Anworth Reports First Quarter Financial Results

Saturday May 4, 2019. 12:02 AM , from Digital Pro Sound

SANTA MONICA, Calif.–(BUSINESS WIRE)–Anworth
Mortgage Asset Corporation (NYSE: ANH) (the “Company” or “Anworth”)
today reported its financial results for the first quarter ended March
31, 2019.

Earnings

The following table summarizes the Company’s core earnings, GAAP net
loss to common stockholders, and comprehensive income for the three
months ended March 31, 2019:

Three Months Ended

March 31, 2019

(unaudited)

Earnings

Per

Weighted

Share

(in thousands)

Core Earnings

$

11,948

$

0.12

GAAP net loss to common stockholders

$

(22,267

)

$

(0.23

)

Comprehensive income

$

20,476

$

0.21

Core earnings is a non-GAAP financial measure, which is explained and
reconciled to GAAP net loss 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, which is included in
this earnings release. Comprehensive income consists of the net loss to
all stockholders (including the amounts paid to preferred stockholders)
and the change in other comprehensive income.

Portfolio

At March 31, 2019 and December 31, 2018, the composition of the
Company’s portfolio at fair value was as follows:

March 31, 2019

December 31, 2018

Dollar Amount

Percentage

Dollar Amount

Percentage

(in thousands)

(unaudited)

Agency MBS:

ARMS and hybrid ARMs

$

1,424,495

24.2

%

$

1,547,405

26.6

%

Fixed-rate Agency MBS

2,320,596

39.3

%

2,001,314

34.3

%

TBA Agency MBS

721,391

12.0

%

906,016

15.6

%

Total Agency MBS

$

4,466,482

75.5

%

$

4,454,735

76.5

%

Non-Agency MBS

768,597

13.0

%

795,203

13.7

%

Residential mortgage loans(1)

535,077

9.1

%

549,016

9.4

%

Residential mortgage loans held-for-securitization

129,583

2.2

%

11,660

0.2

%

Residential real estate

13,752

0.2

%

13,782

0.2

%

Total Portfolio

$

5,913,491

100.0

%

$

5,824,396

100.0

%

Total Assets(2)

$

6,063,120

$

5,939,700

____________________

(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 March 31, 2019, the allocation of the Company’s agency
mortgage-backed securities (“Agency MBS”) was approximately 32%
adjustable-rate and hybrid adjustable-rate Agency MBS, 52% fixed-rate
Agency MBS, and 16% fixed-rate TBA Agency MBS. At December 31, 2018, the
allocation of the Company’s Agency MBS was approximately 35%
adjustable-rate and hybrid adjustable-rate Agency MBS, 45% fixed-rate
Agency MBS, and 20% fixed-rate TBA Agency MBS, both periods of which are
detailed below:

March 31,

2019

December 31,

2018

(dollar amounts in thousands)

(unaudited)

Fair value of Agency MBS and TBA Agency MBS

$

4,466,482

$

4,454,735

Adjustable-rate Agency MBS coupon reset (less than 1 year)

20

%

20

%

Hybrid adjustable-rate Agency MBS coupon reset (1-3 years)

3

5

Hybrid adjustable-rate Agency MBS coupon reset (3-5 years)

6

7

Hybrid adjustable-rate Agency MBS coupon reset (greater than 5 years)

3

3

Total adjustable-rate Agency MBS

32

%

35

%

15-year fixed-rate Agency MBS

8

20

15-year fixed-rate TBA Agency MBS

–

10

20-year fixed-rate Agency MBS

8

8

30-year fixed-rate Agency MBS

36

17

30-year fixed-rate TBA Agency MBS

16

10

Total MBS

100

%

100

%

At March 31, 2019 and December 31, 2018, the summary statistics of the
Company’s Agency MBS portfolio were as follows:

March 31,

2019

December 31,

2018

(unaudited)

Weighted Average Agency MBS Coupon:

Adjustable-rate Agency MBS

4.34

%

4.09

%

Hybrid adjustable-rate Agency MBS

2.52

2.52

15-year fixed-rate Agency MBS

3.13

2.90

15-year fixed-rate TBA Agency MBS

–

3.57

20-year fixed-rate Agency MBS

3.70

3.69

30-year fixed-rate Agency MBS

4.05

4.04

30-year fixed-rate TBA Agency MBS

4.32

4.35

Total Agency MBS:

3.84

%

3.54

%

Average Amortized Cost:

Adjustable-rate Agency MBS

102.67

%

102.65

%

Hybrid adjustable-rate Agency MBS

102.53

102.49

15-year fixed-rate Agency MBS

102.06

102.28

15-year fixed-rate TBA Agency MBS

–

100.47

20-year fixed-rate Agency MBS

104.02

104.48

30-year fixed-rate Agency MBS

102.73

102.90

30-year fixed-rate TBA Agency MBS

103.06

102.49

Total Agency MBS:

