Anworth Mortgage Asset Corporation (NYSE: ANH) (the “Company”)
today reported its financial results for the third quarter ended
September 30, 2016.
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, 2016 (dollar amounts in
thousands):
Three Months Ended September 30, 2016
(unaudited) Earnings Earnings
Per
Weighted
Share
Core Earnings $ 12,082 $ 0.13 GAAP net income to common
stockholders $ 26,638 $ 0.28 Comprehensive income $ 34,224 $ 0.36
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” at the end of this
earnings release. For the three months ended September 30, 2016,
Core Earnings included an adjustment to reflect paydown expense on
Agency MBS, which is the proportional expense of Agency MBS
purchase premiums relative to the principal payments and
prepayments which occurred during the quarter.
Comprehensive Income is shown on the consolidated statements of
comprehensive income included in this earnings release.
Portfolio
At September 30, 2016, the composition of the Company’s
portfolio at fair value was as follows (dollar amounts in
thousands):
September 30, 2016 Dollar Amount
Percentage Agency MBS: ARMS and hybrid ARMs $ 3,171,873 53.9
% Fixed-rate Agency MBS 886,741 15.1 % TBA Agency MBS
367,555 6.3 % Total Agency MBS $ 4,426,169 75.3 % Non-Agency MBS
644,216 11.0 % Residential mortgage loans(1) 795,527 13.5 %
Residential real estate 14,289 0.2 % Total Portfolio $
5,880,201 100.0 % Total Assets(2) $ 6,026,722
_________________
(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, 2016, the allocation of the Company’s agency
mortgage-backed securities, or Agency MBS, was approximately 73%
adjustable-rate and hybrid adjustable-rate Agency MBS, 19%
fixed-rate Agency MBS and 8% fixed-rate TBA Agency MBS as detailed
below (dollar amounts in thousands):
September 30, 2016 Fair value of Agency
MBS and TBA Agency MBS $ 4,426,169 Adjustable-rate Agency
MBS coupon reset (less than 1 year) 45 % Hybrid adjustable-rate
Agency MBS coupon reset (1-2 years) 1 % Hybrid adjustable-rate
Agency MBS coupon reset (2-3 years) 4 % Hybrid adjustable-rate
Agency MBS coupon reset (3-4 years) 10 % Hybrid adjustable-rate
Agency MBS coupon reset (4-5 years) 2 % Hybrid adjustable-rate
Agency MBS coupon reset (5-7 years) 11 % Total
adjustable-rate Agency MBS 73 % 15-year fixed-rate TBA
Agency MBS 8 % 15-year fixed-rate Agency MBS 16 % 20-year and
30-year fixed-rate Agency MBS 3 % Total MBS 100 %
At September 30, 2016, the key metrics of the Company’s Agency
MBS portfolio were as follows (dollar amounts in thousands):
September 30,
2016
Weighted Average Agency MBS Coupon: Adjustable-rate Agency MBS 2.75
% Hybrid adjustable-rate Agency MBS 2.44 15-year fixed-rate Agency
MBS 2.65 15-year fixed-rate TBA Agency MBS 2.50 20-year and 30-year
fixed-rate Agency MBS 4.29 Total Agency MBS: 2.68 % Average
Amortized Cost: Adjustable-rate Agency MBS 102.95 % Hybrid
adjustable-rate Agency MBS 102.94 15-year fixed-rate Agency MBS
102.73 15-year fixed-rate TBA Agency MBS 103.23 20-year and 30-year
fixed-rate Agency MBS 103.10 Total Agency MBS: 102.95 % Average
asset yield (weighted average coupon divided by average amortized
cost) 2.60 % Unamortized premium $114.1 million Unamortized premium
as a percentage of par value 2.95 %
Premium amortization expense on Agency MBS
for the third quarter 2016
$7.1 million
September 30,
2016
Constant prepayment rate (CPR) of Agency MBS 24% Constant
prepayment rate (CPR) of adjustable-rate and hybrid adjustable-rate
Agency MBS 24% 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
September 30, 2016 (dollar amounts in thousands):
Weighted Average Mortgage Loan
Type Fair
Value
Current
Principal
Amortized
Cost
Coupon Yield Prime $ 50,851 $
62,159 81.85 % 4.57 % 5.18 % Alt-A 391,408 502,565 77.72 % 5.33 %
5.40 % Subprime 49,795 52,728 95.26 % 4.43 % 5.20 % Non-performing
152,176 157,039 98.90 % 4.65 % 5.46 % Paydowns receivable
(14 ) - - - - Total Non-Agency MBS $ 644,216 $
774,491 83.54 % 5.07 % 5.38 %
Residential Mortgage Loans
The following table summarizes the Company’s residential
mortgage loans held-for-investment at September 30, 2016 (in
thousands):
Residential mortgage loans held-for-investment $ 795,527
Asset-backed securities issued by securitization trusts $ 779,761
Retained interest in loans held in securitization trust $ 15,766
Residential Real Estate
At September 30, 2016, 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 $14.3 million.
