Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 03, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | ANH | |
Entity Registrant Name | ANWORTH MORTGAGE ASSET CORP | |
Entity Central Index Key | 1,047,884 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 98,372,485 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | |
ASSETS | |||
Agency MBS at fair value (including $3,691,061 and $4,073,852 pledged to counterparties at June 30, 2018 and December 31, 2017, respectively) | $ 3,834,344 | $ 4,278,797 | |
Non-Agency MBS at fair value (including $686,962 and $661,445 pledged to counterparties at June 30, 2018 and December 31, 2017, respectively) | 779,995 | 760,825 | |
Residential mortgage loans held-for-investment | [1] | 585,020 | 639,351 |
Residential real estate | 13,987 | 14,143 | |
Cash and cash equivalents | 12,593 | 12,273 | |
Restricted cash | 11,157 | ||
Interest and dividends receivable | 17,272 | 18,091 | |
Derivative instruments at fair value | 69,639 | 27,793 | |
Prepaid expenses and other | 6,100 | 3,111 | |
Total Assets | 5,318,950 | 5,765,541 | |
Liabilities: | |||
Accrued interest payable | 21,881 | 15,835 | |
Repurchase agreements | 4,018,480 | 4,365,695 | |
Asset-backed securities issued by securitization trusts | [1] | 575,653 | 629,984 |
Junior subordinated notes. | 37,380 | 37,380 | |
Derivative instruments at fair value | 652 | 1,335 | |
Accrued expenses and other | 7,548 | 897 | |
Total Liabilities | 4,677,649 | 5,068,119 | |
Series B Cumulative Convertible Preferred Stock: par value $0.01 per share; liquidating preference $25.00 per share ($19,494 and $14,494, respectively); 780 and 780 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 19,455 | 19,455 | |
Stockholders' Equity: | |||
Common Stock: par value $0.01 per share; authorized 200,000 shares, 98,304 shares issued and outstanding at June 30, 2018 and 98,137 shares issued and outstanding at December 31, 2017, respectively | 983 | 981 | |
Additional paid-in capital | 981,087 | 980,243 | |
Accumulated other comprehensive income consisting of unrealized gains and losses | (19,460) | 17,021 | |
Accumulated deficit | (436,245) | (415,235) | |
Total Stockholders' Equity | 621,846 | 677,967 | |
Total Liabilities and Stockholders' Equity | 5,318,950 | 5,765,541 | |
Series A Preferred Stock | |||
Stockholders' Equity: | |||
Cumulative Preferred Stock | 46,537 | 46,537 | |
Total Stockholders' Equity | 46,537 | 46,537 | |
Series C Preferred Stock | |||
Stockholders' Equity: | |||
Cumulative Preferred Stock | 48,944 | 48,420 | |
Total Stockholders' Equity | 48,944 | 48,420 | |
Preferred Stock | |||
Liabilities: | |||
Dividends payable on stock | 2,292 | 2,272 | |
Common Stock | |||
Liabilities: | |||
Dividends payable on stock | 13,763 | 14,721 | |
Stockholders' Equity: | |||
Total Stockholders' Equity | $ 983 | $ 981 | |
[1] | The consolidated balance sheets include assets of consolidated variable interest entities, or 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 June 30, 2018 and December 31, 2017, total assets of the consolidated VIEs were $587 million and $641 million (including accrued interest receivable of $1.9 million and $2.1 million), respectively (which is recorded above in the line item entitled “Interest and dividends receivable”), and total liabilities were $578 million and $632 million (including accrued interest payable of $1.9 million and $2.0 million), respectively (which is recorded in the line item above entitled “Accrued interest payable”). Please refer to Note 4, “Variable Interest Entities,” for further discussion. |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Agency MBS pledged to counterparties at fair value | $ 3,834,344,000 | $ 4,278,797,000 |
Series B Cumulative Convertible Preferred Stock, par value | $ 0.01 | $ 0.01 |
Series B Cumulative Convertible Preferred Stock, liquidating preference per share | $ 25 | $ 25 |
Series B Cumulative Convertible Preferred Stock, liquidating preference | $ 19,494,000 | $ 19,494,000 |
Series B Cumulative Convertible Preferred Stock, shares issued | 779,743 | 780,000 |
Series B Cumulative Convertible Preferred Stock, shares outstanding | 780,000 | 780,000 |
Common Stock, par value | $ 0.01 | $ 0.01 |
Common Stock, authorized | 200,000,000 | 200,000,000 |
Common Stock, issued | 98,303,913 | 98,137,000 |
Common Stock, outstanding | 98,303,913 | 98,137,000 |
Total assets | $ 5,318,950,000 | $ 5,765,541,000 |
Accrued interest receivable | 17,272,000 | 18,091,000 |
Total liabilities | 4,677,649,000 | 5,068,119,000 |
Accrued interest payable | 21,881,000 | 15,835,000 |
Agency MBS | ||
Agency MBS pledged to counterparties at fair value | 3,691,061,000 | 4,073,852,000 |
Non-Agency MBS | ||
Agency MBS pledged to counterparties at fair value | $ 686,962,000 | $ 661,445,000 |
Series A Preferred Stock | ||
Cumulative Preferred Stock, par value | $ 0.01 | $ 0.01 |
Cumulative Preferred Stock, liquidating preference per share | $ 25 | $ 25 |
Cumulative Preferred Stock, liquidating preference | $ 47,984,000 | $ 47,984,000 |
Cumulative Preferred Stock, shares issued | 1,919,378 | |
Cumulative Preferred Stock, shares outstanding | 1,919,378 | 1,919,378 |
Series C Preferred Stock | ||
Cumulative Preferred Stock, par value | $ 0.01 | $ 0.01 |
Cumulative Preferred Stock, liquidating preference per share | $ 25 | $ 25 |
Cumulative Preferred Stock, liquidating preference | $ 50,257,000 | $ 49,725,000 |
Cumulative Preferred Stock, shares issued | 2,010,278 | 1,989,000 |
Cumulative Preferred Stock, shares outstanding | 2,010,278 | 1,989,000 |
Variable Interest Entities Primary Beneficiary | ||
Total assets | $ 587,000,000 | $ 641,000,000 |
Accrued interest receivable | 1,900,000 | 2,100,000 |
Total liabilities | 578,000,000 | 632,000,000 |
Accrued interest payable | $ 1,900,000 | $ 2,000,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Interest and other income: | ||||
Interest-Agency MBS | $ 24,814 | $ 15,771 | $ 48,871 | $ 32,873 |
Interest-Non-Agency MBS | 9,902 | 9,738 | 19,910 | 19,306 |
Interest-residential mortgage loans | 5,955 | 7,060 | 12,194 | 14,411 |
Other interest income | 44 | 31 | 72 | 58 |
Interest and Dividend Income, Operating, Total | 40,715 | 32,600 | 81,047 | 66,648 |
Interest Expense: | ||||
Interest expense on repurchase agreements | 22,028 | 11,421 | 41,122 | 21,832 |
Interest expense on asset-backed securities | 5,797 | 6,892 | 11,867 | 13,966 |
Interest expense on junior subordinated notes | 504 | 401 | 951 | 785 |
Interest Expense, Total | 28,329 | 18,714 | 53,940 | 36,583 |
Net interest income | 12,386 | 13,886 | 27,107 | 30,065 |
Operating Expenses: | ||||
Management fee to related party | (1,666) | (1,876) | (3,403) | (3,697) |
Rental properties depreciation and expenses | (405) | (347) | (792) | (676) |
General and administrative expenses | (1,324) | (968) | (2,434) | (2,122) |
Total operating expenses | (3,395) | (3,191) | (6,629) | (6,495) |
Other income (loss): | ||||
Income-rental properties | 445 | 451 | 897 | 900 |
Realized loss on sale of MBS | 176 | (11,987) | 108 | |
Impairment charge on Non-Agency MBS | (1,757) | (905) | (1,757) | (1,637) |
Unrealized (loss) gain on Agency MBS held as trading investments | (2,700) | 4,100 | (11,600) | 4,200 |
Gain on sales of residential mortgage loans held-for-investment | 378 | |||
Gain on derivatives, net | 9,930 | (4,422) | 23,342 | (2,044) |
Recovery on Non-Agency MBS | 1 | 1 | 1 | 1 |
Total other (loss) income | 5,942 | (598) | (8,398) | 1,928 |
Net (loss) income | 14,933 | 10,097 | 12,080 | 25,498 |
Dividends on preferred stock | (2,297) | (2,025) | (4,595) | (3,780) |
Net (loss) income to common stockholders | $ 12,636 | $ 8,072 | $ 7,485 | $ 21,718 |
Basic (loss) earnings per common share | $ 0.13 | $ 0.08 | $ 0.08 | $ 0.23 |
Diluted (loss) earnings per common share | $ 0.13 | $ 0.08 | $ 0.08 | $ 0.22 |
Basic weighted average number of shares outstanding | 98,271 | 95,696 | 98,228 | 95,701 |
Diluted weighted average number of shares outstanding | 102,205 | 100,590 | 102,132 | 100,567 |
Agency MBS | ||||
Other income (loss): | ||||
Realized loss on sale of MBS | $ (7,327) | |||
Unrealized (loss) gain on Agency MBS held as trading investments | $ (2,677) | $ 4,101 | $ (11,567) | $ 4,222 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net (loss) income | $ 14,933 | $ 10,097 | $ 12,080 | $ 25,498 |
Amortization of unrealized gains on interest rate swaps remaining in other comprehensive income | 1,023 | 450 | 1,963 | 990 |
Reclassification adjustment for interest (income) expense on swap agreements included in net (loss) income | (18) | 114 | (212) | 188 |
Other comprehensive (loss) income | (14,400) | 4,461 | (36,481) | 16,992 |
Comprehensive (loss) income | 533 | 14,558 | (24,401) | 42,490 |
Agency MBS | ||||
Available-for-sale, fair value adjustment | (13,847) | (4,746) | (49,328) | (2,411) |
Reclassification adjustment for loss on sales included in net (loss) income | (176) | 11,945 | (108) | |
Non-Agency MBS | ||||
Available-for-sale, fair value adjustment | $ (1,558) | $ 8,819 | (891) | $ 18,333 |
Reclassification adjustment for loss on sales included in net (loss) income | $ 42 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Common Stock Shares Outstanding | Common Stock | Additional Paid-In Capital | Accum. Other Comp. Income Gain Agency MBS | Accum. Other Comp. Income Non-Agency MBS | Accum. Other Comp. Gain (Loss) Derivatives | Accum. (Deficit)Series A Preferred Stock | Accum. (Deficit)Series B Preferred Stock | Accum. (Deficit)Series C Preferred Stock | Accum. (Deficit) | Series A Preferred Stock Shares Outstanding | Series C Preferred Stock Shares Outstanding | Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Total |
Beginning Balance at Dec. 31, 2017 | $ 981 | $ 980,243 | $ 2,163 | $ 30,201 | $ (15,344) | $ (415,235) | $ 46,537 | $ 48,420 | $ 677,967 | |||||||
Beginning Balance (in shares) at Dec. 31, 2017 | 98,137 | 1,919 | 1,989 | |||||||||||||
Issuance of Preferred Stock | 524 | 524 | ||||||||||||||
Issuance of Preferred Stock (in shares) | 21 | |||||||||||||||
Issuance of stock | 1 | 365 | 366 | |||||||||||||
Issuance of stock (in shares) | 75 | |||||||||||||||
Other comprehensive income, fair value adjustments and reclassifications | (23,536) | 709 | 746 | (22,081) | ||||||||||||
Net (loss) income | (2,853) | (2,853) | ||||||||||||||
Amortization of restricted stock | 24 | 24 | ||||||||||||||
Dividend declared | $ (1,035) | $ (305) | $ (958) | (1,035) | $ (305) | (958) | ||||||||||
Dividend declared per common share | (14,732) | (14,732) | ||||||||||||||
Ending Balance at Mar. 31, 2018 | 982 | 980,632 | (21,373) | 30,910 | (14,598) | (435,118) | 46,537 | 48,944 | 636,917 | |||||||
Ending Balance (in shares) at Mar. 31, 2018 | 98,212 | 1,919 | 2,010 | |||||||||||||
Beginning Balance at Dec. 31, 2017 | 981 | 980,243 | 2,163 | 30,201 | (15,344) | (415,235) | 46,537 | 48,420 | 677,967 | |||||||
Beginning Balance (in shares) at Dec. 31, 2017 | 98,137 | 1,919 | 1,989 | |||||||||||||
Other comprehensive income, fair value adjustments and reclassifications | (36,481) | |||||||||||||||
Net (loss) income | 12,080 | |||||||||||||||
Dividend declared | (4,595) | |||||||||||||||
Ending Balance at Jun. 30, 2018 | 983 | 981,087 | (35,220) | 29,352 | (13,593) | (436,245) | 46,537 | 48,944 | 621,846 | |||||||
Ending Balance (in shares) at Jun. 30, 2018 | 98,304 | 1,919 | 2,010 | |||||||||||||
Beginning Balance at Mar. 31, 2018 | 982 | 980,632 | (21,373) | 30,910 | (14,598) | (435,118) | 46,537 | 48,944 | 636,917 | |||||||
Beginning Balance (in shares) at Mar. 31, 2018 | 98,212 | 1,919 | 2,010 | |||||||||||||
Issuance of stock | 1 | 430 | 431 | |||||||||||||
Issuance of stock (in shares) | 92 | |||||||||||||||
Other comprehensive income, fair value adjustments and reclassifications | (13,847) | (1,558) | 1,005 | (14,400) | ||||||||||||
Net (loss) income | 14,933 | 14,933 | ||||||||||||||
Amortization of restricted stock | 25 | 25 | ||||||||||||||
Dividend declared | $ (1,035) | $ (305) | $ (957) | (1,035) | $ (305) | (957) | (2,297) | |||||||||
Dividend declared per common share | (13,763) | (13,763) | ||||||||||||||
Ending Balance at Jun. 30, 2018 | $ 983 | $ 981,087 | $ (35,220) | $ 29,352 | $ (13,593) | $ (436,245) | $ 46,537 | $ 48,944 | $ 621,846 | |||||||
Ending Balance (in shares) at Jun. 30, 2018 | 98,304 | 1,919 | 2,010 |
CONSOLIDATED STATEMENTS OF STO7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares | 3 Months Ended | |
Jun. 30, 2018 | Mar. 31, 2018 | |
Dividend declared common share, per share | $ 0.14 | $ 0.15 |
Series A Preferred Stock | ||
Dividend declared, per preferred share | 0.539063 | 0.539063 |
Series B Preferred Stock | ||
Dividend declared, per preferred share | 0.390625 | 0.390625 |
Series C Preferred Stock | ||
Dividend declared, per preferred share | $ 0.476525 | $ 0.476525 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Operating Activities: | ||||||
Net (loss) income | $ 14,933 | $ (2,853) | $ 10,097 | $ 12,080 | $ 25,498 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Depreciation on rental properties | 118 | 116 | 236 | 231 | ||
Realized loss on sales of MBS | (176) | 11,987 | (108) | |||
Unrealized (loss) gain on Agency MBS held as trading investments | 2,700 | (4,100) | 11,600 | (4,200) | ||
Impairment charge | 1,757 | 905 | 1,757 | 1,637 | ||
Gain on sales of residential mortgage loans | (378) | |||||
Amortization of restricted stock | 25 | 20 | 50 | 41 | ||
Recovery on Non-Agency MBS | (1) | (1) | (1) | (1) | ||
Net settlements on interest rate swaps, net of amortization | 2,256 | (1,751) | 1,660 | (4,097) | ||
Unrealized (gain) on interest rate swaps, net | (13,856) | 5,960 | (39,250) | 5,487 | ||
Loss (gain) on derivatives | (9,930) | 4,422 | (23,342) | 2,044 | ||
Changes in assets and liabilities: | ||||||
Decrease (increase) in interest receivable | 446 | (3,063) | 472 | (5,372) | ||
(Decrease) in prepaid expenses and other | 5,822 | 8,549 | 69 | 17 | ||
(Decrease) increase in accrued interest payable | 7,777 | 3,714 | 6,251 | 4,381 | ||
Increase (decrease) in accrued expenses | 1,500 | 389 | 6,650 | 252 | ||
Net cash provided by operating activities | 35,474 | 28,369 | 54,276 | 38,269 | ||
Investing Activities: | ||||||
Proceeds from sales, MBS portfolios | 27,466 | 589,073 | 35,679 | |||
Purchases, MBS portfolios | (52,169) | (568,505) | (724,259) | (683,966) | ||
Principal payments, MBS portfolios | 259,504 | 327,085 | 469,111 | 607,521 | ||
Residential properties purchases | (26) | (58) | (80) | (155) | ||
Net cash provided by (used in) investing activities | 207,337 | (213,985) | 333,901 | (34,036) | ||
Financing Activities: | ||||||
Borrowings from repurchase agreements | 5,533,087 | 5,748,475 | 12,493,057 | 11,201,207 | ||
Repayments on repurchase agreements | (5,760,404) | (5,611,339) | (12,840,272) | (11,209,769) | ||
Net settlements on TBA Agency MBS Contracts | (4,246) | 8,369 | (19,094) | (7,111) | ||
Proceeds from common stock issued (common stock repurchased), net | 431 | 307 | 797 | 629 | ||
Preferred stock dividends paid | (2,297) | (1,755) | (4,575) | (3,415) | ||
Common stock dividends paid | (14,732) | (14,337) | (29,452) | (28,695) | ||
Net cash provided by (used in) financing activities | (248,161) | 151,785 | (399,014) | (20,234) | ||
Net (decrease) increase in cash and cash equivalents | (5,350) | (33,831) | (10,837) | (16,001) | ||
Cash, cash equivalents and restricted cash at beginning of period | 17,943 | 23,430 | 61,251 | 23,430 | 43,421 | $ 43,421 |
Cash, cash equivalents and restricted cash at end of period | 12,593 | $ 17,943 | 27,420 | 12,593 | 27,420 | $ 23,430 |
Supplemental Disclosure of Cash Flow Information: | ||||||
Cash paid for interest | 12,500 | 12,104 | 34,162 | 26,894 | ||
Change in payable for MBS purchased | (14,292) | 340 | ||||
Residential mortgage loans | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Amortization of premium (discount) | (28) | (27) | (56) | (95) | ||
Impairment charge | 18 | |||||
Investing Activities: | ||||||
Proceeds from sales, Residential mortgage loans held-for investment | 6,806 | |||||
Principal payments, Residential mortgage loans held-for-investment | 28 | 27 | 56 | 79 | ||
Agency MBS | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Amortization of premium (discount) | 6,354 | 8,811 | 13,955 | 17,178 | ||
Realized loss on sales of MBS | 7,327 | |||||
Unrealized (loss) gain on Agency MBS held as trading investments | 2,677 | (4,101) | 11,567 | (4,222) | ||
Investing Activities: | ||||||
Proceeds from sales, MBS portfolios | 27,500 | 583,200 | 35,700 | |||
Non-Agency MBS | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Amortization of premium (discount) | 1,768 | 479 | 3,597 | 1,001 | ||
Impairment charge | 1,757 | 905 | 1,757 | 1,637 | ||
Investing Activities: | ||||||
Proceeds from sales, MBS portfolios | 5,800 | |||||
Series C Preferred Stock | ||||||
Financing Activities: | ||||||
Proceeds on Series C Preferred Stock issued | 22,065 | 525 | 26,920 | |||
TBA Agency MBS | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Loss (gain) on derivatives | $ 3,926 | (1,552) | $ 15,907 | (3,181) | ||
Eurodollar Future | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Loss (gain) on derivatives | $ 14 | $ 300 |
Organization and Significant Ac
Organization and Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Significant Accounting Policies | |
Organization and Significant Accounting Policies | NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Our Company We were incorporated in Maryland on October 20, 1997 and commenced operations on March 17, 1998. Our principal business is to invest in, finance, and manage a leveraged portfolio of residential mortgage-backed securities, or MBS, and residential mortgage loans, which presently include the following types of investments: · Agency mortgage-backed securities , or Agency MBS, which include residential mortgage pass-through certificates and collateralized mortgage obligations, or CMOs, which are securities representing interests in pools of mortgage loans secured by residential property in which the principal and interest payments are guaranteed by a government-sponsored enterprise, or GSE, such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac; · Non-agency mortgage-backed securities , or Non-Agency MBS, which are securities issued by companies that are not guaranteed by a GSE and that are secured primarily by first-lien residential mortgage loans; and · Residential mortgage loans through consolidated securitization trusts . We finance residential mortgage loans through asset-backed securities, or ABS, issued by the consolidated securitization trusts. The ABS which are held by unaffiliated third parties are non-recourse financing. The difference in the amount of the loans and the amount of the ABS represents our retained net interest in the securitization trusts. Our principal business objective is to generate net income for distribution to our stockholders primarily based upon the spread between the interest income on our mortgage assets and our borrowing costs to finance our acquisition of those assets. We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code. As long as we retain our REIT status, we generally will not be subject to federal or state income taxes to the extent that we distribute our taxable net income to our stockholders, and we routinely distribute to our stockholders substantially all of the taxable net income generated from our operations. In order to qualify as a REIT, we must meet various ongoing requirements under the tax law, including requirements relating to the composition of our assets, the nature of our gross income, minimum distribution requirements, and requirements relating to the ownership of our stock. Our Manager We are externally managed and advised by Anworth Management LLC, or our Manager. Effective as of December 31, 2011, we entered into a management agreement, or the Management Agreement, with our Manager, which effected the externalization of our management function, or the Externalization. Since the effective date of the Externalization, our day-to-day operations are being conducted by our Manager through the authority delegated to it under the Management Agreement and pursuant to the policies established by our board of directors, or our Board. Our Manager is supervised by our Board and is responsible for administering our day-to-day operations. In addition, our Manager 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. Our Manager will also perform such other services and activities relating to our assets and operations as may be appropriate. In exchange for these services, our Manager receives a management fee, paid monthly in arrears, in an amount equal to one-twelfth of 1.20% of our Equity (as defined in the Management Agreement). BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles utilized in the United States of America, or GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are susceptible to change relate to the determination of the fair value of investments and derivatives, cash flow projections for and credit performance of Non-Agency MBS and residential mortgage loans held-for-investment, amortization of security and loan premiums, accretion of security and loan discounts, and accounting for derivative activities. Actual results could materially differ from these estimates. In the opinion of management, all material adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Our consolidated financial statements include the accounts of all subsidiaries. Significant intercompany accounts and transactions have been eliminated. The interim financial information in the accompanying unaudited consolidated financial statements and the notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2017. Our consolidated financial statements also include the consolidation of certain securitization trusts that meet the definition of a variable interest entity, or VIEs, because the Company has been deemed to be the primary beneficiary of the securitization trusts. These