102.79

%

102.47

%

Average asset yield (weighted average coupon divided by average
amortized cost)

3.74

%

3.45

%

Unamortized premium

$99.7 million

$95.2 million

Unamortized premium as a percentage of par value

2.79

%

2.47

%

Premium amortization expense on Agency MBS for the respective quarter

$5.9 million

$7.4 million

At March 31, 2019 and December 31, 2018, the constant prepayment rate
(“CPR”) and weighted average term to next interest rate reset of our
Agency MBS were as follows:

March 31,

2019

December 31,

2018

(unaudited)

Constant prepayment rate (CPR) of Agency MBS

13%

14%

Constant prepayment rate (CPR) of adjustable-rate and hybrid
adjustable-rate Agency MBS

19%

21%

Weighted average term to next interest rate reset on Agency MBS

24 months

24 months

Non-Agency MBS

The following tables summarize the Company’s Non-Agency MBS at March 31,
2019 and December 31, 2018:

March 31, 2019

Weighted Average

Portfolio Type

Fair

Value

Amortized

Cost

Current

Principal

Amortized

Cost

Coupon

Yield

(in thousands)

(unaudited)

Legacy Non-Agency MBS (pre-2008)

$

551,428

$

537,652

$

719,254

74.75

%

5.59

%

5.56

%

Non-performing

82,884

83,007

83,260

99.70

5.19

5.49

Credit Risk Transfer

134,285

130,210

141,839

91.80

4.30

5.81

Total Non-Agency MBS

$

768,597

$

750,869

$

944,353

79.51

%

5.35

%

5.60

%

December 31, 2018

Weighted Average

Portfolio Type

Fair

Value

Amortized

Cost

Current

Principal

Amortized

Cost

Coupon

Yield

(in thousands)

(unaudited)

Legacy Non-Agency MBS (pre-2008)

$

561,940

$

553,292

$

738,210

74.95

%

5.56

%

5.57

%

Non-performing

101,744

102,450

102,760

99.70

5.14

5.42

Credit Risk Transfer

131,519

129,898

141,839

91.58

4.30

5.72

Total Non-Agency MBS

$

795,203

$

785,640

$

982,809

79.94

%

5.34

%

5.58

%

Residential Mortgage Loans Held-for-Investment

The following table summarizes the Company’s residential mortgage loans
held-for-investment at March 31, 2019 and December 31, 2018:

March 31,

December 31,

2019

2018

(in thousands)

(unaudited)

Residential mortgage loans held-for-investment

$

535,077

$

549,016

Asset-backed securities issued by securitization trusts

525,712

539,651

Retained interest in loans held in securitization trusts

$

9,365

$

9,365

Residential Mortgage Loans Held-for-Securitization

The following table summarizes the Company’s residential mortgage loans
held-for-securitization at March 31, 2019 and December 31, 2018:

March 31,

December 31,

2019

2018

(in thousands)

(unaudited)

Residential mortgage loans held-for-securitization

$

129,583

$

11,660

Amount outstanding on warehouse line of credit

$

15,442

$

–

Payable for purchased loans

$

112,316

$

11,660

Residential Properties Portfolio

At March 31, 2019 and December 31, 2018, Anworth Properties Inc. owned
86 and 86 single-family residential rental properties, respectively,
located in Southeastern Florida that were carried at a total cost, net
of accumulated depreciation, of $13.8 million and $13.8 million,
respectively.

MBS Portfolio Financing

March 31, 2019

Agency

MBS

Non-Agency

MBS

Total

MBS

(dollar amounts in thousands)

(unaudited)

Repurchase Agreements:

Outstanding repurchase agreement balance

$ 3,215,000

$ 545,634

$ 3,760,634

Average interest rate

2.68

%

3.60

%

2.81

%

Average maturity

33 days

18 days

31 days

Average interest rate after adjusting for interest rate swaps

2.32

%

Average maturity after adjusting for interest rate swaps

1,222 days

December 31, 2018

Agency

MBS

Non-Agency

MBS

Total

MBS

(dollar amounts in thousands)

(unaudited)

Repurchase Agreements:

Outstanding repurchase agreement balance

$ 3,235,000

$ 576,627

$ 3,811,627

Average interest rate

2.52

%

3.55

%

2.67

%

Average maturity

35 days

13 days

32 days

Average interest rate after adjusting for interest rate swaps

2.23

%

Average maturity after adjusting for interest rate swaps

1,217 days

Portfolio Leverage

At March 31, 2019, the Company’s leverage multiple was 6.05x. The
leverage multiple is calculated by dividing the Company’s repurchase
agreements and credit line 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 7.18x at March 31, 2019. At December 31,
2018, the Company’s leverage multiple was 6.16x and the effective
leverage was 7.63x.