MBS Portfolio Financing and Leverage
September 30, 2016 Agency
MBS
Non-Agency
MBS
Total
MBS
Repurchase Agreements:
(dollar amounts in thousands)
Outstanding repurchase agreement balance $ 3,540,000 $ 400,800 $
3,940,800 Average interest rate 0.71 % 2.14 % 0.85 % Average
maturity 36 days 15 days 34 days Average interest rate after
adjusting for interest rate swaps 1.16 % Average maturity after
adjusting for interest rate swaps 478 days
At September 30, 2016, the Company’s leverage multiple was 5.5x.
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 6.0x at September 30, 2016.
Interest Rate Swaps and Eurodollar Futures Contracts
At September 30, 2016, the Company’s interest rate swap
agreements (“Swaps”) had the following notional amounts (in
thousands), weighted average fixed rates and remaining terms:
September 30, 2016 Maturity Notional
Amount
Weighted
Average
Fixed
Rate
Remaining
Term in
Months
Remaining
Term in
Years
Less than 12 months $ 775,000 0.69 % 4 0.3 1 year to 2 years
435,000 0.90 16 1.3 2 years to 3 years 100,000 1.00 25 2.1 3 years
to 4 years 116,000 1.32 38 3.2 4 years to 5 years 200,000 2.06 55
4.6 5 years to 7 years 420,000 2.73 78 6.5 $ 2,046,000 1.34
% 30 2.5
At September 30, 2016, the Company’s short position in
Eurodollar Futures Contracts had the following notional amount (in
thousands) and weighted average purchase price:
September 30, 2016 Eurodollar Futures
Contracts Expiration Notional
Amount
Weighted
Average
Purchase
Price
Less than 12 months $ 2,350,000 $ 99.08
Effective Net Interest Rate Spread
September 30,
2016
Average asset yield, including TBA dollar roll income
2.82
%
Effective cost of funds 1.62 Effective net interest rate spread
1.20
%
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, 2016, the Company declared a quarterly common
stock dividend of $0.15 per share for the third quarter ended
September 30, 2016. Based upon the closing price of $4.92 on
September 30, 2016, the annualized dividend yield on the Company’s
common stock at September 30, 2016 was 12.2%.
Book Value Per Common Share
At September 30, 2016, the Company’s book value was $6.25 per
share of common stock, which was an increase of $0.19 from $6.06 in
the prior quarter.
The $0.15 quarterly dividend and the $0.19 increase in book
value per share resulted in a return on equity to common
stockholders of 5.61% for the quarter ended September 30, 2016. For
the nine months ended September 30, 2016, the return on equity to
common stockholders was 7.50% (unannualized).
Stock Transactions
During the quarter ended September 30, 2016, the Company
sold an aggregate of 33,695 shares of its Series C Preferred Stock
under its At Market Issuance Sales Agreements, which provided net
proceeds to the Company of approximately $834 thousand.
During the quarter ended September 30, 2016, the Company
repurchased an aggregate of 339,953 shares of its common stock at a
weighted average price of $4.84 per share.