securitization trusts hold pools of residential mortgage loans and issue series of ABS payable from the cash flows generated by the underlying pools of residential mortgage loans. These securitizations are non-recourse financing for the residential mortgage loans held-for-investment. Generally, a portion of the ABS issued by the securitization trusts are sold to unaffiliated third parties and the balance is purchased by the Company. The Company classifies the underlying residential mortgage loans owned by the securitization trusts as residential mortgage loans held-for-investment in its consolidated balance sheets. The ABS issued to third parties are recorded as liabilities on the Company’s consolidated balance sheets. The Company records interest income on the residential mortgage loans held-for-investment and interest expense on the ABS issued to third parties in the Company’s consolidated statements of operations. The Company records the initial underlying assets and liabilities of the consolidated securitization trusts at their fair value upon consolidation into the Company and, as such, no gain or loss is recorded upon consolidation. See Note 4, “Variable Interest Entities,” for additional information regarding the impact of consolidation of securitization trusts. The consolidated securitization trusts are VIEs because the securitization trusts do not have equity that meets the definition of GAAP equity at risk. In determining if a securitization trust should be consolidated, the Company evaluates (in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810‑10) whether it has both (i) the power to direct the activities of the securitization trust that most significantly impact its economic performance and (ii) the right to receive benefits from the securitization trust or the obligation to absorb losses of the securitization trust that could be significant. The Company determined that it is the primary beneficiary of certain securitization trusts because it has certain delinquency and default oversight rights on residential mortgage loans. In addition, the Company owns the most subordinated class of ABS issued by the securitization trusts and has the obligation to absorb losses and right to receive benefits from the securitization trusts that could potentially be significant to the securitization trusts. The Company assesses modifications, if any, to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company’s initial consolidation assessment. The following is a summary of our significant accounting policies: Revenue Recognition During the three months ended March 31, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers,” and the other ASUs related to ASU 2014-09. These ASUs did not have a material impact on our financial statements. Our revenue streams are primarily from investments in MBS and residential mortgage loans held-for-investment. These are considered financial instruments under ASU 2014-09 and are excluded from the scope of this ASU, as they are covered under various ASC topics. A smaller portion of our business is the ownership and rental of residential properties. These residential property leases are also excluded from ASU 2014-09, as they are covered under ASC 840, “Leases.” The detail of the revenue recognition for each of our revenue streams is covered under the discussion for each of those items. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less. The carrying amount of cash equivalents approximates their fair value. Restricted cash includes cash pledged as collateral to counterparties on various derivative transactions. Mortgage-Backed Securities Agency MBS are securities that are obligations (including principal and interest) guaranteed by GSEs, such as Fannie Mae or Freddie Mac. Our investment-grade Agency MBS portfolio is invested primarily in fixed-rate and adjustable-rate mortgage-backed pass-through certificates and hybrid adjustable-rate MBS. Hybrid adjustable-rate MBS have an initial interest rate that is fixed for a certain period, usually one to ten years, and then adjusts annually for the remainder of the term of the asset. We structure our investment portfolio to be diversified with a variety of prepayment characteristics, investing in mortgage assets with prepayment penalties, investing in certain mortgage security structures that have prepayment protections and purchasing mortgage assets at a premium and at a discount. A portion of our portfolio consists of Non-Agency MBS. Our principal business objective is to generate net income for distribution to our stockholders primarily based upon the spread between the interest income on our mortgage assets and our borrowing costs to finance our acquisition of those assets. We classify our MBS as either trading investments, available-for-sale investments, or held-to-maturity investments. Our management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. We currently classify most of our MBS as available-for-sale. We have also designated a portion of our MBS as trading investments. All assets that are classified as available-for-sale are carried at fair value and unrealized gains or losses are generally included in “Other comprehensive income (loss)” as a component of stockholders’ equity. Losses that are credit-related on securities classified as available-for-sale, which are determined by management to be other-than-temporary in nature, are reclassified from “Other comprehensive income (loss)” on the consolidated balance sheets to income (loss) on the consolidated statements of operations. Assets classified as trading investments are reported at fair value with unrealized gains and losses included in our consolidated statements of operations. The most significant source of our revenue is derived from our investments in MBS. Interest income on Agency MBS is accrued based on the actual coupon rate and the outstanding principal amount of the underlying mortgages. Premiums and discounts are amortized or accreted into interest income over the estimated lives of the securities using the effective interest yield method, adjusted for the effects of actual and estimated prepayments based on ASC 320‑10. Our policy for estimating prepayment speeds for calculating the effective yield is to evaluate historical performance, street consensus prepayment speeds and current market conditions. If our estimate of prepayments is materially incorrect, as compared to the aforementioned references, we may be required to make an adjustment to the amortization or accretion of premiums and discounts that would have an impact on future income, which could be material and adverse. A majority of our Non-Agency MBS are accounted for under “Loans and Debt Securities Acquired with Credit Deterioration” (ASC 310‑30). A debt security accounted for under ASC 310‑30 is initially recorded at its purchase price (fair value). The amount of expected cash flows that exceed the initial investment represents the market yield adjustment (accretable yield), which is recognized as interest income on a level yield basis over the life of the security. The excess of total contractual cash flows over the cash flows expected at its origination is considered to be the non-accretable difference. We must periodically reassess the expected cash flows of loans accounted for under ASC 310‑30 along with the cash flows received. A significant increase in expected cash flows must be accounted for as an increase in the rate of accretion over the remaining life of the security. Conversely, if expected cash flows decrease, an other-than-temporary impairment must be recognized as a charge to earnings. Adjustments to the fair value of Non-Agency MBS, accounted for as available-for-sale securities, are recorded in AOCI. The determination as to whether impairment and accretable yield exists is based on cash flow projections related to the securities. As a result, the timing and amount of impairment and accretable yield constitutes material estimates that are susceptible to significant change. Interest income on the Non-Agency MBS that were purchased at a discount to par value and were rated below AA at the time of purchase is recognized based on the security’s effective interest rate. The effective interest rate on these securities is based on the projected cash flows from each security, which are estimated based on our observation of current information and events and include assumptions related to interest rates, prepayment rates, and the timing and amount of credit losses. On at least a quarterly basis, we review and, if appropriate, make adjustments to our cash flow projections based on input and analysis received from external sources, internal models, and our judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the available-for-sale securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore, actual maturities of available-for-sale securities are generally shorter than stated contractual maturities. Stated contractual maturities are generally greater than ten years. There can be no assurance that our assumptions used to estimate future cash flows or the current period’s yield for each asset would not change in the near term, and the change could be material. Based on the projected cash flows from our Non-Agency MBS purchased at a discount to par value, a portion of the purchase discount may be designated as a non-accretable difference and, therefore, not accreted into interest income. The amount designated as a non-accretable difference may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions, and other factors. If the performance of a security with a non-accretable difference is more favorable than forecasted, a portion of the amount designated as a non-accretable difference may be accreted into interest income prospectively. Conversely, if the performance of a security with a non-accretable difference is less favorable than forecasted, an impairment charge and write-down of such security to a new cost basis results. Securities transactions are recorded on the date the securities are purchased or sold. Realized gains or losses from securities transactions are determined based on the specific identified cost of the securities. The following tables show the gross unrealized losses and fair value of those individual securities in our MBS portfolio that are in a continuous unrealized loss position at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time: June 30, 2018 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 85 $ 1,420,191 $ (28,200) 174 $ 786,735 $ (26,691) 259 $ 2,206,926 $ (54,891) Non-Agency MBS 19 $ 119,068 $ (1,523) 10 $ 52,812 $ (2,132) 29 $ 171,880 $ (3,655) December 31, 2017 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 73 $ 1,171,947 $ (7,770) 192 $ 884,897 $ (17,598) 265 $ 2,056,844 $ (25,368) Non-Agency MBS 9 $ 63,568 $ (774) 14 $ 85,569 $ (2,380) 23 $ 149,137 $ (3,154) We do not consider those available-for-sale Agency MBS, or AFS MBS, that have been in a continuous loss position for 12 months or more to be other-than-temporarily impaired. The unrealized losses on our investments in AFS MBS were caused by fluctuations in interest rates. We purchased the AFS MBS primarily at a premium relative to their face value and the contractual cash flows of those investments are guaranteed by the GSEs. Since September 2008, the GSEs have been in the conservatorship of the U.S. government. At June 30, 2018, we did not expect to sell the AFS MBS at a price less than the amortized cost basis of our investments. Because the decline in market value of the AFS MBS is attributable to changes in interest rates and not the credit quality of the AFS MBS in our portfolio, and because we did not have the intent to sell these investments nor is it more likely than not that we will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2018. At June 30, 2018, there was an aggregate of approximately $22.6 million in unrealized losses on Trading Agency MBS that was not included in the table above, as this is recognized on our statements of operations. At December 31, 2017, there was an aggregate of approximately $11 million in unrealized losses on Trading Agency MBS that was not included in the table above, as they were previously recognized on our statements of operations. The unrealized losses on our investments in Non-Agency MBS were primarily caused by fluctuations in interest rates. We purchased the Non-Agency MBS primarily at a discount relative to their face value. During the three months ended June 30, 2018, there were several bonds that were impaired for a total of approximately $1.8 million, as the cash flow projections were less favorable than previously forecasted. On the remainder of the Non-Agency MBS, at June 30, 2018, we did not expect to sell these Non-Agency MBS at a price less than the amortized cost basis of our investments. Because the decline in market value of these Non-Agency MBS is attributable to changes in interest rates and not the credit quality of these Non-Agency MBS in our portfolio, and because we did not have the intent to sell these investments nor is it more likely than not that we will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2018. Residential Mortgage Loans Held-for-Investment Residential mortgage loans held-for-investment are residential mortgage loans held by consolidated securitization trusts. Residential mortgage loans held-for-investment are carried at unpaid principal balances net of any premiums or discounts and allowance for loan losses. We expect that we will be required to continue to consolidate the securitization trusts that hold the residential mortgage loans. We establish an allowance for residential loan losses based on our estimate of credit losses. These estimates for the allowance for loan losses require consideration of various observable inputs including, but not limited to, historical loss experience, delinquency status, borrower credit scores, geographic concentrations, and loan-to-value ratios, and are adjusted for current economic conditions as deemed necessary by our management. Many of these factors are subjective and cannot be reduced to a mathematical formula. In addition, since we have not incurred any significant amount of direct losses on our portfolio, we review national historical credit performance information from external sources to assist in our analysis. Changes in our estimates can significantly impact the allowance for loan losses and provision expense. The allowance reflects management’s best estimate of the credit losses inherent in the loan portfolio at the balance sheet date. It is also possible that we will experience credit losses that are different from our current estimates or that the time of those losses may differ from our estimates. We recognize interest income from residential mortgage loans on an accrual basis. Any related premium or discount is amortized into interest income using the effective interest method over the weighted average life of these loans. Coupon interest is recognized as revenue when earned and deemed collectable or until a loan becomes more than 90 days past due, at which point the loan is placed on non-accrual status. Interest previously accrued for loans that have been placed on non-accrual status is reversed against interest income in the period the loan is placed in non-accrual status. Residential loans delinquent more than 90 days or in foreclosure are characterized as delinquent. Cash principal and interest that are advanced from servicers after a loan becomes greater than 90 days past due are recorded as a liability due to the servicer. When a delinquent loan previously placed on non-accrual status has cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan is placed back on accrual status. Alternatively, non-accrual loans may be placed back on accrual status if restructured and after the loan is considered re-performing. A restructured loan is considered re-performing when the loan has been current for at least 12 months. Residential Properties Residential properties are stated at cost and consist of land, buildings, and improvements, including other costs incurred during their acquisition, possession, and renovation. Residential properties purchased that are not subject to an existing lease are treated as asset acquisitions and, as such, are recorded at their purchase price, including acquisition and renovation costs, all of which are allocated to land and building based upon their relative fair values at the date of acquisition. Residential properties acquired either subject to an existing lease or as part of a portfolio level transaction are treated as a business combination under ASC 805, Business Combinations , and, as such, are recorded at fair value, allocated to land, building and the existing lease, if applicable, based upon their relative fair values at the date of acquisition, with acquisition fees and other costs expensed as incurred. Building depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We will generally use a 27.5 year estimated life with no salvage value. We will incur costs to prepare our acquired properties to be leased. These costs will be capitalized and allocated to building costs. Costs related to the restoration, renovation, or improvement of our properties that improve and extend their useful lives are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary repairs and maintenance are expensed as incurred. Costs incurred by us to lease the properties will be capitalized and amortized over the life of the lease. Escrow deposits include refundable and non-refundable cash and earnest money on deposit with independent third parties for property purchases. Repurchase Agreements We finance the acquisition of MBS primarily through the use of repurchase agreements. Under these repurchase agreements, we sell securities to a lender and agree to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sale price that we receive and the repurchase price that we pay represents interest paid to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which we pledge our securities and accrued interest as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. We retain beneficial ownership of the pledged collateral. Upon the maturity of a repurchase agreement, we are required to repay the loan and concurrently receive back our pledged collateral from the lender or, with the consent of the lender, we may renew such agreement at the then-prevailing financing rate. These repurchase agreements may require us to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. Asset-Backed Securities Issued by Securitization Trusts Asset-backed securities issued by the securitization trusts are recorded at principal balances net of unamortized premiums or discounts. This long-term debt is collateralized only by the assets held in the trusts and is otherwise non-recourse to the Company. Derivative Financial Instruments Risk Management We primarily use short-term (less than or equal to 12 months) repurchase agreements to finance the purchase of MBS. These obligations expose us to variability in interest payments due to changes in interest rates. We actively monitor changes in interest rate exposures and evaluate various opportunities to mitigate this risk. Our objective is to limit the impact of interest rate changes on earnings and cash flows. The principal instruments we use to achieve this are interest rate swap agreements, or interest rate swaps. Interest rate swaps effectively convert a percentage of our repurchase agreements to fixed-rate obligations over a period of up to ten years. Under interest rate swaps, we agree to pay an amount equal to a specified fixed-rate of interest times a notional principal amount and to receive in return an amount equal to a specified variable-rate of interest times a notional amount, generally based on the London Interbank Offered Rate, or LIBOR. The notional amounts are not exchanged. We do not issue nor hold the interest rate swaps for speculative purposes. We also enter into To-Be-Announced, or TBA, Agency MBS as either a means of investing in and financing Agency MBS, or as a means of disposing of or reducing our exposure to agency securities. Pursuant to TBA contracts, we agree to purchase or sell, for future delivery, Agency MBS with certain principal and interest terms and certain types of collateral, but the particular Agency MBS to be delivered are not identified until shortly before the TBA settlement date. We also may choose, prior to settlement, to move the settlement of these MBS out to a later date by entering into an offsetting short or long position (referred to as a “pair off”), net settling the paired-off positions for cash, and simultaneously purchasing a similar TBA contract for a later settlement date. This transaction is commonly referred to as a “dollar roll.” The Agency MBS purchased or sold for a forward settlement date are typically priced at a discount to agency securities for settlement in the current month. This difference (or discount) is referred to as the “price drop.” The price drop represents compensation to us for foregoing net interest margin (interest income less repurchase agreement financing cost). TBA Agency MBS are accounted for as derivative instruments since they do not meet the exemption allowed for a “regular way” security trade under ASC 815, as either the TBA contracts do not settle in the shortest period of time possible or we cannot assess that it is probable at inception that we will take physical delivery of the security or that we will not settle on a net basis. Accounting for Derivatives and Hedging Activities We account for derivative instruments in accordance with ASC 815, which requires recognition of all derivatives as either assets or liabilities and measurement of those instruments at fair value, which is typically based on values obtained from large financial institutions who are market makers for these types of instruments. The accounting for changes in the fair value of derivative instruments depends on whether the instruments are designated and qualify as hedges in accordance with ASC 815. Changes in fair value related to derivatives not designated as hedges are recorded in our consolidated statements of operations as “Gain (loss) on derivatives, net.” For a derivative to qualify for hedge accounting, we must anticipate that the hedge will be highly “effective” as defined by ASC 815‑10. A hedge of the variability of cash flows that are to be received or paid in connection with a recognized asset or liability is known as a “cash flow” hedge. Changes in the fair value of a derivative that is highly effective and that is designated as a cash flow hedge, to the extent the hedge is effective, are recorded in AOCI and reclassified to income when the forecasted transaction affects income (e.g. when periodic settlement interest payments are due on repurchase agreements). Hedge ineffectiveness, if any, is recorded in current period income. When we discontinue hedge accounting, the gain or loss on the derivative remains in AOCI and is reclassified as an unrealized gain or loss on the consolidated statements of operations when the forecasted transaction affects income. In all situations where hedge accounting is discontinued and the derivative remains outstanding, we carry the derivative at its fair value on our balance sheet, recognizing changes in fair value in the current period consolidated statements of operations. All of our interest rate swaps had historically been accounted for as cash flow hedges under ASC 815. After August 22, 2014, none of our interest rate swaps were designated for hedge accounting. As a result of discontinuing hedge accounting for our interest rate swaps, changes in the fair value of these interest rate swaps are recorded in “Gain (loss) on derivatives, net” in our consolidated statements of operations rather than in AOCI. Also, net interest paid or received on these interest rate swaps which was previously recognized in interest expense, is instead recognized in “Gain (loss) on derivatives, net.” These interest rate swaps continue to be reported as assets or liabilities on our consolidated balance sheets at their fair value. As long as the forecasted transactions that were being hedged (i.e. rollovers of our repurchase agreement borrowings) are still expected to occur, the balance in AOCI from the activity in these interest rate swaps through the dates of de-designation will remain in AOCI and be recognized in our consolidated statements of operations as “interest expense” over the remaining term of these interest rate swaps. For purposes of the consolidated statements of cash flows, cash flows hedges were classified with the cash flows from the hedged item. Cash flows from derivatives that are not hedges are classified according to the underlying nature or purpose of the derivative transaction. For more details on the amounts and other qualitative information on all our derivative transactions, see Note 14. Fo |
