of Funds:
Total interest expense
$
5,349
1.19
%
Net settlement on interest rate Swaps
after de-designation(3)
3,908
0.86
Effective total interest expense and
effective cost of funds
$
9,257
2.05
%
Effective net interest rate spread
1.62
%
Average earning assets
$
2,067,406
Average borrowings
$
1,803,127
________________________________ (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 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 (loss) on
derivatives, net” that is shown on the Company’s consolidated
statements of operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210223005924/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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