Interest Rate Swaps

At March 31, 2019 and December 31, 2018, the Company’s interest rate
swaps agreements (“Swaps”) had the following notional amounts, weighted
average fixed rates, and remaining terms:

March 31, 2019

Maturity

Notional

Amount

Weighted

Average

Fixed

Rate

Remaining

Term in

Months

Remaining

Term in

Years

(in thousands)

(unaudited)

Less than 12 months

$

650,000

1.61

%

6

0.5

1 year to 2 years

666,000

1.76

18

1.5

2 years to 3 years

300,000

1.87

30

2.5

3 years to 4 years

270,000

2.09

44

3.7

4 years to 5 years

355,000

2.39

57

4.7

5 years to 7 years

525,000

2.48

75

6.3

7 years to 10 years

590,000

2.82

104

8.7

$

3,356,000

2.13

%

47

3.9

December 31, 2018

Maturity

Notional

Amount

Weighted

Average

Fixed

Rate

Remaining

Term in

Months

Remaining

Term in

Years

(in thousands)

(unaudited)

Less than 12 months

$

725,000

1.60

%

7

0.6

1 year to 2 years

591,000

1.70

19

1.6

2 years to 3 years

400,000

1.96

30

2.5

3 years to 4 years

220,000

1.92

43

3.6

4 years to 5 years

205,000

2.27

57

4.8

5 years to 7 years

475,000

2.41

73

6.1

7 years to 10 years

690,000

2.83

104

8.7

$

3,306,000

2.10

%

47

3.9

Effective Net Interest Rate Spread

March 31,

2019

December 31,

2018

(unaudited)

Average asset yield, including TBA dollar roll income

3.66

%

3.56

%

Effective cost of funds

2.52

2.52

Effective net interest rate spread

1.14

%

1.04

%

Certain components of the 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.

Dividend

On March 14, 2019, the Company declared a quarterly common stock
dividend of $0.13 per share for the first quarter ended March 31, 2019.
Based upon the closing price of $4.04 on March 31, 2019, the annualized
dividend yield on the Company’s common stock at March 31, 2019 was 12.9%.

Book Value per Common Share

At March 31, 2019, the Company’s book value was $4.76 per share of
common stock, which was an increase of $0.05 from $4.71 in the prior
quarter.

The $0.13 quarterly dividend plus the $0.05 increase in book value per
common share from the prior quarter resulted in a return on book value
per common share of 3.8% for the quarter ended March 31, 2019.

Subsequent Events

On April 1, 2019, the conversion rate of our Series B Preferred Stock
increased from 5.2588 to 5.3539 shares of our common stock based upon
the common stock dividend of $0.13 per share that was declared on March
14, 2019.

On April 30, 2019, we settled on an aggregate of approximately $74.5
million (including premium and accrued interest) of Non-QM residential
mortgage loans that we acquired during the quarter ended March 31, 2019.

Conference Call

The Company will host a conference call on Monday, May 6, 2019 at 1:00
PM Eastern Time, 10:00 AM Pacific Time, to discuss its first quarter
2019 results. The dial-in number for the conference call is 877-504-2731
for U.S. callers (international callers should dial 412-902-6640 and
Canadian callers should dial 855-669-9657). When dialing in,
participants should ask to be connected to the Anworth Mortgage earnings
call. Replays of the call will be available for a 7-day period
commencing at 3:00 PM Eastern Time on May 6, 2019. 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 10131180. The conference call will also be
webcast live over the Internet, which can be accessed on the Company’s
website at
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
or the Company’s website at

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 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; implementation of or
changes in government regulations affecting our business; our ability to
maintain our qualification as a real estate investment trust for federal
income tax purposes; our ability to maintain an exemption from the
Investment Company Act of 1940, as amended; risks associated with our
home rental business; and the Manager’s ability to manage our growth.
Our Annual Report on Form 10-K and other SEC filings discuss the most
significant risk factors that may affect our business, results of
operations and financial condition. We undertake no obligation to revise
or update publicly any forward-looking statements for any reason.

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

March 31,

December 31,

2019

2018

(audited)

ASSETS

Agency MBS at fair value (including $3,421,455 and $3,433,252
pledged to counterparties at March 31, 2019

and December 31, 2018, respectively)

$

3,745,091

$

3,548,719

Non-Agency MBS at fair value (including $700,391 and $726,428
pledged to counterparties at March 31, 2019

and December 31, 2018, respectively)

768,597

795,203

Residential mortgage loans held-for-securitization

129,583

11,660

Residential mortgage loans held-for-investment through consolidated
securitization trusts(1)

535,077

549,016

Residential real estate

13,752

13,782

Cash and cash equivalents

21,997

3,165

Reverse repurchase agreements

—

20,000

Restricted cash

75,513

30,296

Interest and dividends receivable

17,539

16,872

Derivative instruments at fair value

27,396

46,207