Restricted Cash
Restricted Cash | 6 Months Ended |
Jun. 30, 2018 | |
Restricted Cash | |
Restricted Cash | NOTE 2. RESTRICTED CASH This includes cash pledged as collateral for interest rate swaps. The following represents the Company’s restricted cash balances at June 30, 2018 and December 31, 2017: June 30, December 31, 2018 2017 (in thousands) Restricted cash - interest rate swap margin calls $ — $ 11,157 |
Mortgage Backed Securities
Mortgage Backed Securities | 6 Months Ended |
Jun. 30, 2018 | |
Mortgage Backed Securities | |
Mortgage Backed Securities | NOTE 3. MORTGAGE-BACKED SECURITIES The following tables summarize our Agency MBS and Non-Agency MBS at June 30, 2018 and December 31, 2017, which are carried at their fair value: June 30, 2018 Total Non-Agency Total By Agency Freddie Mac Fannie Mae Agency MBS (1) MBS MBS (in thousands) Amortized cost $ 1,452,764 $ 2,422,478 $ 3,875,242 $ 750,616 $ 4,625,858 Paydowns receivable (2) 16,474 — 16,474 28 16,502 Unrealized gains 4,463 15,608 20,071 33,006 53,077 Unrealized losses (32,606) (44,837) (77,443) (3,655) (81,098) Fair value $ 1,441,095 $ 2,393,249 $ 3,834,344 $ 779,995 $ 4,614,339 20-Year and 15-Year 30-Year Total Non-Agency Total By Security Type ARMs Hybrids Fixed-Rate (1) Fixed-Rate Agency MBS MBS MBS (in thousands) Amortized cost $ 997,383 $ 831,084 $ 1,167,834 $ 878,941 $ 3,875,242 $ 750,616 $ 4,625,858 Paydowns receivable (2) 7,611 8,863 — — 16,474 28 16,502 Unrealized gains 17,647 246 134 2,044 20,071 33,006 53,077 Unrealized losses (1,217) (21,399) (35,902) (18,925) (77,443) (3,655) (81,098) Fair value $ 1,021,424 $ 818,794 $ 1,132,066 $ 862,060 $ 3,834,344 $ 779,995 $ 4,614,339 (1) Included in the 15-year fixed-rate MBS are Trading Agency MBS. These have an amortized cost of $656.1 million, an unrealized loss of $22.6 million, and a fair value of $633.5 million. (2) Paydowns receivable on Agency MBS are generated when the Company receives notice from Freddie Mac of prepayments but does not receive the actual cash with respect to such prepayments until the 15th day of the following month. During the three months ended June 30, 2018, we did not sell any Agency MBS. During the six months ended June 30, 2018, we sold approximately $583.2 million of Agency MBS and realized gross losses of approximately $19.3 million. During the three months ended June 30, 2017, we sold approximately $27.5 million of Agency MBS and realized gross gains of approximately $176 thousand. During the six months ended June 30, 2017, we sold approximately $35.7 million of Agency MBS and realized gross gains of approximately $176 thousand and realized gross losses of approximately $68 thousand. During the three months ended June 20, 2018, we did not sell any Non-Agency MBS. During the six months ended June 20, 2018, we sold approximately $5.8 million of Non-Agency MBS and recognized gross losses of approximately $42 thousand. We did not sell any Non-Agency MBS during the three or six months ended June 30, 2017. During the three months ended June 30, 2018, we had gross unrealized losses on trading investments of $2.7 million. During the six months ended June 30, 2018, we had gross unrealized losses on trading investments of $11.6 million. During the three months ended June 30, 2017, we had gross unrealized gains on trading investments of approximately $4.1 million. During the six months ended June 30, 2017, we had gross unrealized gains on trading investments of approximately $4.2 million. December 31, 2017 Total Non-Agency Total By Agency Freddie Mac Fannie Mae Agency MBS (1) MBS MBS (in thousands) Amortized cost $ 1,678,835 $ 2,594,496 $ 4,273,331 $ 730,624 $ 5,003,955 Paydowns receivable (2) 13,873 — 13,873 — 13,873 Unrealized gains 6,597 21,348 27,945 33,355 61,300 Unrealized losses (18,205) (18,147) (36,352) (3,154) (39,506) Fair value $ 1,681,100 $ 2,597,697 $ 4,278,797 $ 760,825 $ 5,039,622 20-Year and Total 15-Year 30-Year Agency Non-Agency Total By Security Type ARMs Hybrids Fixed-Rate (1) Fixed-Rate MBS MBS MBS (in thousands) Amortized cost $ 1,249,366 $ 863,762 $ 1,277,570 $ 882,633 $ 4,273,331 $ 730,624 $ 5,003,955 Paydowns receivable (2) 5,943 7,930 — — 13,873 — 13,873 Unrealized gains 23,425 833 595 3,092 27,945 33,355 61,300 Unrealized losses (1,871) (12,845) (16,338) (5,298) (36,352) (3,154) (39,506) Fair value $ 1,276,863 $ 859,680 $ 1,261,827 $ 880,427 $ 4,278,797 $ 760,825 $ 5,039,622 (1) Included in the 15-year fixed-rate MBS are Trading Agency MBS. These have an amortized cost of $909.2 million, an unrealized loss of $11 million, and a fair value of $898.2 million. (2) Paydowns receivable on Agency MBS are generated when the Company receives notice from Freddie Mac of prepayments but does not receive the actual cash with respect to such prepayments until the 15th day of the following month. The following table presents information regarding the estimates of the contractually required principal payments, cash flows expected to be collected, and estimated fair value, of the Non-Agency MBS held at carrying value acquired by the Company for the three and six months ended June 30, 2018 and cumulatively at June 30, 2018 and December 31, 2017: Change During the Change During the Three Months Ended Six Months Ended At At June 30, June 30, June 30, December 31, 2018 2018 2018 2017 (in thousands) Non-Agency MBS acquired with credit deterioration: Contractually required principal $ (14,654) $ (14,595) $ 783,752 $ 798,347 Contractual principal not expected to be collected (non-accretable yield) 5,233 622 (331,858) (332,480) Expected cash flows to be collected (9,421) (13,973) 451,894 465,867 Market yield adjustment (5,007) (7,806) 139,392 147,198 Unrealized gain, net (1,253) 32 28,557 28,525 Fair value (15,681) (21,747) 619,843 641,590 Fair value of other Non-Agency MBS (without credit deterioration) 17,135 40,917 160,152 119,235 Total fair value of Non-Agency MBS $ 1,454 $ 19,170 $ 779,995 $ 760,825 The following table presents the change for the three and six months ended June 30, 2018 of the components of the Company’s purchase discount on the Non-Agency MBS acquired with credit deterioration between the amount designated as the market yield adjustment and the non-accretable difference: Three Months Ended Six Months Ended June 30, June 30, 2018 2018 Market Yield Non- Market Yield Non- Adjustment Accretable Adjustment Accretable (in thousands) Balance at beginning of period $ 144,399 $ (337,091) $ 147,198 $ (332,480) Accretion of discount (1,783) — (3,602) (100) Purchases (820) (4) (3,213) (9,907) Realized credit losses, net of recoveries — 4,590 — 9,982 Sales — — 1,413 — Impairment charge — (1,757) — (1,757) Transfer (2,404) 2,404 (2,404) 2,404 Other — — — — Balance at end of period $ 139,392 $ (331,858) $ 139,392 $ (331,858) |
Variable Interest Entities
Variable Interest Entities | 6 Months Ended |
Jun. 30, 2018 | |
Variable Interest Entities | |
Variable Interest Entities | NOTE 4. VARIABLE INTEREST ENTITIES As discussed in Note 1, “Summary of Significant Accounting Policies,” we have determined that we are the primary beneficiary of certain securitization trusts. The following table presents a summary of the assets and liabilities of our consolidated securitization trusts as of June 30, 2018 and December 31, 2017: June 30, December 31, 2018 2017 (in thousands) Residential mortgage loans held-for-investment $ 585,020 $ 639,351 Accrued interest receivable 1,934 2,093 Total assets $ 586,954 $ 641,444 Accrued interest payable $ 1,887 $ 2,047 Asset-backed securities issued by securitization trusts 575,653 629,984 Total liabilities $ 577,540 $ 632,031 Our risk with respect to each investment in a securitization trust is limited to our direct ownership in the securitization trust. We own the most subordinated classes on all of the trusts. The residential mortgage loans held by the consolidated securitization trusts are held solely to satisfy the liabilities of the securitization trusts, and the investors in the securitization trusts have no recourse to the general credit of the Company for the ABS issued by the securitization trusts. The assets of a consolidated securitization trust can only be used to satisfy the obligations of that trust. ABS are not paid down according to any schedule but rather as payments are made on the underlying mortgages. The final distribution dates for the three trusts are all at various dates in 2045. We are not contractually required and have not provided any additional financial support to the securitization trusts for the period ended June 30, 2018. Residential Mortgage Loans Held by Consolidated Securitization Trusts Residential mortgage loans held by consolidated securitization trusts are carried at unpaid principal balances net of any premiums or discounts and allowances for loan losses. The residential mortgage loans are secured by first liens on the underlying residential properties. We continue to be the primary beneficiary of these trusts and believe that we are still required to consolidate these trusts. The following table details the carrying value for residential mortgage loans held-for-investment at June 30, 2018 and December 31, 2017: June 30, December 31, 2018 2017 (in thousands) Principal balance $ 580,938 $ 634,219 Unamortized premium, net of discount 4,268 5,335 Allowance for loan losses (186) (203) Carrying value $ 585,020 $ 639,351 The following table provides a reconciliation of the carrying value of residential mortgage loans held-for-investment for the three months ended June 30, 2018 and for the year ended December 31, 2017: Three Months Ended For the Year Ended June 30, December 31, 2018 2017 (in thousands) Balance at beginning of period $ 611,006 $ 744,462 Deductions during period: Collections of principal (25,468) (102,569) Amortization of premium (518) (2,542) Balance at end of period $ 585,020 $ 639,351 The following table details various portfolio characteristics of the residential mortgage loans held-for-investment at June 30, 2018 and December 31, 2017: June 30, December 31, 2018 2017 (dollar amounts in thousands) Portfolio Characteristics: Number of loans 868 931 Current principal balance $ 580,938 $ 634,219 Average loan balance $ 669 $ 681 Net weighted average coupon rate 3.86 % 3.86 % Weighted average maturity (years) 25.8 26.3 Weighted average FICO score 761 762 Current Performance: Current $ 576,053 $ 629,901 30 days delinquent 2,895 2,918 60 days delinquent 802 — 90+ days delinquent 597 1,400 Bankruptcy/foreclosure 591 — Total $ 580,938 $ 634,219 The following table summarizes the geographic concentrations of residential mortgage loans held-for-investment at June 30, 2018 and December 31, 2017 based on principal balance outstanding: June 30, December 31, State 2018 2017 California 43.1 % 43.8 % Florida 6.3 6.3 Other states (none greater than 5%) 50.6 49.9 Total 100.0 % 100.0 % Allowance for Loan Losses on Residential Mortgage Loans Held by Consolidated Securitization Trusts As discussed in Note 1, “Summary of Significant Accounting Policies,” the Company establishes and maintains an allowance for loan losses on residential mortgage loans held by consolidated securitization trusts based on the Company’s estimate of credit losses. The following table summarizes the activity in the allowance for loan losses for the three months ended June 30, 2018 and for the year ended December 31, 2017: June 30, December 31, 2018 2017 (in thousands) Balance at beginning of period $ 186 $ 203 Provision for loan losses — — Charge-offs, net — — Balance at end of period $ 186 $ 203 Asset-Backed Securities Issued by Securitization Trusts Asset-backed securities issued by securitization trusts are recorded at principal balances net of unamortized premiums and discounts. Asset-backed securities issued by securitization trusts are issued in various tranches and have a principal balance of $575.7 million at June 30, 2018 and $630.0 million at December 31, 2017. The investors in the asset-backed securities are not affiliated with the Company and have no recourse to the general credit of the Company. |
Residential Properties
Residential Properties | 6 Months Ended |
Jun. 30, 2018 | |
Residential Properties | |
Residential Properties | NOTE 5. RESIDENTIAL PROPERTIES At June 30, 2018, we owned 88 single-family residential properties which are all located in Southeastern Florida and are carried at a total cost, net of accumulated depreciation, of approximately $14.0 million. At December 31, 2017, we owned 88 properties at a net cost of approximately $14.1 million. The income from these properties is included in our consolidated statements of operations as “Income on rental properties.” The expenses on these properties are included in our consolidated statements of operations in “Rental properties depreciation and expenses.” |
Repurchase Agreements
Repurchase Agreements | 6 Months Ended |
Jun. 30, 2018 | |
Repurchase Agreements | |
Repurchase Agreements | NOTE 6. REPURCHASE AGREEMENTS We have entered into repurchase agreements with large financial institutions to finance most of our MBS. The repurchase agreements are short-term borrowings that are secured by the market value of our MBS and bear fixed interest rates that have historically been based upon LIBOR. At June 30, 2018 and December 31, 2017, the repurchase agreements had the following balances, weighted average interest rates, and remaining weighted average maturities: June 30, 2018 Agency MBS Non-Agency MBS Total MBS Weighted Weighted Weighted Average Average Average Interest Interest Interest Balance Rate Balance Rate Balance Rate (in thousands) (in thousands) (in thousands) Overnight $ — — % $ — — % $ — — % Less than 30 days 1,595,000 1.99 543,480 3.35 2,138,480 2.34 30 days to 90 days 1,880,000 2.13 — — 1,880,000 2.13 Over 90 days — — — — — — Demand — — — — — — $ 3,475,000 2.07 % $ 543,480 3.35 % $ 4,018,480 2.24 % Weighted average maturity 39 days 14 days 35 days Weighted average interest rate after adjusting for interest rate swaps 1.97 % Weighted average maturity after adjusting for interest rate swaps 1,122 days MBS pledged as collateral under the repurchase agreements and interest rate swaps $ 3,691,061 $ 686,962 $ 4,378,023 December 31, 2017 Agency MBS Non-Agency MBS Total MBS Weighted Weighted Weighted Average Average Average Interest Interest Interest Balance Rate Balance Rate Balance Rate (in thousands) (in thousands) (in thousands) Overnight $ — — % $ — — % $ — — % Less than 30 days 2,015,000 1.46 520,695 2.87 2,535,695 1.75 30 days to 90 days 1,830,000 1.48 — — 1,830,000 1.48 Over 90 days — — — — — — Demand — — — — — — $ 3,845,000 1.47 % $ 520,695 2.87 % $ 4,365,695 1.64 % Weighted average maturity 33 days 14 days 31 days Weighted average interest rate after adjusting for interest rate swaps 1.77 % Weighted average maturity after adjusting for interest rate swaps 674 days MBS pledged as collateral under the repurchase agreements and interest rate swaps $ 4,073,852 $ 661,445 $ 4,735,297 The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) only in the event of default on a contract at June 30, 2018 and December 31, 2017 (see Notes 1, 8, and 14 for more information on the Company’s interest rate swaps and other derivative instruments): Net Amounts of Assets Gross Amounts Not Offset Gross Amounts or Liabilities in the Balance Sheets (1) of Recognized Gross Amounts Presented in Cash June 30, 2018 Assets or Offset in the the Balance Financial Collateral Net (in thousands) Liabilities Balance Sheets Sheets Instruments Received Amounts Derivative assets at fair value (2) $ 69,639 $ — $ 69,639 $ (69,639) $ — $ — Total $ 69,639 $ — $ 69,639 $ (69,639) $ — $ — Repurchase agreements (3) $ 4,018,480 $ — $ 4,018,480 $ (4,018,480) $ — $ — Derivative liabilities at fair value (2) 652 — 652 (652) — — Total $ 4,019,132 $ — $ 4,019,132 $ (4,019,132) $ — $ — Net Amounts of Assets Gross Amounts Not Offset Gross Amounts or Liabilities in the Balance Sheets (1) of Recognized Gross Amounts Presented in Cash December 31, 2017 Assets or Offset in the the Balance Financial Collateral Net (in thousands) Liabilities Balance Sheets Sheets Instruments Received Amounts Derivative assets at fair value (2) $ 27,793 $ — $ 27,793 $ (27,793) $ — $ — Total $ 27,793 $ — $ 27,793 $ (27,793) $ — $ — Repurchase agreements (3) $ 4,365,695 $ — $ 4,365,695 $ (4,365,695) $ — $ — Derivative liabilities at fair value (2) 1,335 — 1,335 (1,335) — — Total $ 4,367,030 $ — $ 4,367,030 $ (4,367,030) $ — $ — (1) Amounts presented are limited to collateral pledged sufficient to reduce the related net amount to zero in accordance with ASU No. 2011‑11, as amended by ASU No. 2013‑01. (2) At June 30, 2018, we had not pledged any Agency MBS as collateral on our interest rate swap derivatives, which were approximately $67.7 million in derivative assets and approximately $652 thousand in derivative liabilities at June 30, 2018. At December 31, 2017, we had pledged approximately $62 thousand in Agency MBS as collateral and paid another approximately $11.2 million on interest rate swap margin calls on our interest rate swap derivatives, which were approximately $27.8 million in derivative assets and approximately $51 thousand in derivative liabilities at December 31, 2017. (3) At June 30, 2018, we had pledged approximately $3.69 billion in Agency MBS and approximately $687 million in Non-Agency MBS as collateral on our repurchase agreements. At December 31, 2017, we had pledged $4.07 billion in Agency MBS and approximately $661.4 million in Non-Agency MBS as collateral on our repurchase agreements. |
Junior Subordinated Notes
Junior Subordinated Notes | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Junior Subordinated Notes | NOTE 7. JUNIOR SUBORDINATED NOTES On March 15, 2005, we issued $37,380,000 of junior subordinated notes to a newly-formed statutory trust, Anworth Capital Trust I, organized by us under Delaware law. The trust issued $36,250,000 in trust preferred securities to unrelated third party investors. Both the notes and the trust preferred securities require quarterly payments and bear interest at the prevailing three-month LIBOR rate plus 3.10%, reset quarterly. The first interest payments were made on June 30, 2005. Both the notes and the trust preferred securities will mature in 2035 and are currently redeemable, at our option, in whole or in part, without penalty. We used the net proceeds of this private placement to invest in Agency MBS. We have reviewed the structure of the transaction under ASC 810‑10 and concluded that Anworth Capital Trust I does not meet the requirements for consolidation. As of the date of this filing, we have not redeemed any of the notes or trust preferred securities. |
Fair Values of Financial Instru
Fair Values of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Fair Values of Financial Instruments | |