Subsequent Events
From October 1, 2016 through November 1, 2016, the Company
issued an aggregate of 8,218 shares of Series C Preferred Stock at
a weighted average price of $24.97 per share, resulting in net
proceeds to us of approximately $203 thousand.
From October 1, 2016 through November 1, 2016, the Company
repurchased an aggregate of 80,421 shares of its common stock at a
weighted average price of $4.78 per share under its share
repurchase program.
Conference Call
The Company will host a conference call on Thursday, November 3,
2016 at 1:00 PM Eastern Time, 10:00 AM Pacific Time, to discuss its
third quarter 2016 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, 2016. 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 10095610. 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
We are an externally-managed mortgage real estate investment
trust (“REIT”). Our principal business is to invest primarily in
mortgage-backed securities on a leveraged basis. Income generated
for distribution to our shareholders is based primarily on the
difference between the yield on our mortgage assets and the cost of
our borrowings. We qualify as a REIT for federal income tax
purposes and are not subject to federal corporate income taxes on
distributions to our stockholders. 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
Mortgage Asset Corporation is a component of the Russell 2000®
Index.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This news release may contain forward-looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based upon our current expectations and speak only
as of the date hereof. Forward-looking statements, which are based
on various assumptions (some of which are beyond our control) may
be identified by reference to a future period or periods or by the
use of forward-looking terminology, such as “may,” “will,”
“believe,” “expect,” “anticipate,” “assume,” “estimate,” “intend,”
“continue,” or other similar terms or variations on those terms or
the negative of those terms. Our actual results may differ
materially and adversely from those expressed in any
forward-looking statements as a result of various factors and
uncertainties, including but not limited to, changes in interest
rates; changes in the market value of our mortgage-backed
securities; changes in the yield curve; the availability of
mortgage-backed securities for purchase; increases in the
prepayment rates on the mortgage loans securing our mortgage-backed
securities; our ability to use borrowings to finance our assets
and, if available, the terms of any financing; risks associated
with investing in mortgage-related assets; 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, 2016
2015 (audited) ASSETS
Agency MBS: Agency MBS pledged to counterparties at fair value $
3,836,791 $ 4,694,731 Agency MBS at fair value 191,982 173,344
Paydowns receivable 29,841 24,707 $
4,058,614 $ 4,892,782 Non-Agency MBS at fair value (including
$521,364 and $596,831 pledged to counterparties at
September 30, 2016 and December 31, 2015,
respectively)
644,216 682,061 Residential mortgage loans held-for-investment(1)
795,527 969,172 Residential real estate 14,289 14,363 Cash and cash
equivalents 17,097 5,754 Restricted cash 19,426 39,230 Interest and
dividends receivable 16,616 17,525 Derivative instruments at fair
value 2,023 12,470 Prepaid expenses and other 91,359
2,983 Total Assets: $ 5,659,167 $ 6,636,340
LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities:
Accrued interest payable $ 10,355 $ 13,443 Repurchase agreements
3,940,800 4,915,528 Asset-backed securities issued by
securitization trusts(1) 779,761 915,486 Junior subordinated notes
37,380 37,380 Derivative instruments at fair value 48,224 34,547
Dividends payable on Series A Preferred Stock 1,035 1,035 Dividends
payable on Series B Preferred Stock 394 394 Dividends payable on
Series C Preferred Stock 216 207 Dividends payable on common stock
14,366 14,861 Accrued expenses and other 143,052
1,308
Total Liabilities:
$ 4,975,583 $ 5,934,189
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 September 30, 2016 and December 31, 2015,
