Anworth Reports Fourth Quarter 2020 Financial Results

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02/23/2021 - 04:05 PM

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