Fair Values of Financial Instruments | NOTE 8. FAIR VALUES OF FINANCIAL INSTRUMENTS As defined in ASC 820‑10, fair value is the price that would be received from the sale of an asset or paid to transfer or settle a liability in an orderly transaction between market participants in the principal (or most advantageous) market for the asset or liability. ASC 820‑10 establishes a fair value hierarchy that ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the three following categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. This includes those financial instruments that are valued using models or other valuation methodologies where substantially all of the assumptions are observable in the marketplace, can be derived from observable market data or are supported by observable levels at which transactions are executed in the marketplace. The valuation techniques, including the judgments or assumptions that are used by us in arriving at the fair value of our MBS and derivative instruments, are as follows: The fair values for Agency MBS and TBA Agency MBS are based primarily on independent broker pricing quotes and independent third-party pricing service quotes, which are deemed indicative of market activity. The brokers and third-party pricing services use commonly used market pricing methodology that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, loan age, collateral type, periodic and life cap, geography, and prepayment speeds. We evaluate the pricing information we receive taking into account factors such as coupon, prepayment experience, fixed/adjustable rate, coupon index, time to reset, and issuing agency, among other factors. Based on these factors and our market knowledge and expertise, bond prices are compared to prices of similar securities and our own observations of trading activity in the marketplace. The fair values for Non-Agency MBS are based primarily on prices from independent well-known major financial brokers that make markets in these instruments and pricing from independent pricing services. We understand that these market participants use pricing models that not only consider the characteristics of the type of security and its underlying collateral from observable market data but also consider the historical performance data of the underlying collateral of the security, including loan delinquency, loan losses, and credit enhancement. To validate the prices the Company obtains, we consider and review a number of observable market data points including trading activity in the marketplace, and current market intelligence on all major markets, including benchmark security evaluations and bid list results from various sources. We compare the prices received from brokers against the prices received from pricing services and vice-versa and also against our own internal models for reasonableness and make inquiries to the brokers and pricing services about the prices received from these parties and their methods. For derivative instruments, the fair value is determined as follows: For all centrally cleared interest rate swaps (those entered into after September 9, 2013) pricing is provided by the central counterparty (large central clearing exchanges such as the Chicago Mercantile Exchange, or CME, and LCH). These entities use pricing models that reference the underlying rates including the overnight index swap rate and LIBOR forward rate to produce the daily settlement price. For all non-centrally cleared interest rate swaps, we obtain the pricing from independent dealers who are large financial institutions and are market makers for these types of instruments. These market participants use pricing models that incorporate the LIBOR interest swap rate curve and the overnight index swap rate. To validate the prices for all interest rate swaps, we compare to other sources such as Bloomberg. At June 30, 2018, all of our outstanding interest rate swaps were with either CME or LCH. Accordingly, our MBS and derivative instruments are classified as Level 2 in the fair value hierarchy. Level 3: Unobservable inputs that are not corroborated by market data. This is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are generally less readily observable from objective sources. In determining the appropriate levels, we perform a detailed analysis of the assets and liabilities that are subject to ASC 820‑10. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. At June 30, 2018, fair value measurements on a recurring basis were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Agency MBS (1) $ — $ 3,834,344 $ — $ 3,834,344 Non-Agency MBS (1) $ — $ 779,995 $ — $ 779,995 Derivative instruments (2) $ — $ 69,639 $ — $ 69,639 Liabilities: Derivative instruments (2) $ — $ 652 $ — $ 652 (1) For more detail about the fair value of our MBS by agency and type of security, see Note 3. (2) Derivative instruments include discontinued hedges under ASC 815‑10. For more detail about our derivative instruments, see Note 1 and Note 14. At December 31, 2017, fair value measurements on a recurring basis were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Agency MBS (1) $ — $ 4,278,797 $ — $ 4,278,797 Non-Agency MBS (1) $ — $ 760,825 $ — $ 760,825 Derivative instruments (2) $ — $ 27,793 $ — $ 27,793 Liabilities: Derivative instruments (2) $ — $ 1,335 $ — $ 1,335 (1) For more detail about the fair value of our MBS by agency and type of security, see Note 3. (2) Derivative instruments include discontinued hedges under ASC 815‑10. For more detail about our derivative instruments, see Note 1 and Note 14. At June 30, 2018 and December 31, 2017, cash and cash equivalents, restricted cash, interest receivable, repurchase agreements, and interest payable are reflected in our consolidated financial statements at cost. The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets at June 30, 2018 and December 31, 2017: June 30, 2018 December 31, 2017 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value (in thousands) Financial Assets: Residential mortgage loans held-for-investment $ 585,020 $ 573,151 $ 639,351 $ 641,126 Financial Liabilities: Asset-backed securities issued by securitization trusts $ 575,653 $ 562,689 $ 629,984 $ 630,562 The residential mortgage loans held-for-investment are carried at unpaid principal balances net of any premiums or discounts and allowances for loan losses. Asset-backed securities issued by securitization trusts are carried at principal balances net of unamortized premiums or discounts. For both of these items, fair values are obtained by an independent broker and are considered Level 2 in the fair value hierarchy. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | NOTE 9. INCOME TAXES We have elected to be taxed as a REIT and to comply with the provisions of the Code with respect thereto. Accordingly, we will not be subject to federal or state income taxes to the extent that our distributions to stockholders satisfy the REIT requirements and that certain asset, gross income and stock ownership tests are met. We believe that we currently meet all REIT requirements regarding these tests. Therefore, we believe that we continue to qualify as a REIT under the provisions of the Code. |
Series B Cumulative Convertible
Series B Cumulative Convertible Preferred Stock | 6 Months Ended |
Jun. 30, 2018 | |
Equity | |
Series B Cumulative Convertible Preferred Stock | NOTE 10. SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK Our Series B Preferred Stock has a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The holders of our Series B Preferred Stock must receive dividends at a rate of 6.25% per year on the $25.00 liquidation preference before holders of our common stock are entitled to receive any dividends. Our Series B Preferred Stock is senior to our common stock and on parity with our 8.625% Series A Cumulative Preferred Stock, or Series A Preferred Stock, and our 7.625% Series C Cumulative Redeemable Preferred Stock, or Series C Preferred Stock, with respect to the payment of distributions and amounts, upon liquidation, dissolution or winding up. So long as any shares of our Series B Preferred Stock remain outstanding, we will not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of our Series B Preferred Stock outstanding at the time, authorize or create, or increase the authorized or issued amount of, any class or series of capital stock ranking senior to our Series B Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding-up. Our Series B Preferred Stock has no maturity date, is not redeemable and is convertible at the then-current conversion rate into shares of our common stock per $25.00 liquidation preference. The conversion rate is adjusted in any fiscal quarter in which the cash dividends paid to common stockholders results in an annualized common stock dividend yield that is greater than 6.25%. The conversion ratio is also subject to adjustment upon the occurrence of certain specific events, such as a change in control. Our Series B Preferred Stock is convertible into shares of our common stock at the option of the holder(s) of Series B Preferred Stock at any time at the then-prevailing conversion rate. On or after January 25, 2012, we may, at our option, under certain circumstances, convert each share of Series B Preferred Stock into a number of shares of our common stock at the then-prevailing conversion rate. We may exercise this conversion option only if our common stock price equals or exceeds 130% of the then-prevailing conversion price of our Series B Preferred Stock for at least twenty (20) trading days in a period of thirty (30) consecutive trading days (including the last trading day of such period) ending on the trading day immediately prior to our issuance of a press release announcing the exercise of the conversion option. During the three months ended June 30, 2018, we did not, at our option, convert any shares of Series B Preferred Stock. Our Series B Preferred Stock contains certain fundamental change provisions that allow the holder to redeem our Series B Preferred Stock for cash if certain events occur, such as a change in control. Our Series B Preferred Stock generally does not have voting rights, except if dividends on the Series B Preferred Stock are in arrears for six or more quarterly periods (whether or not consecutive). Under such circumstances, the holders of our Series B Preferred Stock, together with the holders of our Series A Preferred Stock and our Series C Preferred Stock, would be entitled to elect two additional directors to our Board to serve until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain material and adverse changes to the terms of our Series B Preferred Stock may not be taken without the affirmative vote of at least two-thirds of the outstanding shares of Series B Preferred Stock, Series A Preferred Stock, and Series C Preferred Stock voting together as a single class. Through June 30, 2018, we have declared and set aside for payment the required dividends for our Series B Preferred Stock. During the three months ended June 30, 2018, there were no transactions to convert shares of our Series B Preferred Stock into shares of our common stock. |
Public Offerings and Capital St
Public Offerings and Capital Stock | 6 Months Ended |
Jun. 30, 2018 | |
Equity | |
Public Offerings and Capital Stock | NOTE 11. PUBLIC OFFERINGS AND CAPITAL STOCK At June 30, 2018, our authorized capital included 200,000,000 shares of common stock, of which 98,303,913 shares were issued and outstanding. At June 30, 2018, our authorized capital included 20,000,000 shares of $0.01 par value preferred stock, of which 5,150,000 shares had been designated 8.625% Series A Cumulative Preferred Stock (liquidation preference $25.00 per share), 3,150,000 shares had been designated 6.25% Series B Cumulative Convertible Preferred Stock (liquidation preference $25.00 per share), and 5,000,000 shares had been designated 7.625% Series C Cumulative Redeemable Preferred Stock (liquidation preference $25.00 per share). The Series A Preferred Stock has no maturity date and we are not required to redeem it at any time. We may redeem the Series A Preferred Stock for cash, at our option, in whole or from time to time in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date. To date, we have not redeemed any shares of our Series A Preferred Stock. The undesignated shares of preferred stock may be issued in one or more classes or series with such distinctive designations, rights, and preferences as determined by our Board. At June 30, 2018, there were 1,919,378 shares of Series A Preferred Stock issued and outstanding, 779,743 shares of Series B Preferred Stock issued and outstanding, and 2,010,278 shares of Series C Preferred Stock issued and outstanding. On January 27, 2015, we completed a public offering of 300,000 shares of our Series C Preferred Stock at a public offering price of $24.50 per share and received net proceeds of approximately $7 million. The shares were sold pursuant to the Company’s effective shelf registration statement on Form S‑3. The Series C Preferred Stock has no maturity date and is not subject to any sinking fund or mandatory redemption. On or after January 27, 2020, we may, at our option, redeem the Series C Preferred Stock for cash, in whole or from time to time in part, at a redemption price of $25.00 per share plus accrued and unpaid dividends, if any, to the redemption date. On August 10, 2016, we entered into an At Market Issuance Sales Agreement, or the FBR Sales Agreement, with FBR Capital Markets & Co., or FBR, pursuant to which we may offer and sell from time to time through FBR as our agent, up to $196,615,000 maximum aggregate amount of our common stock, Series B Preferred Stock, and Series C Preferred Stock, in such amounts as we may specify by notice to FBR, in accordance with the terms and conditions set forth in the FBR Sales Agreement. During the three months ended June 30, 2018, we did not sell any shares of our Series B Preferred Stock, Series C Preferred Stock, or common stock under the FBR Sales Agreement. At June 30, 2018, there was approximately $152.1 million available for sale and issuance under the FBR Sales Agreement. On October 3, 2011, we announced that our Board had authorized a share repurchase program which permits us to acquire up to 2,000,000 shares of our common stock. The shares are expected to be acquired at prevailing prices through open market transactions. The manner, price, number, and timing of share repurchases will be subject to market conditions and applicable rules of the U.S. Securities and Exchange Commission, or the SEC. Our Board also authorized the Company to purchase an amount of our common stock up to the amount of common stock sold through our Dividend Reinvestment and Stock Purchase Plan. Subsequently, our Board authorized the Company to acquire an aggregate of an additional 45,000,000 shares (pursuant to six separate authorizations) between December 13, 2013 and January 22, 2016. During the three months ended June 30, 2018, we did not repurchase any shares of our common stock under our share repurchase program. Our Dividend Reinvestment and Stock Purchase Plan allows stockholders and non-stockholders to purchase shares of our common stock and to reinvest dividends therefrom to acquire additional shares of our common stock. On March 15, 2018, we filed a shelf registration statement on Form S-3 with the SEC registering up to 15,303,119 shares of our common stock for our 2018 Dividend Reinvestment and Stock Purchase Plan, or the 2018 DRP Plan, which replaced our 2015 Dividend Reinvestment and Stock Purchase Plan upon its expiration. The registration statement for the 2018 DRP Plan was declared effective by the SEC on March 26, 2018. During the three months ended June 30, 2018, we issued an aggregate of 91,829 shares of our common stock at a weighted average price of $4.71 per share under the 2018 DRP Plan, resulting in proceeds to us of approximately $433 thousand. On August 5, 2014, we filed a registration statement on Form S‑8 with the SEC to register an aggregate of up to 2,000,000 shares of our common stock to be issued pursuant to the Anworth Mortgage Asset Corporation 2014 Equity Compensation Plan, or the 2014 Equity Plan. On April 1, 2016, we filed a shelf registration statement on Form S‑3 with the SEC, offering up to $534,442,660 maximum offering price of our capital stock. This registration statement was declared effective by the SEC on April 13, 2016. At June 30, 2018, approximately $490.2 million of our capital stock was available for future issuance under this registration statement. |
Transactions with Affiliates
Transactions with Affiliates | 6 Months Ended |
Jun. 30, 2018 | |
Transactions with Affiliates | |
Transactions with Affiliates | NOTE 12. TRANSACTIONS WITH AFFILIATES Management Agreement and Externalization Effective as of December 31, 2011, we entered into the Management Agreement with our Manager, pursuant to which our day-to-day operations are being conducted by our Manager. Our Manager is supervised and directed by 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 management services. Our Manager will also perform such other services and activities relating to our assets and operations as described in the Management Agreement. In exchange for services provided, our Manager receives a management fee, paid monthly in arrears, in an amount equal to one-twelfth of 1.20% of our Equity (as defined in the Management Agreement). On the effective date of the Management Agreement, the employment agreements with our executives were terminated, our employees became employees of our Manager, and we took such other actions as we believed were reasonably necessary to implement the Management Agreement and externalize our management function. Mr. Lloyd McAdams, our Chairman and Chief Executive Officer, beneficially owns 47.4% of the outstanding membership interests of our Manager; Mr. Joseph E. McAdams, our President and the Chief Investment Officer of our Manager, beneficially owns 47.4% of the outstanding membership interests of our Manager; and Ms. Heather U. Baines, an Executive Vice President of our Manager, beneficially owns 5.2% of the outstanding membership interests of our Manager. The Management Agreement may only be terminated without cause, as defined in the agreement, after the expiration of any annual renewal term. We are required to provide 180-days’ prior notice of non-renewal of the Management Agreement and must pay a termination fee on the last day of any automatic renewal term equal to three times the average annual management fee earned by our Manager during the prior 24-month period immediately preceding the most recently completed month prior to the effective date of termination. We may only not renew the Management Agreement with or without cause with the consent of the majority of our independent directors. These provisions make it difficult to terminate the Management Agreement and increase the effective cost to us of not renewing the Management Agreement. Certain of our former officers and employees were previously granted restricted stock and other equity awards (see Note 13), including dividend equivalent rights, in connection with their service to us, and certain of our former officers and employees had agreements under which they would receive payments if the Company is subject to a change in control (discussed later in this Note 12). In connection with the Externalization, certain of the agreements under which our officers and employees were granted equity awards and would be paid payments in the event of a change in control were modified so that such agreements will continue with respect to our former officers and employees after they became officers and employees of our Manager. In addition, as officers and employees of our Manager, they will continue to be eligible to receive equity awards under equity compensation plans in effect now or in the future. Messrs. Lloyd McAdams, Joseph E. McAdams, Charles J. Siegel, John T. Hillman, and Ms. Heather U. Baines and others are officers and employees of PIA Farmland, Inc. and its external manager, PIA, where they devote a portion of their time. PIA Farmland, Inc., a privately-held real estate investment trust investing in U.S. farmland properties to lease to independent farm operators, was incorporated in February 2013 and acquired its first farm property in October 2013. These officers and employees are under no contractual obligations to PIA Farmland, Inc., its external manager, PIA, or to Anworth or its external manager, Anworth Management LLC, as to their time commitment. Mr. Steven Koomar, the Chief Executive Officer of PIA Farmland, Inc., has no involvement with either Anworth or its external manager, Anworth Management LLC. Change in Control and Arbitration Agreements On June 27, 2006, we entered into Change in Control and Arbitration Agreements with Mr. Charles J. Siegel, our Chief Financial Officer, and with various officers and employees of our Manager. These agreements provide that should a change in control (as defined in the agreements) occur, each of these persons will receive certain severance and other benefits valued as of December 31, 2011. Under these agreements, in the event that a change in control occurs, each of these persons will receive a lump sum payment equal to (i) 12 months annual base salary in effect on December 31, 2011, plus (ii) the average annual incentive compensation received for the two complete fiscal years prior December 31, 2011, plus (iii) the average annual bonus received for the two complete fiscal years prior to December 31, 2011, as well as other benefits. For one of the Senior Vice Presidents and Portfolio Managers of our Manager, in the event that a change in control occurs, in addition to other benefits, he will receive a lump sum payment equal to (i) 12 months of the annual base salary (in effect on September 18, 2014) paid by our Manager plus (ii) $350,000. The Change in Control and Arbitration Agreements also provide for accelerated vesting of equity awards granted to these persons upon a change in control. Agreements with Pacific Income Advisers, Inc. On January 26, 2012, we entered into a sublease agreement that became effective on July 1, 2012 with PIA, a company owned by trusts controlled in part by Mr. Lloyd McAdams, our Chairman and Chief Executive Officer. Under the sublease agreement, we lease, on a pass-through basis, 7,300 square feet of office space from PIA at the same location and pay rent at an annual rate equal to PIA’s obligation, which is currently $67.40 per square foot. The base monthly rental for us is $41,001.44, which will be increased by 3% per annum on July 1, 2018. The sublease agreement runs through September 30, 2022 unless earlier terminated pursuant to the master lease. During the three and six months ended June 30, 2018, we expensed $139 thousand and $278 thousand, respectively, in rent and related expenses to PIA under this sublease agreement, which is included in “Other expenses” on our statements of operations. During the three and six months ended June 30, 2017, we expensed $124 thousand and $250 thousand, respectively, in rent and related expenses to PIA under this sublease agreement At June 30, 2018, the future minimum lease commitment was as follows: Total Year 2018 2019 2020 2021 2022 Commitment (in whole dollars) Commitment $ 253,389 $ 514,374 $ 529,800 $ 545,697 $ 276,882 $ 2,120,142 On July 25, 2008, we entered into an administrative services agreement with PIA, which was amended and restated on August 20, 2010. Under this agreement, PIA provides administrative services and equipment to us including human resources, operational support and information technology, and we pay an annual fee of 5 basis points on the first $225 million of stockholders’ equity and 1 basis point thereafter (paid quarterly in arrears) for those services. The administrative services agreement had an initial term of one year and renews for successive one-year terms thereafter unless either party gives notice of termination no less than 30 days before the expiration of the then-current annual term. We may also terminate the administrative services agreement upon 30 days prior written notice for any reason and immediately if there is a material breach by PIA. During the three and six months ended June 30, 2018, we paid fees of $39 thousand and $78 thousand, respectively, to PIA in connection with the administrative services agreement. During the three and six months ended June 30, 2017, we paid fees of $38 thousand and $76 thousand, respectively, to PIA in connection with the administrative agreement. |