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 September 30, 2016 and December 31, 2015,
respectively
$ 46,537 $ 46,537
Series C Cumulative Preferred Stock: par
value $0.01 per share; liquidating preference $25.00 per share
($11,690 and $10,848, respectively); 468 and 434 shares issued and
outstanding at September 30, 2016 and December 31, 2015,
respectively
10,872 10,039
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 95,772 shares issued and 95,742 shares
outstanding at September 30, 2016 and 99,078 shares issued and
98,944 shares outstanding at December 31, 2015, respectively
958 991 Additional paid-in capital 966,720 981,034 Accumulated
other comprehensive income consisting of unrealized gains and
losses 37,449 949 Accumulated deficit (402,876 )
(361,323 ) Total Stockholders' Equity: $ 659,660 $ 678,227
Total Liabilities and Stockholders' Equity: $ 5,659,167
$ 6,636,340
__________
(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,
2016 and December 31, 2015, total assets of the consolidated VIEs
were $798 million and $972 million, respectively, and total
liabilities were $782 million and $918 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,
2016 2015
2016 2015 Interest and
other income: Interest-Agency MBS $ 18,494 $ 24,572 $ 49,948 $
82,624 Interest-Non-Agency MBS 8,766 8,078 27,185 18,110
Interest-residential mortgage loans 8,359 4,120 26,783 5,308
Income-rental properties 424 399 1,263 1,178 Other interest income
11 11 35 31
36,054 37,180 105,214
107,251 Interest Expense: Interest expense on
repurchase agreements 8,615 8,167 26,973 22,256 Interest expense on
asset-backed securities 7,918 3,729 24,932 4,804 Interest expense
on junior subordinated notes 360 323
1,060 957 16,893
12,219 52,965 28,017 Net
operating income 19,161 24,961
52,249 79,234 Provision for loan losses
- 70 - 140 Net
operating income after provision for loan losses 19,161
24,891 52,249 79,094
Operating Expenses: Management fee to related party (1,943 )
(2,167 ) (5,956 ) (6,684 ) General and administrative expenses
(1,493 ) (1,356 ) (4,751 ) (3,869 )
Total operating expenses
(3,436 ) (3,523 ) (10,707 ) (10,553 )
Other income (loss): Gain on sales of Agency MBS 1,206 - (2,032 ) -
Unrealized gain on Agency MBS held as trading investments 1,148 -
1,148 - Loss on sales of Non-Agency MBS - - - (76 ) Gain on sales
of residential mortgage loans held-for-investment 716 - 749 - Gain
(loss) on interest rate swaps, net 8,141 (50,965 ) (58,167 )
(92,378 ) Gain on derivatives-TBA Agency MBS, net 3,412 10,345
26,826 12,297 Loss on derivatives-Eurodollar Futures Contracts
(2,060 ) (2,569 ) (3,396 ) (6,639 ) Recovery on Non-Agency MBS
1 7 3 13
Total other income (loss) 12,564 (43,182 )
(34,869 ) (86,783 ) Net income (loss) $ 28,289
$ (21,814 ) $ 6,673 $ (18,242 ) Dividend on Series A
Cumulative Preferred Stock (1,035 ) (1,035 ) (3,105 ) (3,105 )
Dividend on Series B Cumulative Convertible Preferred Stock (394 )
(394 ) (1,182 ) (1,182 ) Dividend on Series C Cumulative Redeemable
Preferred Stock (222 ) (203 ) (636 )
(514 ) Net income (loss) to common stockholders $ 26,638 $
(23,446 ) $ 1,750 $ (23,043 ) Basic earnings (loss) per
common share $ 0.28 $ (0.23 ) $ 0.02 $ (0.22 ) Diluted earnings
(loss) per common share $ 0.27 $ (0.23 ) $ 0.02 $ (0.22 ) Basic
weighted average number of shares outstanding 95,881 102,431 96,644
104,611 Diluted weighted average number of shares outstanding
100,590 102,431 96,644 104,611
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, 2016
2015 2016
2015 Net income (loss) $ 28,289
$ (21,814 ) $ 6,673 $ (18,242 ) Available-for-sale Agency
MBS, fair value adjustment (3,955 ) 9,213 33,511 15,237
Reclassification adjustment for (gain) loss on sales of Agency MBS
included in net income (loss)
(1,206 ) - 2,032 - Available-for-sale Non-Agency MBS, fair value
adjustment 10,225 (792 ) (5,156 ) 4,089 Reclassification adjustment
for loss on sales of Non-Agency MBS
included in net income (loss)
- - - 76 Unrealized gains on derivatives 784 4,540 5,718 15,929
Reclassification adjustment for interest expense on swap agreements