Equity Compensation Plan
Equity Compensation Plan | 6 Months Ended |
Jun. 30, 2018 | |
Equity Compensation Plan | |
Equity Compensation Plan | NOTE 13. EQUITY COMPENSATION PLAN 2014 Equity Compensation Plan At our 2014 annual meeting of stockholders held on May 22, 2014, our stockholders approved the adoption of the Anworth Mortgage Asset Corporation 2014 Equity Compensation Plan, or the 2014 Equity Plan, which replaced the Anworth Mortgage Asset Corporation 2004 Equity Compensation Plan, or the 2004 Equity Plan, due to its expiration. We filed a registration statement on Form S‑8 on August 5, 2014 to register up to an aggregate of 2,000,000 shares of our common stock to be issued pursuant to the 2014 Equity Plan. The 2014 Equity Plan decreased the aggregate share reserve from 3,500,000 shares that were available under the 2004 Equity Plan to 2,000,000 shares of our registered common stock available under the 2014 Equity Plan. The 2014 Equity Plan authorizes our Board, or a committee of our Board, to grant dividend equivalent rights, or DERs, and phantom shares, which qualify as performance-based awards under Section 162(m) of the Code. Unlike the 2004 Equity Plan, however, the 2014 Equity Plan does not provide for automatic increases in the aggregate share reserve or the number of shares remaining available for grant and only provides for the granting of DERs or phantom shares. During the three months ended June 30, 2018, we did not issue any equity-based awards under the 2014 Equity Plan. In August 2016, we granted to various officers and employees an aggregate of 146,552 performance-based restricted stock units (or phantom shares) with no associated grants of DERs. During the period commencing on the day immediately following the three-year anniversary of the grant date and ending on the ten-year anniversary of the grant date, the restricted stock units will vest on the last day of any month when the total return to stockholders (meaning the aggregate of our common stock price appreciation and dividends declared, assuming full reinvestment of such dividends) exceeds 10% per annum. During the period commencing on the grant date and ending on the last day of the calendar month after the three-year anniversary of the grant date, the restricted stock units will vest immediately upon the Grantee’s involuntary termination of service for any reason other than for cause. The closing price of the Company’s common stock on the grant date was $4.96. During the three and six months ended June 30, 2018, the amounts expensed on these grants was approximately $21 thousand and $42 thousand, respectively. The unrecognized stock compensation expense at June 30, 2018 was approximately $102 thousand. During the three and six months ended June 30, 2017, the amounts expensed on these grants was approximately $20 thousand and $41 thousand, respectively. In December 2017, we issued to various officers and employees an aggregate of 162,613 performance-based restricted stock units (or phantom shares) with no associated grants of DERs. During the period commencing on the day immediately following the three-year anniversary of the grant date and ending on the ten-year anniversary of the grant date, the restricted stock units shall vest on the last day of any month when the total return to stockholders (meaning the aggregate of our common stock price appreciation and dividends declared, assuming full reinvestment of such dividends) exceeds 10% per annum. During the period commencing on the grant date and ending on the last day of the calendar month after the three-year anniversary of the grant date, the restricted stock units will vest immediately upon the grantee’s involuntary termination of service for any reason other than for cause. The closing price of the Company’s common stock on the grant date was $5.66. During the three and six months ended June 30, 2018, the amount expensed on these grants was approximately $4 thousand and $8 thousand, respectively. The unrecognized stock expense on these grants at June 30, 2018 was approximately $156 thousand. Certain of our former officers have previously been granted restricted stock and other equity incentive awards, including DERs, in connection with their service to us. In connection with the Externalization, certain of the agreements under which our former officers have been granted equity awards were modified so that such agreements will continue with respect to our former officers after they became officers and employees of our Manager. As a result, these awards and any future grants will be accounted for as non-employee awards. In addition, as officers and employees of our Manager, they will continue to be eligible to receive equity incentive awards under equity incentive plans in effect now or in the future. In accordance with the Externalization effective December 31, 2011, the DERs previously granted to all of our officers, with the exception of our Chief Executive Officer, were terminated under the Anworth Mortgage Asset Corporation 2007 Dividend Equivalent Rights Plan, or the 2007 DER Plan, and were reissued under the 2014 Equity Plan with the same amounts, terms, and conditions. The 2004 Equity Plan was subsequently replaced by the 2014 Equity Plan. The DERs granted to our Chief Executive Officer are accounted for under the 2007 DER Plan. Under the 2007 DER Plan and the 2014 Equity Plan, a DER is a right to receive amounts equal in value to the dividend distributions paid on a share of our common stock. DERs are paid in either cash or shares of our common stock, whichever is specified by our Compensation Committee at the time of grant, at such times as dividends are paid on shares of our common stock during the period between the date a DER is issued and the date the DER expires or earlier terminates. These DERs are not attached to any stock and only have the right to receive the same cash distribution per common share distributed to our common stockholders during the term of the grant. All of these grants have a five-year term from the date of the grant. During the three and six months ended June 30, 2018, we paid or accrued $98 thousand and $203 thousand, respectively, related to DERs granted. At June 30, 2018, there were 734,348 DERs issued and outstanding. During the three and six months ended June 30, 2017, we paid or accrued $104 thousand and $207 thousand, respectively, related to DERs granted. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments | |
Derivative Instruments | NOTE 14. DERIVATIVE INSTRUMENTS The table below presents the fair value of our derivative instruments as well as their classification in our consolidated balance sheets as of June 30, 2018 and December 31, 2017: June 30, December 31, Derivative Instruments Balance Sheet Location 2018 2017 (in thousands) Interest rate swaps Derivative Assets $ 67,735 $ 27,793 TBA Agency MBS Derivative Assets 1,904 — $ 69,639 $ 27,793 Interest rate swaps Derivative Liabilities $ 652 $ 51 TBA Agency MBS Derivative Liabilities — 1,284 $ 652 $ 1,335 Interest Rate Swap Agreements At June 30, 2018, we were a counterparty to interest rate swaps, which are derivative instruments as defined by ASC 815‑10, with an aggregate notional amount of $3.146 billion and a weighted average maturity of approximately 48 months. We utilize interest rate swaps to manage interest rate risk relating to our repurchase agreements and do not anticipate entering into derivative transactions for speculative or trading purposes. In accordance with the swap agreements, we will pay a fixed-rate of interest during the term of the swap agreements (ranging from 1.001% to 3.0295%) and receive a payment that varies with the three-month LIBOR rate. During the three months ended June 30, 2018, we added four new interest rate swaps for a total notional amount of $200 million. During the three months ended June 30, 2018, three interest rate swaps with an aggregate notional amount of $135 million matured. At June 30, 2018, the amount in AOCI relating to interest rate swaps was approximately $13.6 million. The estimated net amount of the existing losses that were reported in AOCI at June 30, 2018 that is expected to be reclassified into earnings within the next twelve months is approximately $4.1 million. At June 30, 2018 and June 30, 2017, we had a gain of approximately $13.9 million and a loss of approximately $6.0 million, respectively, on interest rate swaps. At June 30, 2018 and December 31, 2017, our interest rate swaps had the following notional amounts, weighted average fixed rates, and remaining terms: June 30, 2018 December 31, 2017 Weighted Weighted Average Remaining Average Remaining Notional Fixed Term in Notional Fixed Term in Maturity Amount Rate Months Amount Rate Months (in thousands) (in thousands) Less than 1 year $ 250,000 1.55 % 5 $ 410,000 0.96 % 4 1 year to 2 years 766,000 1.62 16 725,000 1.60 19 2 years to 3 years 550,000 1.78 28 516,000 1.62 33 3 years to 4 years 300,000 1.87 39 350,000 1.90 43 4 years to 5 years 170,000 1.83 52 220,000 1.92 56 5 years to 7 years 485,000 2.32 73 260,000 1.98 74 7 years to 10 years 625,000 2.63 105 200,000 2.08 101 $ 3,146,000 1.99 % 48 $ 2,681,000 1.65 % 37 Interest Rate Swap Agreements by Counterparty June 30, December 31, 2018 2017 (in thousands) Central clearing houses (1) $ 3,146,000 $ 2,421,000 JPMorgan Securities — 50,000 Deutsche Bank Securities — 75,000 RBS Greenwich Capital — 115,000 Bank of New York — 20,000 $ 3,146,000 $ 2,681,000 (1) For all interest rate swaps entered into after September 9, 2013, the counterparty will be central clearing houses, such as the CME or LCH, regardless of who the trading party is. See the section entitled “Derivative Financial Instruments – Interest Rate Risk Management” in Note 1 for additional details. Eurodollar Futures Contracts Each Eurodollar Futures Contract embodied $1 million of notional value and was effective for a term of approximately three months. We did not designate these contracts as hedges for accounting purposes. As a result, realized and unrealized changes in fair value were recognized in earnings in the period in which the changes occurred. At June 30, 2018 and December 31, 2017, we did not have any Eurodollar Futures Contracts outstanding. For the three months ended June 30, 2017, we had a loss on Eurodollar Futures Contracts of approximately $14 thousand. For the six months ended June 30, 2017, we had a loss on Eurodollar Futures Contracts of approximately $0.3 million. TBA Agency MBS We also enter into TBA contracts and will recognize a gain or loss on the sale of the contracts or dollar roll income. See the section in Note 1 on “Derivative Financial Instruments – TBA Agency MBS” for more information on TBA Agency MBS. During the three months ended June 30, 2018, we recognized a loss on derivatives-TBA Agency MBS (including derivative income) of approximately $3.9 million. During the six months ended June 30, 2018, we recognized a loss on derivatives-TBA Agency MBS (including derivative income) of approximately $15.9 million. During the three months ended June 30, 2017, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $1.6 million. During the six months ended June 30, 2017, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $3.2 million. The types of securities involved in these TBA contracts are Fannie Mae and Freddie Mac 15-year fixed-rate securities with coupons ranging from 3.5% to 4.0%. At June 30, 2018, the net notional amount of the TBA Agency MBS was approximately $750 million. For more information on our accounting policies, the objectives and risk exposures relating to derivatives and hedging agreements, see the section on “Derivative Financial Instruments” in Note 1. For more information on the fair value of our interest rate swaps, see Note 8. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments And Contingencies | |
Commitments and Contingencies | NOTE 15. COMMITMENTS AND CONTINGENCIES Lease Commitment and Administrative Services Commitment — We sublease office space and use administrative services from PIA as more fully described in Note 12. |
Other Expenses
Other Expenses | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other Expenses | NOTE 16. OTHER EXPENSES Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (in thousands) Legal and professional fees $ 187 $ 135 $ 342 $ 315 Printing and stockholder communications 113 46 129 109 Directors and Officers insurance 88 95 173 220 DERs expense 98 104 203 207 Amortization of restricted stock 25 20 50 41 Software implementation and maintenance 103 73 180 194 Administrative service fees 39 38 78 76 Rent 139 124 278 250 Stock exchange and filing fees 43 39 91 79 Custodian and clearing fees 226 60 372 130 Sarbanes-Oxley consulting fees 30 . 30 51 60 Board of directors fees and expenses 80 79 160 157 Securities data services 110 103 259 223 Recovery on Lehman receivable — (18) — (18) Other 43 40 68 79 Total of other expenses $ 1,324 $ 968 $ 2,434 $ 2,122 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events | |
Subsequent Events | NOTE 17. SUBSEQUENT EVENTS Effective July 2, 2018, the conversion rate of our Series B Preferred Stock increased from 5.0453 shares of our common stock to 5.1021 shares of our common stock based upon the common stock dividend of $0.14 that was declared on June 15, 2018. From July 2, 2018 through August 3, 2018, no interest rate swaps matured and we added two new interest rate swaps with an aggregate notional amount of $50 million. |
Organization and Significant 26
Organization and Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Significant Accounting Policies | |
Revenue Recognition | Revenue Recognition During the three months ended March 31, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers,” and the other ASUs related to ASU 2014-09. These ASUs did not have a material impact on our financial statements. Our revenue streams are primarily from investments in MBS and residential mortgage loans held-for-investment. These are considered financial instruments under ASU 2014-09 and are excluded from the scope of this ASU, as they are covered under various ASC topics. A smaller portion of our business is the ownership and rental of residential properties. These residential property leases are also excluded from ASU 2014-09, as they are covered under ASC 840, “Leases.” The detail of the revenue recognition for each of our revenue streams is covered under the discussion for each of those items. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less. The carrying amount of cash equivalents approximates their fair value. Restricted cash includes cash pledged as collateral to counterparties on various derivative transactions. |
Mortgage-Backed Securities | Mortgage-Backed Securities Agency MBS are securities that are obligations (including principal and interest) guaranteed by GSEs, such as Fannie Mae or Freddie Mac. Our investment-grade Agency MBS portfolio is invested primarily in fixed-rate and adjustable-rate mortgage-backed pass-through certificates and hybrid adjustable-rate MBS. Hybrid adjustable-rate MBS have an initial interest rate that is fixed for a certain period, usually one to ten years, and then adjusts annually for the remainder of the term of the asset. We structure our investment portfolio to be diversified with a variety of prepayment characteristics, investing in mortgage assets with prepayment penalties, investing in certain mortgage security structures that have prepayment protections and purchasing mortgage assets at a premium and at a discount. A portion of our portfolio consists of Non-Agency MBS. Our principal business objective is to generate net income for distribution to our stockholders primarily based upon the spread between the interest income on our mortgage assets and our borrowing costs to finance our acquisition of those assets. We classify our MBS as either trading investments, available-for-sale investments, or held-to-maturity investments. Our management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. We currently classify most of our MBS as available-for-sale. We have also designated a portion of our MBS as trading investments. All assets that are classified as available-for-sale are carried at fair value and unrealized gains or losses are generally included in “Other comprehensive income (loss)” as a component of stockholders’ equity. Losses that are credit-related on securities classified as available-for-sale, which are determined by management to be other-than-temporary in nature, are reclassified from “Other comprehensive income (loss)” on the consolidated balance sheets to income (loss) on the consolidated statements of operations. Assets classified as trading investments are reported at fair value with unrealized gains and losses included in our consolidated statements of operations. The most significant source of our revenue is derived from our investments in MBS. Interest income on Agency MBS is accrued based on the actual coupon rate and the outstanding principal amount of the underlying mortgages. Premiums and discounts are amortized or accreted into interest income over the estimated lives of the securities using the effective interest yield method, adjusted for the effects of actual and estimated prepayments based on ASC 320‑10. Our policy for estimating prepayment speeds for calculating the effective yield is to evaluate historical performance, street consensus prepayment speeds and current market conditions. If our estimate of prepayments is materially incorrect, as compared to the aforementioned references, we may be required to make an adjustment to the amortization or accretion of premiums and discounts that would have an impact on future income, which could be material and adverse. A majority of our Non-Agency MBS are accounted for under “Loans and Debt Securities Acquired with Credit Deterioration” (ASC 310‑30). A debt security accounted for under ASC 310‑30 is initially recorded at its purchase price (fair value). The amount of expected cash flows that exceed the initial investment represents the market yield adjustment (accretable yield), which is recognized as interest income on a level yield basis over the life of the security. The excess of total contractual cash flows over the cash flows expected at its origination is considered to be the non-accretable difference. We must periodically reassess the expected cash flows of loans accounted for under ASC 310‑30 along with the cash flows received. A significant increase in expected cash flows must be accounted for as an increase in the rate of accretion over the remaining life of the security. Conversely, if expected cash flows decrease, an other-than-temporary impairment must be recognized as a charge to earnings. Adjustments to the fair value of Non-Agency MBS, accounted for as available-for-sale securities, are recorded in AOCI. The determination as to whether impairment and accretable yield exists is based on cash flow projections related to the securities. As a result, the timing and amount of impairment and accretable yield constitutes material estimates that are susceptible to significant change. Interest income on the Non-Agency MBS that were purchased at a discount to par value and were rated below AA at the time of purchase is recognized based on the security’s effective interest rate. The effective interest rate on these securities is based on the projected cash flows from each security, which are estimated based on our observation of current information and events and include assumptions related to interest rates, prepayment rates, and the timing and amount of credit losses. On at least a quarterly basis, we review and, if appropriate, make adjustments to our cash flow projections based on input and analysis received from external sources, internal models, and our judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the available-for-sale securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore, actual maturities of available-for-sale securities are generally shorter than stated contractual maturities. Stated contractual maturities are generally greater than ten years. There can be no assurance that our assumptions used to estimate future cash flows or the current period’s yield for each asset would not change in the near term, and the change could be material. Based on the projected cash flows from our Non-Agency MBS purchased at a discount to par value, a portion of the purchase discount may be designated as a non-accretable difference and, therefore, not accreted into interest income. The amount designated as a non-accretable difference may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions, and other factors. If the performance of a security with a non-accretable difference is more favorable than forecasted, a portion of the amount designated as a non-accretable difference may be accreted into interest income prospectively. Conversely, if the performance of a security with a non-accretable difference is less favorable than forecasted, an impairment charge and write-down of such security to a new cost basis results. Securities transactions are recorded on the date the securities are purchased or sold. Realized gains or losses from securities transactions are determined based on the specific identified cost of the securities. The following tables show the gross unrealized losses and fair value of those individual securities in our MBS portfolio that are in a continuous unrealized loss position at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time: June 30, 2018 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 85 $ 1,420,191 $ (28,200) 174 $ 786,735 $ (26,691) 259 $ 2,206,926 $ (54,891) Non-Agency MBS 19 $ 119,068 $ (1,523) 10 $ 52,812 $ (2,132) 29 $ 171,880 $ (3,655) December 31, 2017 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 73 $ 1,171,947 $ (7,770) 192 $ 884,897 $ (17,598) 265 $ 2,056,844 $ (25,368) Non-Agency MBS 9 $ 63,568 $ (774) 14 $ 85,569 $ (2,380) 23 $ 149,137 $ (3,154) We do not consider those available-for-sale Agency MBS, or AFS MBS, that have been in a continuous loss position for 12 months or more to be other-than-temporarily impaired. The unrealized losses on our investments in AFS MBS were caused by fluctuations in interest rates. We purchased the AFS MBS primarily at a premium relative to their face value and the contractual cash flows of those investments are guaranteed by the GSEs. Since September 2008, the GSEs have been in the conservatorship of the U.S. government. At June 30, 2018, we did not expect to sell the AFS MBS at a price less than the amortized cost basis of our investments. Because the decline in market value of the AFS MBS is attributable to changes in interest rates and not the credit quality of the AFS MBS in our portfolio, and because we did not have the intent to sell these investments nor is it more likely than not that we will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2018. At June 30, 2018, there was an aggregate of approximately $22.6 million in unrealized losses on Trading Agency MBS that was not included in the table above, as this is recognized on our statements of operations. At December 31, 2017, there was an aggregate of approximately $11 million in unrealized losses on Trading Agency MBS that was not included in the table above, as they were previously recognized on our statements of operations. The unrealized losses on our investments in Non-Agency MBS were primarily caused by fluctuations in interest rates. We purchased the Non-Agency MBS primarily at a discount relative to their face value. During the three months ended June 30, 2018, there were several bonds that were impaired for a total of approximately $1.8 million, as the cash flow projections were less favorable than previously forecasted. On the remainder of the Non-Agency MBS, at June 30, 2018, we did not expect to sell these Non-Agency MBS at a price less than the amortized cost basis of our investments. Because the decline in market value of these Non-Agency MBS is attributable to changes in interest rates and not the credit quality of these Non-Agency MBS in our portfolio, and because we did not have the intent to sell these investments nor is it more likely than not that we will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2018. |
Residential Mortgage Loans Held-for-Investment | Residential Mortgage Loans Held-for-Investment Residential mortgage loans held-for-investment are residential mortgage loans held by consolidated securitization trusts. Residential mortgage loans held-for-investment are carried at unpaid principal balances net of any premiums or discounts and allowance for loan losses. We expect that we will be required to continue to consolidate the securitization trusts that hold the residential mortgage loans. We establish an allowance for residential loan losses based on our estimate of credit losses. These estimates for the allowance for loan losses require consideration of various observable inputs including, but not limited to, historical loss experience, delinquency status, borrower credit scores, geographic concentrations, and loan-to-value ratios, and are adjusted for current economic conditions as deemed necessary by our management. Many of these factors are subjective and cannot be reduced to a mathematical formula. In addition, since we have not incurred any significant amount of direct losses on our portfolio, we review national historical credit performance information from external sources to assist in our analysis. Changes in our estimates can significantly impact the allowance for loan losses and provision expense. The allowance reflects management’s best estimate of the credit losses inherent in the loan portfolio at the balance sheet date. It is also possible that we will experience credit losses that are different from our current estimates or that the time of those losses may differ from our estimates. We recognize interest income from residential mortgage loans on an accrual basis. Any related premium or discount is amortized into interest income using the effective interest method over the weighted average life of these loans. Coupon interest is recognized as revenue when earned and deemed collectable or until a loan becomes more than 90 days past due, at which point the loan is placed on non-accrual status. Interest previously accrued for loans that have been placed on non-accrual status is reversed against interest income in the period the loan is placed in non-accrual status. Residential loans delinquent more than 90 days or in foreclosure are characterized as delinquent. Cash principal and interest that are advanced from servicers after a loan becomes greater than 90 days past due are recorded as a liability due to the servicer. When a delinquent loan previously placed on non-accrual status has cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan is placed back on accrual status. Alternatively, non-accrual loans may be placed back on accrual status if restructured and after the loan is considered re-performing. A restructured loan is considered re-performing when the loan has been current for at least 12 months. |
Residential Properties | Residential Properties Residential properties are stated at cost and consist of land, buildings, and improvements, including other costs incurred during their acquisition, possession, and renovation. Residential properties purchased that are not subject to an existing lease are treated as asset acquisitions and, as such, are recorded at their purchase price, including acquisition and renovation costs, all of which are allocated to land and building based upon their relative fair values at the date of acquisition. Residential properties acquired either subject to an existing lease or as part of a portfolio level transaction are treated as a business combination under ASC 805, Business Combinations , and, as such, are recorded at fair value, allocated to land, building and the existing lease, if applicable, based upon their relative fair values at the date of acquisition, with acquisition fees and other costs expensed as incurred. Building depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We will generally use a 27.5 year estimated life with no salvage value. We will incur costs to prepare our acquired properties to be leased. These costs will be capitalized and allocated to building costs. Costs related to the restoration, renovation, or improvement of our properties that improve and extend their useful lives are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary repairs and maintenance are expensed as incurred. Costs incurred by us to lease the properties will be capitalized and amortized over the life of the lease. Escrow deposits include refundable and non-refundable cash and earnest money on deposit with independent third parties for property purchases. |
Repurchase Agreements | Repurchase Agreements We finance the acquisition of MBS primarily through the use of repurchase agreements. Under these repurchase agreements, we sell securities to a lender and agree to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sale price that we receive and the repurchase price that we pay represents interest paid to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which we pledge our securities and accrued interest as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. We retain beneficial ownership of the pledged collateral. Upon the maturity of a repurchase agreement, we are required to repay the loan and concurrently receive back our pledged collateral from the lender or, with the consent of the lender, we may renew such agreement at the then-prevailing financing rate. These repurchase agreements may require us to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. |
Asset-Backed Securities Issued by Securitization Trusts | Asset-Backed Securities Issued by Securitization TrustsAsset-backed securities issued by the securitization trusts are recorded at principal balances net of unamortized premiums or discounts. This long-term debt is collateralized only by the assets held in the trusts and is otherwise non-recourse to the Company. |
Derivative Financial Instruments | Derivative Financial Instruments Risk Management We primarily use short-term (less than or equal to 12 months) repurchase agreements to finance the purchase of MBS. These obligations expose us to variability in interest payments due to changes in interest rates. We actively monitor changes in interest rate exposures and evaluate various opportunities to mitigate this risk. Our objective is to limit the impact of interest rate changes on earnings and cash flows. The principal instruments we use to achieve this are interest rate swap agreements, or interest rate swaps. Interest rate swaps effectively convert a percentage of our repurchase agreements to fixed-rate obligations over a period of up to ten years. Under interest rate swaps, we agree to pay an amount equal to a specified fixed-rate of interest times a notional principal amount and to receive in return an amount equal to a specified variable-rate of interest times a notional amount, generally based on the London Interbank Offered Rate, or LIBOR. The notional amounts are not exchanged. We do not issue nor hold the interest rate swaps for speculative purposes. We also enter into To-Be-Announced, or TBA, Agency MBS as either a means of investing in and financing Agency MBS, or as a means of disposing of or reducing our exposure to agency securities. Pursuant to TBA contracts, we agree to purchase or sell, for future delivery, Agency MBS with certain principal and interest terms and certain types of collateral, but the particular Agency MBS to be delivered are not identified until shortly before the TBA settlement date. We also may choose, prior to settlement, to move the settlement of these MBS out to a later date by entering into an offsetting short or long position (referred to as a “pair off”), net settling the paired-off positions for cash, and simultaneously purchasing a similar TBA contract for a later settlement date. This transaction is commonly referred to as a “dollar roll.” The Agency MBS purchased or sold for a forward settlement date are typically priced at a discount to agency securities for settlement in the current month. This difference (or discount) is referred to as the “price drop.” The price drop represents compensation to us for foregoing net interest margin (interest income less repurchase agreement financing cost). TBA Agency MBS are accounted for as derivative instruments since they do not meet the exemption allowed for a “regular way” security trade under ASC 815, as either the TBA contracts do not settle in the shortest period of time possible or we cannot assess that it is probable at inception that we will take physical delivery of the security or that we will not settle on a net basis. Accounting for Derivatives and Hedging Activities We account for derivative instruments in accordance with ASC 815, which requires recognition of all derivatives as either assets or liabilities and measurement of those instruments at fair value, which is typically based on values obtained from large financial institutions who are market makers for these types of instruments. The accounting for changes in the fair value of derivative instruments depends on whether the instruments are designated and qualify as hedges in accordance with ASC 815. Changes in fair value related to derivatives not designated as hedges are recorded in our consolidated statements of operations as “Gain (loss) on derivatives, net.” For a derivative to qualify for hedge accounting, we must anticipate that the hedge will be highly “effective” as defined by ASC 815‑10. A hedge of the variability of cash flows that are to be received or paid in connection with a recognized asset or liability is known as a “cash flow” hedge. Changes in the fair value of a derivative that is highly effective and that is designated as a cash flow hedge, to the extent the hedge is effective, are recorded in AOCI and reclassified to income when the forecasted transaction affects income (e.g. when periodic settlement interest payments are due on repurchase agreements). Hedge ineffectiveness, if any, is recorded in current period income. When we discontinue hedge accounting, the gain or loss on the derivative remains in AOCI and is reclassified as an unrealized gain or loss on the consolidated statements of operations when the forecasted transaction affects income. In all situations where hedge accounting is discontinued and the derivative remains outstanding, we carry the derivative at its fair value on our balance sheet, recognizing changes in fair value in the current period consolidated statements of operations. All of our interest rate swaps had historically been accounted for as cash flow hedges under ASC 815. After August 22, 2014, none of our interest rate swaps were designated for hedge accounting. As a result of discontinuing hedge accounting for our interest rate swaps, changes in the fair value of these interest rate swaps are recorded in “Gain (loss) on derivatives, net” in our consolidated statements of operations rather than in AOCI. Also, net interest paid or received on these interest rate swaps which was previously recognized in interest expense, is instead recognized in “Gain (loss) on derivatives, net.” These interest rate swaps continue to be reported as assets or liabilities on our consolidated balance sheets at their fair value. As long as the forecasted transactions that were being hedged (i.e. rollovers of our repurchase agreement borrowings) are still expected to occur, the balance in AOCI from the activity in these interest rate swaps through the dates of de-designation will remain in AOCI and be recognized in our consolidated statements of operations as “interest expense” over the remaining term of these interest rate swaps. For purposes of the consolidated statements of cash flows, cash flows hedges were classified with the cash flows from the hedged item. Cash flows from derivatives that are not hedges are classified according to the underlying nature or purpose of the derivative transaction. For more details on the amounts and other qualitative information on all our derivative transactions, see Note 14. For more information on the fair value of our derivative instruments, see Note 8. |
Credit Risk | Credit Risk At June 30, 2018, we had attempted to limit our exposure to credit losses on our Agency MBS by purchasing securities primarily through Freddie Mac and Fannie Mae. The payment of principal and interest on the Freddie Mac and Fannie Mae MBS are guaranteed by those respective enterprises. Since September 2008, both Freddie Mac and Fannie Mae have been in the conservatorship of the U.S. government. While it is the intent that the conservatorship will help stabilize Freddie Mac’s and Fannie Mae’s overall financial position, there can be no assurance that it will continue to succeed or that, if necessary, Freddie Mac and Fannie Mae will be able to satisfy its guarantees of Agency MBS. There have also been concerns as to what the U.S. government will do regarding winding down or reforming the operations of Freddie Mac and Fannie Mae. There have also been concerns over the past few years regarding the credit standing of Freddie Mac, Fannie Mae, and U.S. sovereign debt. We do not know what effect any future ratings of Freddie Mac, Fannie Mae and U.S. sovereign debt may ultimately have on the U.S. economy, the value of our securities, or the ability of Freddie Mac and Fannie Mae to satisfy its guarantees of Agency MBS, if necessary. Our adjustable-rate MBS are subject to periodic and lifetime interest rate caps. Periodic caps can limit the amount an interest rate can increase during any given period. Some adjustable-rate MBS subject to periodic payment caps may result in a portion of the interest being deferred and added to the principal outstanding. We also invest in Non-Agency MBS, which are securities that are secured by pools of residential mortgages which are not issued by GSEs and are not guaranteed by any agency of the U.S. government or any federally chartered corporation. Such investments carry a risk that the borrower on the underlying mortgage may default on their obligation to make full and timely payments of principal and interest. Other-than-temporary losses on our available-for-sale MBS, as measured by the amount of decline in estimated fair value attributable to credit losses that are considered to be other-than-temporary, are charged against income, resulting in an adjustment of the cost basis of such securities. Based on the criteria in ASC 320‑10, the determination of whether a security is other-than-temporarily impaired, or OTTI, involves judgments and assumptions based on both subjective and objective factors. When a security is impaired, an OTTI is considered to have occurred if (i) we intend to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis or (iii) we do not expect to recover its amortized cost basis (i.e., there is a credit-related loss). The following are among, but not all of, the factors considered in determining whether and to what extent an OTTI exists and the portion that is related to credit loss: (i) the expected cash flow from the investment; (ii) whether there has been an other-than-temporary deterioration of the credit quality of the underlying mortgages; (iii) the credit protection available to the related mortgage pool for MBS; (iv) any other market information available, including analysts’ assessments and statements, public statements and filings made by the debtor or counterparty; (v) management’s internal analysis of the security, considering all known relevant information at the time of assessment; and (vi) the magnitude and duration of historical decline in market prices. Because management’s assessments are based on factual information as well as subjective information available at the time of assessment, the determination as to whether an other-than-temporary decline exists and, if so, the amount considered impaired, is also subjective and therefore constitutes material estimates that are susceptible to significant change. We also own residential mortgage loans held-for-investment. As the majority of these loans (the tranches of the securitization trusts senior to our interests) are collateral for the asset-backed securities issued by the trusts, our potential credit risk is on the subordinated tranches that we own, as these tranches would be the first ones to absorb any losses resulting from defaults by the borrowers on the underlying mortgage loans. For all interest rate swaps entered into on or after September 9, 2013, all interest rate swap participants are required by rules of the Commodities Futures Trading Commission, under authority granted to it pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, to clear interest rate swaps through a registered derivatives clearing organization, or “swap execution facility,” through standardized documents under which each interest rate swap counterparty transfers its position to another entity whereby a central clearinghouse effectively becomes the counterparty on each side of the interest rate swap. It is the intent of the Dodd-Frank Act that the clearing of interest rate swaps in this manner is designed to avoid concentration of risk in any single entity by spreading and centralizing the risk in the clearinghouse and its members. |