included in net income (loss)
87 535 395 1,589
Other comprehensive income 5,935 13,496
36,500 36,920 Comprehensive
income (loss) $ 34,224 $ (8,318 ) $ 43,173 $ 18,678
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 loss to common stockholders”
for the quarter ended September 30, 2016 to “Core Earnings” for the
same period. Core Earnings represents “net loss 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, 2016 (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 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 September 30, 2016. 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, 2016
Amount Per Share (in thousands) Net
income to common stockholders $ 26,638 $ 0.28 Adjustments to derive
core earnings: Unrealized gain on Agency MBS held as trading
investments (1,148 ) (0.01 ) Gain on sales of Agency MBS (1,206 )
(0.01 ) Gain on sales of residential mortgage loans
held-for-investment (716 ) (0.01 ) Gain on interest rate swaps
(8,141 ) (0.08 ) Gain on derivatives-TBA securities, net (3,412 )
(0.04 ) Loss on derivatives-Eurodollar Futures Contracts 2,060 0.02
Recovery on Non-Agency MBS 1 - Amortization of other comprehensive
income on de-designated interest rate swaps(1) 87 - Periodic net
settlement on interest rate swaps after de-designation(2) (3,443 )
(0.04 ) Dollar roll income on TBA securities(3) 3,477 0.04 Loss
from expiration of Eurodollar Futures Contracts (311 ) - Premium
amortization on Agency MBS 7,078 0.07 Paydown expense(4)
(8,882 ) (0.09 ) Core earnings $ 12,082 $ 0.13
Basic weighted average number of shares outstanding 95,881
_______________
(1) 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 and is
recorded in its statements of operations as a portion of interest
expense in accordance with GAAP. (2) 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. Net payments on the interest rate swaps made
prior to de-designation are recognized in GAAP net income to common
stockholders. (3) Dollar roll income on TBA Agency MBS is the
income resulting from the price discount typically obtained by
extending the settlement of TBA Agency MBS to a later date. This is
a component of both the “Gain on derivatives-TBA Agency MBS” and
“Derivative income-TBA Agency MBS” that are shown on the Company’s
statements of operations. (4) Paydown expense on Agency MBS
represents the proportional expense of Agency MBS purchase premiums
relative to the Agency MBS principal payments and prepayments which
occurred during the quarter.
Effective Net Interest Rate Spread
Three Months Ended September 30, 2016
Amount
Annualized
Percentage
(in thousands) Average Asset Yield, Including TBA Dollar
Roll Income: Total interest and other income $ 36,054 2.70 % Dollar
roll income on TBA Agency MBS(1) 3,477 0.26 % Premium amortization
on Agency MBS 7,078 0.53 % Paydown expense on Agency MBS(2)
(8,882 ) -0.67 % Total interest income and average asset yield,
including TBA dollar roll income $ 37,727 2.82 % Effective
Cost of Funds: Total interest expense $ 16,893 1.37 % Periodic net
settlement on interest rate Swaps after de-designation(3) 3,443
0.28 % Amortization of other comprehensive income on de-designated
Swaps(4) 87 0 % Loss on expiration of Eurodollar Futures Contracts
(311 ) -0.03 % Effective total interest expense and
effective cost of funds $ 20,112 1.62 % Effective net
interest rate spread 1.20 % Average earning assets $ 5,344,533
Average borrowings $ 4,954,807
_______________
(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 both the “(loss) gain on derivatives-TBA Agency MBS”
and “derivative income-TBA Agency MBS” that are 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. Net payments on the
interest rate swaps made prior to de-designation are recognized in
GAAP net income to common stockholders. (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 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/20161102006836/en/
Anworth Mortgage Asset CorporationJohn T. Hillman1299 Ocean
Avenue, Second FloorSanta Monica, CA 90401(310) 255-4438 or (310)
255-4493jhillman@anworth.comhttp://www.anworth.com
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