Income Taxes | Income Taxes We have elected to be taxed as a REIT and to comply with the provisions of the Code with respect thereto. Accordingly, we will not be subject to federal income tax to the extent that our distributions to our stockholders satisfy the REIT requirements and that certain asset, income, and stock ownership tests are met. We have no unrecognized tax benefits and do not anticipate any increase in unrecognized benefits during 2018 relative to any tax positions taken prior to January 1, 2018. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income taxes accounts; and no such accruals existed at June 30, 2018. We file REIT U.S. federal and California income tax returns. These returns are generally open to examination by the IRS and the California Franchise Tax Board for all years after 2013 and 2012, respectively. |
Cumulative Convertible Preferred Stock | Cumulative Convertible Preferred Stock We classify our Series B Cumulative Convertible Preferred Stock, or Series B Preferred Stock, on our balance sheets using the guidance in ASC 480‑10‑S99. Our Series B Preferred Stock contains certain fundamental change provisions that allow the holder to redeem the preferred stock for cash only if certain events occur, such as a change in control. As redemption under these circumstances is not solely within our control, we have classified our Series B Preferred Stock as temporary equity. We have analyzed whether the conversion features in our Series B Preferred Stock should be bifurcated under the guidance in ASC 815‑10 and have determined that bifurcation is not necessary. |
Stock-Based Expense | Stock-Based Expense In accordance with ASC 718‑10, any expense relating to share-based payment transactions is recognized in the unaudited consolidated financial statements (see Note 13 to the accompanying unaudited consolidated financial statements). |
Earnings Per Share | Earnings Per Share Basic earnings per share, or EPS, is computed by dividing net (loss) income to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS assumes the conversion, exercise or issuance of all potential common stock equivalents (which includes convertible preferred stock) and the adding back of the Series B Preferred Stock dividends unless the effect is to reduce a loss or increase the income per share. The computation of EPS for the three and six months ended June 30, 2018 and June 30, 2017 is as follows: Net Income to Common Average Earnings Stockholders Shares per Share (in thousands) For the three months ended June 30, 2018 Basic EPS $ 12,636 98,271 $ 0.13 Effect of dilutive securities 305 3,934 — Diluted EPS $ 12,941 102,205 $ 0.13 For the three months ended June 30, 2017 Basic EPS $ 8,072 95,696 $ 0.08 Effect of dilutive securities 244 4,894 — Diluted EPS $ 8,316 100,590 $ 0.08 Net Income to Common Average Earnings Stockholders Shares per Share (in thousands) For the six months ended June 30, 2018 Basic EPS $ 7,485 98,228 $ 0.08 Effect of dilutive securities 609 3,904 — Diluted EPS $ 8,094 102,132 $ 0.08 For the six months ended June 30, 2017 Basic EPS $ 21,718 95,701 $ 0.23 Effect of dilutive securities 638 4,866 (0.01) Diluted EPS $ 22,356 100,567 $ 0.22 |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income In accordance with ASC 220‑10‑55‑2, total comprehensive income is comprised of net income or net loss and other comprehensive income, which includes unrealized gains and losses on marketable securities classified as available-for-sale, and unrealized gains and losses on derivative financial instruments. In accordance with ASU 2013‑02, we have identified, in our consolidated statements of comprehensive income, items that are reclassified and included in our consolidated statements of operations. |
Use of Estimates | USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS On February 25, 2016, the FASB issued ASU 2016‑2, “Leases” (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate, airplanes, and manufacturing equipment, to recognize on their balance sheet the assets and liabilities for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU will become effective for public entities beginning with the quarter ending March 31, 2019, and we intend to adopt it at that time. We do not believe that this ASU will have a material impact on our financial statements, as we do not have any finance leases and our only operating lease is for the sublease of our headquarters. Also, with respect to the small portion of our business in which we are a lessor of rental properties, this ASU is not applicable to this portion of our business, as all of our leases are for less than one year. On June 16, 2016, the FASB issued ASU 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. The scope excludes financial assets measured at fair value through net income, available-for-sale securities, loans made to participants by defined contribution employee benefit plans, policy loan receivables of an insurance company, pledge receivables of a not-for-profit entity, and receivables between entities under common control. This ASU will require entities to immediately record the full amount of credit losses that are expected in their loan portfolios and to re-evaluate at each reporting period. The income statement will reflect the credit loss provision (or expense) necessary to adjust the allowance estimate since the previous reporting date. The expected credit loss estimate should consider available information relevant to assessing the collectability of contractual cash flows including information about past events (i.e. historical loss experience), current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU will become effective for public entities beginning with the quarter ending March 31, 2020. Although, at this time, we are not able to measure the impact that this ASU will have on our financial statements, we believe that when implemented, while not having a significant impact on the losses incurred over the life of the loans, it is likely that credit losses will be recognized through the allowance account sooner than previously required. In January 2017, the FASB issued ASU 2017‑03, “Accounting Changes and Error Corrections (Topic 250) and Investment-Equity Method and Joint Ventures (Topic 323).” This ASU applies to ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606),” ASU 2016‑02, “Leases (Topic 842),” and ASU 2016‑13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU relates to a SEC Staff Announcement that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M.) Consistent with Topic 11.M, if a registrant does not know, or cannot reasonably estimate, the impact that adoption of the ASUs referenced in this announcement is expected to have on the financial statements, then, in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. In this regard, the SEC staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies that the registrant expects to apply, if determined, and a comparison to the registrant’s current accounting policies. Also, a registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The part of this ASU that relates to Topic 323 does not apply to the Company as it relates to the accounting for investments in qualified affordable housing projects, and the Company does not have any such projects. This ASU not only applies immediately to the disclosures of the ASUs listed above, but also applies to any subsequent amendments to guidance in the ASUs that are issued prior to a registrant’s adoption of the aforementioned ASUs. We do not believe that this ASU will have a material impact on our financial statements. In March 2017, the FASB issued ASU 2017‑08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310‑20) – Premium Amortization on Purchased Callable Debt Securities.” Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. This ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. This ASU will become effective for entities beginning with the quarter ending March 31, 2019. We do not believe that this ASU will have a material impact on our financial statements. In July 2017, the FASB issued ASU 2017-11, “Accounting for Certain Financial Instruments with Down Round Features.” A down round feature is a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. This ASU requires companies to disregard the down round features when assessing whether the instrument is indexed to its own stock for determining liability or equity classification. Companies that provide earnings per share (“EPS”) data will adjust their basic EPS calculation for the effect of the feature when triggered (that is, when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. This ASU will become effective for all public entities beginning with the quarter ending March 31, 2019. We do not believe that this ASU will have a material impact on our financial statements. In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815), Targeted Improvement to Accounting for Hedging Activities.” The amendments in this ASU are intended to more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. Additionally, by aligning the timing and recognition of hedge results with the earnings effects of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. This ASU will become effective for public entities beginning with the quarter ending March 31, 2019. As the Company no longer uses hedge accounting, we do not believe that this ASU will have a material impact on our financial statements. In June 2018, the FASB issued ASU 2018-07, “Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This ASU expands the scope of Topic 718, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Currently, nonemployee awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, equity-classified nonemployee awards within the scope of Topic 718 will be measured at grant-date fair value. This ASU will become effective for public companies beginning with the quarter ending March 31, 2019. We do not believe this ASU will have a material impact on our financial statements. |
Organization and Significant 27
Organization and Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Significant Accounting Policies | |
Investments' Gross Unrealized Losses and Fair Value of Securities in Continuous Unrealized Loss Position, Aggregated by Investment Category and Length of Time | June 30, 2018 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 85 $ 1,420,191 $ (28,200) 174 $ 786,735 $ (26,691) 259 $ 2,206,926 $ (54,891) Non-Agency MBS 19 $ 119,068 $ (1,523) 10 $ 52,812 $ (2,132) 29 $ 171,880 $ (3,655) December 31, 2017 Less Than 12 Months 12 Months or More Total Description Number Number Number of of Fair Unrealized of Fair Unrealized of Fair Unrealized Securities Securities Value Losses Securities Value Losses Securities Value Losses (in thousands) (in thousands) (in thousands) Agency MBS 73 $ 1,171,947 $ (7,770) 192 $ 884,897 $ (17,598) 265 $ 2,056,844 $ (25,368) Non-Agency MBS 9 $ 63,568 $ (774) 14 $ 85,569 $ (2,380) 23 $ 149,137 $ (3,154) |
Computation of Earnings Per Share | The computation of EPS for the three and six months ended June 30, 2018 and June 30, 2017 is as follows: Net Income to Common Average Earnings Stockholders Shares per Share (in thousands) For the three months ended June 30, 2018 Basic EPS $ 12,636 98,271 $ 0.13 Effect of dilutive securities 305 3,934 — Diluted EPS $ 12,941 102,205 $ 0.13 For the three months ended June 30, 2017 Basic EPS $ 8,072 95,696 $ 0.08 Effect of dilutive securities 244 4,894 — Diluted EPS $ 8,316 100,590 $ 0.08 Net Income to Common Average Earnings Stockholders Shares per Share (in thousands) For the six months ended June 30, 2018 Basic EPS $ 7,485 98,228 $ 0.08 Effect of dilutive securities 609 3,904 — Diluted EPS $ 8,094 102,132 $ 0.08 For the six months ended June 30, 2017 Basic EPS $ 21,718 95,701 $ 0.23 Effect of dilutive securities 638 4,866 (0.01) Diluted EPS $ 22,356 100,567 $ 0.22 |
Restricted Cash (Tables)
Restricted Cash (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Restricted Cash | |
Summary of Restricted Cash Balances | June 30, December 31, 2018 2017 (in thousands) Restricted cash - interest rate swap margin calls $ — $ 11,157 |
Mortgage-Backed Securities (Tab
Mortgage-Backed Securities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Mortgage Backed Securities | |
Agency MBS and Non-Agency MBS, Which are Carried at Fair Value | June 30, 2018 Total Non-Agency Total By Agency Freddie Mac Fannie Mae Agency MBS (1) MBS MBS (in thousands) Amortized cost $ 1,452,764 $ 2,422,478 $ 3,875,242 $ 750,616 $ 4,625,858 Paydowns receivable (2) 16,474 — 16,474 28 16,502 Unrealized gains 4,463 15,608 20,071 33,006 53,077 Unrealized losses (32,606) (44,837) (77,443) (3,655) (81,098) Fair value $ 1,441,095 $ 2,393,249 $ 3,834,344 $ 779,995 $ 4,614,339 20-Year and 15-Year 30-Year Total Non-Agency Total By Security Type ARMs Hybrids Fixed-Rate (1) Fixed-Rate Agency MBS MBS MBS (in thousands) Amortized cost $ 997,383 $ 831,084 $ 1,167,834 $ 878,941 $ 3,875,242 $ 750,616 $ 4,625,858 Paydowns receivable (2) 7,611 8,863 — — 16,474 28 16,502 Unrealized gains 17,647 246 134 2,044 20,071 33,006 53,077 Unrealized losses (1,217) (21,399) (35,902) (18,925) (77,443) (3,655) (81,098) Fair value $ 1,021,424 $ 818,794 $ 1,132,066 $ 862,060 $ 3,834,344 $ 779,995 $ 4,614,339 (1) Included in the 15-year fixed-rate MBS are Trading Agency MBS. These have an amortized cost of $656.1 million, an unrealized loss of $22.6 million, and a fair value of $633.5 million. (2) Paydowns receivable on Agency MBS are generated when the Company receives notice from Freddie Mac of prepayments but does not receive the actual cash with respect to such prepayments until the 15th day of the following month. During the three months ended June 30, 2018, we did not sell any Agency MBS. During the six months ended June 30, 2018, we sold approximately $583.2 million of Agency MBS and realized gross losses of approximately $19.3 million. During the three months ended June 30, 2017, we sold approximately $27.5 million of Agency MBS and realized gross gains of approximately $176 thousand. During the six months ended June 30, 2017, we sold approximately $35.7 million of Agency MBS and realized gross gains of approximately $176 thousand and realized gross losses of approximately $68 thousand. During the three months ended June 20, 2018, we did not sell any Non-Agency MBS. During the six months ended June 20, 2018, we sold approximately $5.8 million of Non-Agency MBS and recognized gross losses of approximately $42 thousand. We did not sell any Non-Agency MBS during the three or six months ended June 30, 2017. During the three months ended June 30, 2018, we had gross unrealized losses on trading investments of $2.7 million. During the six months ended June 30, 2018, we had gross unrealized losses on trading investments of $11.6 million. During the three months ended June 30, 2017, we had gross unrealized gains on trading investments of approximately $4.1 million. During the six months ended June 30, 2017, we had gross unrealized gains on trading investments of approximately $4.2 million. December 31, 2017 Total Non-Agency Total By Agency Freddie Mac Fannie Mae Agency MBS (1) MBS MBS (in thousands) Amortized cost $ 1,678,835 $ 2,594,496 $ 4,273,331 $ 730,624 $ 5,003,955 Paydowns receivable (2) 13,873 — 13,873 — 13,873 Unrealized gains 6,597 21,348 27,945 33,355 61,300 Unrealized losses (18,205) (18,147) (36,352) (3,154) (39,506) Fair value $ 1,681,100 $ 2,597,697 $ 4,278,797 $ 760,825 $ 5,039,622 20-Year and Total 15-Year 30-Year Agency Non-Agency Total By Security Type ARMs Hybrids Fixed-Rate (1) Fixed-Rate MBS MBS MBS (in thousands) Amortized cost $ 1,249,366 $ 863,762 $ 1,277,570 $ 882,633 $ 4,273,331 $ 730,624 $ 5,003,955 Paydowns receivable (2) 5,943 7,930 — — 13,873 — 13,873 Unrealized gains 23,425 833 595 3,092 27,945 33,355 61,300 Unrealized losses (1,871) (12,845) (16,338) (5,298) (36,352) (3,154) (39,506) Fair value $ 1,276,863 $ 859,680 $ 1,261,827 $ 880,427 $ 4,278,797 $ 760,825 $ 5,039,622 (1) Included in the 15-year fixed-rate MBS are Trading Agency MBS. These have an amortized cost of $909.2 million, an unrealized loss of $11 million, and a fair value of $898.2 million. Paydowns receivable on Agency MBS are generated when the Company receives notice from Freddie Mac of prepayments but does not receive the actual cash with respect to such prepayments until the 15th day of the following month. |
Estimates of Contractually Required Payments Expected to be Collected and Fair Value | Change During the Change During the Three Months Ended Six Months Ended At At June 30, June 30, June 30, December 31, 2018 2018 2018 2017 (in thousands) Non-Agency MBS acquired with credit deterioration: Contractually required principal $ (14,654) $ (14,595) $ 783,752 $ 798,347 Contractual principal not expected to be collected (non-accretable yield) 5,233 622 (331,858) (332,480) Expected cash flows to be collected (9,421) (13,973) 451,894 465,867 Market yield adjustment (5,007) (7,806) 139,392 147,198 Unrealized gain, net (1,253) 32 28,557 28,525 Fair value (15,681) (21,747) 619,843 641,590 Fair value of other Non-Agency MBS (without credit deterioration) 17,135 40,917 160,152 119,235 Total fair value of Non-Agency MBS $ 1,454 $ 19,170 $ 779,995 $ 760,825 |
Schedule of Components of Purchase Discount on its Non-Agency MBS | Three Months Ended Six Months Ended June 30, June 30, 2018 2018 Market Yield Non- Market Yield Non- Adjustment Accretable Adjustment Accretable (in thousands) Balance at beginning of period $ 144,399 $ (337,091) $ 147,198 $ (332,480) Accretion of discount (1,783) — (3,602) (100) Purchases (820) (4) (3,213) (9,907) Realized credit losses, net of recoveries — 4,590 — 9,982 Sales — — 1,413 — Impairment charge — (1,757) — (1,757) Transfer (2,404) 2,404 (2,404) 2,404 Other — — — — Balance at end of period $ 139,392 $ (331,858) $ 139,392 $ (331,858) |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Variable Interest Entities | |
Summary of Assets and Liabilities of Variable Interest Entities | June 30, December 31, 2018 2017 (in thousands) Residential mortgage loans held-for-investment $ 585,020 $ 639,351 Accrued interest receivable 1,934 2,093 Total assets $ 586,954 $ 641,444 Accrued interest payable $ 1,887 $ 2,047 Asset-backed securities issued by securitization trusts 575,653 629,984 Total liabilities $ 577,540 $ 632,031 |
Summary of Residential Mortgage Loans Held-for-Investment | June 30, December 31, 2018 2017 (in thousands) Principal balance $ 580,938 $ 634,219 Unamortized premium, net of discount 4,268 5,335 Allowance for loan losses (186) (203) Carrying value $ 585,020 $ 639,351 |
Summary of Reconciliation of Carrying Value of Residential Mortgage Loans Held-for-Investment | Three Months Ended For the Year Ended June 30, December 31, 2018 2017 (in thousands) Balance at beginning of period $ 611,006 $ 744,462 Deductions during period: Collections of principal (25,468) (102,569) Amortization of premium (518) (2,542) Balance at end of period $ 585,020 $ 639,351 |
Summary of Portfolio Characteristics of Residential Mortgage Loans Held-for-Investment | June 30, December 31, 2018 2017 (dollar amounts in thousands) Portfolio Characteristics: Number of loans 868 931 Current principal balance $ 580,938 $ 634,219 Average loan balance $ 669 $ 681 Net weighted average coupon rate 3.86 % 3.86 % Weighted average maturity (years) 25.8 26.3 Weighted average FICO score 761 762 Current Performance: Current $ 576,053 $ 629,901 30 days delinquent 2,895 2,918 60 days delinquent 802 — 90+ days delinquent 597 1,400 Bankruptcy/foreclosure 591 — Total $ 580,938 $ 634,219 |
Summary of Geographic Concentrations of Residential Mortgage Loans Held-for-Investment | June 30, December 31, State 2018 2017 California 43.1 % 43.8 % Florida 6.3 6.3 Other states (none greater than 5%) 50.6 49.9 Total 100.0 % 100.0 % |
Summary of Activity in Allowance for Loan Losses | June 30, December 31, 2018 2017 (in thousands) Balance at beginning of period $ 186 $ 203 Provision for loan losses — — Charge-offs, net — — Balance at end of period $ 186 $ 203 |
Repurchase Agreements (Tables)
Repurchase Agreements (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Repurchase Agreements | |
Repurchase Agreements Balances, Weighted Average Interest Rates and Remaining Weighted Average Maturities | At June 30, 2018 and December 31, 2017, the repurchase agreements had the following balances, weighted average interest rates, and remaining weighted average maturities: June 30, 2018 Agency MBS Non-Agency MBS Total MBS Weighted Weighted Weighted Average Average Average Interest Interest Interest Balance Rate Balance Rate Balance Rate (in thousands) (in thousands) (in thousands) Overnight $ — — % $ — — % $ — — % Less than 30 days 1,595,000 1.99 543,480 3.35 2,138,480 2.34 30 days to 90 days 1,880,000 2.13 — — 1,880,000 2.13 Over 90 days — — — — — — Demand — — — — — — $ 3,475,000 2.07 % $ 543,480 3.35 % $ 4,018,480 2.24 % Weighted average maturity 39 days 14 days 35 days Weighted average interest rate after adjusting for interest rate swaps 1.97 % Weighted average maturity after adjusting for interest rate swaps 1,122 days MBS pledged as collateral under the repurchase agreements and interest rate swaps $ 3,691,061 $ 686,962 $ 4,378,023 December 31, 2017 Agency MBS Non-Agency MBS Total MBS Weighted Weighted Weighted Average Average Average Interest Interest Interest Balance Rate Balance Rate Balance Rate (in thousands) (in thousands) (in thousands) Overnight $ — — % $ — — % $ — — % Less than 30 days 2,015,000 1.46 520,695 2.87 2,535,695 1.75 30 days to 90 days 1,830,000 1.48 — — 1,830,000 1.48 Over 90 days — — — — — — Demand — — — — — — $ 3,845,000 1.47 % $ 520,695 2.87 % $ 4,365,695 1.64 % Weighted average maturity 33 days 14 days 31 days Weighted average interest rate after adjusting for interest rate swaps 1.77 % Weighted average maturity after adjusting for interest rate swaps 674 days MBS pledged as collateral under the repurchase agreements and interest rate swaps $ 4,073,852 $ 661,445 $ 4,735,297 |
Liabilities and Assets Subject to Netting Arrangements | Net Amounts of Assets Gross Amounts Not Offset Gross Amounts or Liabilities in the Balance Sheets (1) of Recognized Gross Amounts Presented in Cash June 30, 2018 Assets or Offset in the the Balance Financial Collateral Net (in thousands) Liabilities Balance Sheets Sheets Instruments Received Amounts Derivative assets at fair value (2) $ 69,639 $ — $ 69,639 $ (69,639) $ — $ — Total $ 69,639 $ — $ 69,639 $ (69,639) $ — $ — Repurchase agreements (3) $ 4,018,480 $ — $ 4,018,480 $ (4,018,480) $ — $ — Derivative liabilities at fair value (2) 652 — 652 (652) — — Total $ 4,019,132 $ — $ 4,019,132 $ (4,019,132) $ — $ — Net Amounts of Assets Gross Amounts Not Offset Gross Amounts or Liabilities in the Balance Sheets (1) of Recognized Gross Amounts Presented in Cash December 31, 2017 Assets or Offset in the the Balance Financial Collateral Net (in thousands) Liabilities Balance Sheets Sheets Instruments Received Amounts Derivative assets at fair value (2) $ 27,793 $ — $ 27,793 $ (27,793) $ — $ — Total $ 27,793 $ — $ 27,793 $ (27,793) $ — $ — Repurchase agreements (3) $ 4,365,695 $ — $ 4,365,695 $ (4,365,695) $ — $ — Derivative liabilities at fair value (2) 1,335 — 1,335 (1,335) — — Total $ 4,367,030 $ — $ 4,367,030 $ (4,367,030) $ — $ — (1) Amounts presented are limited to collateral pledged sufficient to reduce the related net amount to zero in accordance with ASU No. 2011‑11, as amended by ASU No. 2013‑01. (2) At June 30, 2018, we had not pledged any Agency MBS as collateral on our interest rate swap derivatives, which were approximately $67.7 million in derivative assets and approximately $652 thousand in derivative liabilities at June 30, 2018. At December 31, 2017, we had pledged approximately $62 thousand in Agency MBS as collateral and paid another approximately $11.2 million on interest rate swap margin calls on our interest rate swap derivatives, which were approximately $27.8 million in derivative assets and approximately $51 thousand in derivative liabilities at December 31, 2017. At June 30, 2018, we had pledged approximately $3.69 billion in Agency MBS and approximately $687 million in Non-Agency MBS as collateral on our repurchase agreements. At December 31, 2017, we had pledged $4.07 billion in Agency MBS and approximately $661.4 million in Non-Agency MBS as collateral on our repurchase agreements. |
Fair Values of Financial Inst32
Fair Values of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Values of Financial Instruments | |
Fair Value Measurements on Recurring Basis | At June 30, 2018, fair value measurements on a recurring basis were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Agency MBS (1) $ — $ 3,834,344 $ — $ 3,834,344 Non-Agency MBS (1) $ — $ 779,995 $ — $ 779,995 Derivative instruments (2) $ — $ 69,639 $ — $ 69,639 Liabilities: Derivative instruments (2) $ — $ 652 $ — $ 652 (1) For more detail about the fair value of our MBS by agency and type of security, see Note 3. (2) Derivative instruments include discontinued hedges under ASC 815‑10. For more detail about our derivative instruments, see Note 1 and Note 14. At December 31, 2017, fair value measurements on a recurring basis were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Agency MBS (1) $ — $ 4,278,797 $ — $ 4,278,797 Non-Agency MBS (1) $ — $ 760,825 $ — $ 760,825 Derivative instruments (2) $ — $ 27,793 $ — $ 27,793 Liabilities: Derivative instruments (2) $ — $ 1,335 $ — $ 1,335 (1) For more detail about the fair value of our MBS by agency and type of security, see Note 3. (2) Derivative instruments include discontinued hedges under ASC 815‑10. For more detail about our derivative instruments, see Note 1 and Note 14. |
Carrying Value and Estimated Fair Value of Financial Instruments | The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets at June 30, 2018 and December 31, 2017: June 30, 2018 December 31, 2017 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value (in thousands) Financial Assets: Residential mortgage loans held-for-investment $ 585,020 $ 573,151 $ 639,351 $ 641,126 Financial Liabilities: Asset-backed securities issued by securitization trusts $ 575,653 $ 562,689 $ 629,984 $ 630,562 |
Transactions with Affiliates (T
Transactions with Affiliates (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Transactions with Affiliates | |
Future Minimum Lease Commitment | At June 30, 2018, the future minimum lease commitment was as follows: Total Year 2018 2019 2020 2021 2022 Commitment (in whole dollars) Commitment $ 253,389 $ 514,374 $ 529,800 $ 545,697 $ 276,882 $ 2,120,142 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments | |
Fair Value of Derivative Instruments | The table below presents the fair value of our derivative instruments as well as their classification in our consolidated balance sheets as of June 30, 2018 and December 31, 2017: June 30, December 31, Derivative Instruments Balance Sheet Location 2018 2017 (in thousands) Interest rate swaps Derivative Assets $ 67,735 $ 27,793 TBA Agency MBS Derivative Assets 1,904 — $ 69,639 $ 27,793 Interest rate swaps Derivative Liabilities $ 652 $ 51 TBA Agency MBS Derivative Liabilities — 1,284 $ 652 $ 1,335 |
Notional Amounts of Swap Agreement, Weighted Average Fixed Rates and Remaining Terms | At June 30, 2018 and December 31, 2017, our interest rate swaps had the following notional amounts, weighted average fixed rates, and remaining terms: June 30, 2018 December 31, 2017 Weighted Weighted Average Remaining Average Remaining Notional Fixed Term in Notional Fixed Term in Maturity Amount Rate Months Amount Rate Months (in thousands) (in thousands) Less than 1 year $ 250,000 1.55 % 5 $ 410,000 0.96 % 4 1 year to 2 years 766,000 1.62 16 725,000 1.60 19 2 years to 3 years 550,000 1.78 28 516,000 1.62 33 3 years to 4 years 300,000 1.87 39 350,000 1.90 43 4 years to 5 years 170,000 1.83 52 220,000 1.92 56 5 years to 7 years 485,000 2.32 73 260,000 1.98 74 7 years to 10 years 625,000 2.63 105 200,000 2.08 101 $ 3,146,000 1.99 % 48 $ 2,681,000 1.65 % 37 |
Swap Agreements by Counterparty | June 30, December 31, 2018 2017 (in thousands) Central clearing houses (1) $ 3,146,000 $ 2,421,000 JPMorgan Securities — 50,000 Deutsche Bank Securities — 75,000 RBS Greenwich Capital — 115,000 Bank of New York — 20,000 $ 3,146,000 $ 2,681,000 For all interest rate swaps entered into after September 9, 2013, the counterparty will be central clearing houses, such as the CME or LCH, regardless of who the trading party is. See the section entitled “Derivative Financial Instruments – Interest Rate Risk Management” in Note 1 for additional details. |
Other Expenses (Tables)
Other Expenses (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | |
Other Expenses | Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (in thousands) Legal and professional fees $ 187 $ 135 $ 342 $ 315 Printing and stockholder communications 113 46 129 109 Directors and Officers insurance 88 95 173 220 DERs expense 98 104 203 207 Amortization of restricted stock 25 20 50 41 Software implementation and maintenance 103 73 180 194 Administrative service fees 39 38 78 76 Rent 139 124 278 250 Stock exchange and filing fees 43 39 91 79 Custodian and clearing fees 226 60 372 130 Sarbanes-Oxley consulting fees 30 . 30 51 60 Board of directors fees and expenses 80 79 160 157 Securities data services 110 103 259 223 Recovery on Lehman receivable — (18) — (18) Other 43 40 68 79 Total of other expenses $ 1,324 $ 968 $ 2,434 $ 2,122 |
Organization and Significant 36
Organization and Significant Accounting Policies - Gross Unrealized Losses and Fair Value of individual securities in Mortgage Backed Securities portfolio (Detail) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)item | |
Schedule Of Available For Sale Securities [Line Items] | |||||
Unrealized gain (loss) on trading investments | $ (2,700) | $ 4,100 | $ (11,600) | $ 4,200 | |
Impairment charge | $ 1,757 | 905 | $ 1,757 | 1,637 | |
Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Less Than 12 Months Number of Securities | item | 85 | 85 | 73 | ||
Less Than 12 Months Fair Value | $ 1,420,191 | $ 1,420,191 | $ 1,171,947 | ||
Less Than 12 Months Unrealized Losses | $ (28,200) | $ (28,200) | $ (7,770) | ||
12 Months or More Number of Securities | item | 174 | 174 | 192 | ||
12 Months or More Fair Value | $ 786,735 | $ 786,735 | $ 884,897 | ||
12 Months or More Unrealized Losses | $ (26,691) | $ (26,691) | $ (17,598) | ||
Total Number of Securities | item | 259 | 259 | 265 | ||
Total Fair Value | $ 2,206,926 | $ 2,206,926 | $ 2,056,844 | ||
Total Unrealized Losses | (54,891) | (54,891) | $ (25,368) | ||
Unrealized gain (loss) on trading investments | $ (2,677) | 4,101 | $ (11,567) | 4,222 | |
Non-Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Less Than 12 Months Number of Securities | item | 19 | 19 | 9 | ||
Less Than 12 Months Fair Value | $ 119,068 | $ 119,068 | $ 63,568 | ||
Less Than 12 Months Unrealized Losses | $ (1,523) | $ (1,523) | $ (774) | ||
12 Months or More Number of Securities | item | 10 | 10 | 14 | ||
12 Months or More Fair Value | $ 52,812 | $ 52,812 | $ 85,569 | ||
12 Months or More Unrealized Losses | $ (2,132) | $ (2,132) | $ (2,380) | ||
Total Number of Securities | item | 29 | 29 | 23 | ||
Total Fair Value | $ 171,880 | $ 171,880 | $ 149,137 | ||
Total Unrealized Losses | (3,655) | (3,655) | (3,154) | ||
Impairment charge | 1,757 | $ 905 | 1,757 | $ 1,637 | |
Trading Securities | Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Unrealized gain (loss) on trading investments | $ (22,600) | $ (11,000) | |||
Trading Securities | Non-Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Impairment charge | $ 1,800 |
Organization and Significant 37
Organization and Significant Accounting Policies - Additional Information (Detail) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Description of management fee | In exchange for services provided, our Manager receives a management fee, paid monthly in arrears, in an amount equal to one-twelfth of 1.20% of our Equity (as defined in the Management Agreement). |
Annual management fee as a percent of equity | 1.20% |
Building Estimated Useful Life | 27 years 6 months |
Building Salvage Value | $ 0 |
Organization and Significant 38
Organization and Significant Accounting Policies - Computation of Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net (Loss) Income to Common Stockholders, Basic EPS | $ 12,636 | $ 8,072 | $ 7,485 | $ 21,718 |
Net (Loss) Income to Common Stockholders, Effect of dilutive securities | 305 | 244 | 609 | 638 |
Net (Loss) Income to Common Stockholders, Diluted EPS | $ 12,941 | $ 8,316 | $ 8,094 | $ 22,356 |
Average Shares, Basic EPS | 98,271 | 95,696 | 98,228 | 95,701 |
Average Shares, Effect of dilutive securities | 3,934 | 4,894 | 3,904 | 4,866 |
Average Shares, Diluted EPS | 102,205 | 100,590 | 102,132 | 100,567 |
Earnings (Loss) per Share, Basic EPS | $ 0.13 | $ 0.08 | $ 0.08 | $ 0.23 |
Earnings (Loss) per Share, Effect of dilutive securities | (0.01) | |||
Earnings (Loss) per Share, Diluted EPS | $ 0.13 | $ 0.08 | $ 0.08 | $ 0.22 |
Restricted Cash - Summary of Re
Restricted Cash - Summary of Restricted Cash Balances (Detail) $ in Thousands | Dec. 31, 2017USD ($) |
Restricted Cash And Cash Equivalents Items [Line Items] | |
Restricted cash | $ 11,157 |
Swap Margin Calls | |
Restricted Cash And Cash Equivalents Items [Line Items] | |
Restricted cash | $ 11,157 |
Agency MBS and Non-Agency MBS,
Agency MBS and Non-Agency MBS, which are Carried at Fair Value (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Schedule Of Available For Sale Securities [Line Items] | ||
Fair value | $ 779,995 | $ 760,825 |
Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 3,875,242 | 4,273,331 |
Paydowns receivable | 16,474 | 13,873 |
Unrealized gains | 20,071 | 27,945 |
Unrealized losses | (77,443) | (36,352) |
Available-for-sale Securities, Total | 3,834,344 | 4,278,797 |
Agency MBS | 15-Year Fixed-Rate | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 1,167,834 | 1,277,570 |
Unrealized gains | 134 | 595 |
Unrealized losses | (35,902) | (16,338) |
Available-for-sale Securities, Total | 1,132,066 | 1,261,827 |
Agency MBS | 20-Year and 30-Year Fixed Rate Debt | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 878,941 | 882,633 |
Unrealized gains | 2,044 | 3,092 |
Unrealized losses | (18,925) | (5,298) |
Available-for-sale Securities, Total | 862,060 | 880,427 |
Agency MBS | Freddie Mac | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 1,452,764 | 1,678,835 |
Paydowns receivable | 16,474 | 13,873 |
Unrealized gains | 4,463 | 6,597 |
Unrealized losses | (32,606) | (18,205) |
Available-for-sale Securities, Total | 1,441,095 | 1,681,100 |
Agency MBS | Fannie Mae | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 2,422,478 | 2,594,496 |
Unrealized gains | 15,608 | 21,348 |
Unrealized losses | (44,837) | (18,147) |
Available-for-sale Securities, Total | 2,393,249 | 2,597,697 |
Agency MBS | ARMs | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 997,383 | 1,249,366 |
Paydowns receivable | 7,611 | 5,943 |
Unrealized gains | 17,647 | 23,425 |
Unrealized losses | (1,217) | (1,871) |
Available-for-sale Securities, Total | 1,021,424 | 1,276,863 |
Agency MBS | Hybrids | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 831,084 | 863,762 |
Paydowns receivable | 8,863 | 7,930 |
Unrealized gains | 246 | 833 |
Unrealized losses | (21,399) | (12,845) |
Available-for-sale Securities, Total | 818,794 | 859,680 |
MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 4,625,858 | 5,003,955 |
Paydowns receivable | 16,502 | 13,873 |
Unrealized gains | 53,077 | 61,300 |
Unrealized losses | (81,098) | (39,506) |
Available-for-sale Securities, Total | 4,614,339 | 5,039,622 |
Non-Agency MBS | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Amortized cost | 750,616 | 730,624 |
Paydowns receivable | 28 | |
Unrealized gains | 33,006 | 33,355 |
Unrealized losses | (3,655) | (3,154) |
Fair value | $ 779,995 | $ 760,825 |
Agency MBS and Non-Agency MBS41
Agency MBS and Non-Agency MBS, which are Carried at Fair Value (Parenthetical) (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Schedule Of Available For Sale Securities [Line Items] | |||||
Unrealized gain (loss) on trading investments | $ (2,700) | $ 4,100 | $ (11,600) | $ 4,200 | |
Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Amortized cost | 3,875,242 | 3,875,242 | $ 4,273,331 | ||
Unrealized gain (loss) on trading investments | (2,677) | $ 4,101 | (11,567) | $ 4,222 | |
Agency MBS | Trading Securities | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Unrealized gain (loss) on trading investments | (22,600) | (11,000) | |||
Non-Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Amortized cost | 750,616 | 750,616 | 730,624 | ||
15-Year Fixed-Rate | Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Amortized cost | 1,167,834 | $ 1,167,834 | $ 1,277,570 | ||
15-Year Fixed-Rate | Agency MBS | Trading Securities | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Fair value fixed rate period | 15 years | 15 years | |||
Amortized cost | 656,100 | $ 656,100 | $ 909,200 | ||
Unrealized gain (loss) on trading investments | (22,600) | 11,000 | |||
Trading investments | $ 633,500 | $ 633,500 | $ 898,200 |
Mortgage-Backed Securities - Ad
Mortgage-Backed Securities - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Schedule Of Available For Sale Securities [Line Items] | |||||
Sale of securities | $ 27,466 | $ 589,073 | $ 35,679 | ||
Unrealized gain (loss) on trading investments | $ (2,700) | 4,100 | (11,600) | 4,200 | |
Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Sale of securities | 27,500 | 583,200 | 35,700 | ||
Gross realized losses on sales of securities | 19,300 | 68 | |||
Gross realized gains on sales of securities | 176 | 176 | |||
Unrealized gain (loss) on trading investments | $ (2,677) | $ 4,101 | (11,567) | $ 4,222 | |
Non-Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Sale of securities | 5,800 | ||||
Gross realized losses on sales of securities | 42 | ||||
Trading Securities | Agency MBS | |||||
Schedule Of Available For Sale Securities [Line Items] | |||||
Unrealized gain (loss) on trading investments | $ (22,600) | $ (11,000) |
Estimates of Contractually Requ
Estimates of Contractually Required Payments Expected to be Collected and Fair Value (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | |
Non-Agency MBS acquired with credit deterioration: | |||
Total fair value of Non-Agency MBS | $ 779,995 | $ 779,995 | $ 760,825 |
Total fair value of Non-Agency MBS | 1,454 | ||
Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield Period Increase Decrease | 19,170 | ||
Non-Agency MBS | |||
Non-Agency MBS acquired with credit deterioration: | |||
Contractually required principal | 783,752 | 783,752 | 798,347 |
Contractual principal not expected to be collected (non-accretable yield) | (331,858) | (331,858) | (332,480) |
Expected cash flows to be collected | 451,894 | 451,894 | 465,867 |
Market yield adjustment | 139,392 | 139,392 | 147,198 |
Unrealized gain, net | 28,557 | 28,557 | 28,525 |
Fair value | 619,843 | 619,843 | 641,590 |
Fair value of other Non-Agency MBS (without credit deterioration) | 160,152 | 160,152 | 119,235 |
Total fair value of Non-Agency MBS | 779,995 | 779,995 | $ 760,825 |
Contractually required principal | (14,654) | (14,595) | |
Contractual principal not expected to be collected (non-accretable yield) | 5,233 | 622 | |
Expected cash flows to be collected | (9,421) | (13,973) | |
Market yield adjustment | (5,007) | (7,806) | |
Unrealized gain, net | (1,253) | 32 | |
Fair value | (15,681) | (21,747) | |
Fair value of other Non-Agency MBS (without credit deterioration) | $ 17,135 | $ 40,917 |
Schedule of Components of Purch
Schedule of Components of Purchase Discount on its Non-Agency MBS (Detail) - Non-Agency MBS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | |
Market Yield Adjustment | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Balance, beginning of period | $ 144,399 | $ 147,198 |
Accretion of discount | (1,783) | (3,602) |
Purchases | (820) | (3,213) |
Sales | 1,413 | |
Transfer | (2,404) | (2,404) |
Balance, end of period | 139,392 | 139,392 |
Non-Accretable Discount | ||
Schedule Of Available For Sale Securities [Line Items] | ||
Balance, beginning of period | (337,091) | (332,480) |
Accretion of discount | (100) | |
Purchases | (4) | (9,907) |
Realized credit losses, net of recoveries | 4,590 | 9,982 |
Impairment charge | (1,757) | (1,757) |
Transfer | 2,404 | 2,404 |
Balance, end of period | $ (331,858) | $ (331,858) |
Variable Interest Entities - Su
Variable Interest Entities - Summary of Assets and Liabilities of Variable Interest Entities (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Variable Interest Entity [Line Items] | |||||
Residential mortgage loans held-for-investment | [1] | $ 585,020 | $ 639,351 | ||
Accrued interest receivable | 17,272 | 18,091 | |||
Accrued interest payable | 21,881 | 15,835 | |||
Asset-backed securities issued by securitization trusts | [1] | 575,653 | 629,984 | ||
Variable Interest Entities Primary Beneficiary | |||||
Variable Interest Entity [Line Items] | |||||
Accrued interest receivable | 1,900 | 2,100 | |||
Accrued interest payable | 1,900 | 2,000 | |||
Asset-backed securities issued by securitization trusts | 575,700 | 630,000 | |||
Variable Interest Entities Primary Beneficiary | Residential Mortgage Backed Securities | |||||
Variable Interest Entity [Line Items] | |||||
Residential mortgage loans held-for-investment | 585,020 | $ 611,006 | 639,351 | $ 744,462 | |
Accrued interest receivable | 1,934 | 2,093 | |||
Total assets | 586,954 | 641,444 | |||
Accrued interest payable | 1,887 | 2,047 | |||
Asset-backed securities issued by securitization trusts | 575,653 | 629,984 | |||
Total liabilities | $ 577,540 | $ 632,031 | |||
[1] | The consolidated balance sheets include assets of consolidated variable interest entities, or 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 June 30, 2018 and December 31, 2017, total assets of the consolidated VIEs were $587 million and $641 million (including accrued interest receivable of $1.9 million and $2.1 million), respectively (which is recorded above in the line item entitled “Interest and dividends receivable”), and total liabilities were $578 million and $632 million (including accrued interest payable of $1.9 million and $2.0 million), respectively (which is recorded in the line item above entitled “Accrued interest payable”). Please refer to Note 4, “Variable Interest Entities,” for further discussion. |
Variable Interest Entities - Ca
Variable Interest Entities - Carrying Value for Residential Mortgage Loans (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Variable Interest Entity [Line Items] | ||||||
Carrying value | [1] | $ 585,020 | $ 639,351 | |||
Variable Interest Entities Primary Beneficiary | Residential Mortgage Backed Securities | ||||||
Variable Interest Entity [Line Items] | ||||||
Principal balance | 580,938 | 634,219 | ||||
Unamortized premium, net of discount | 4,268 | 5,335 | ||||
Allowance for loan losses | (186) | $ (186) | (203) | $ (203) | ||
Carrying value | $ 585,020 | $ 611,006 | $ 639,351 | $ 744,462 | ||
[1] | The consolidated balance sheets include assets of consolidated variable interest entities, or 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 June 30, 2018 and December 31, 2017, total assets of the consolidated VIEs were $587 million and $641 million (including accrued interest receivable of $1.9 million and $2.1 million), respectively (which is recorded above in the line item entitled “Interest and dividends receivable”), and total liabilities were $578 million and $632 million (including accrued interest payable of $1.9 million and $2.0 million), respectively (which is recorded in the line item above entitled “Accrued interest payable”). Please refer to Note 4, “Variable Interest Entities,” for further discussion. |
Variable Interest Entities - 47
Variable Interest Entities - Summary of Reconciliation of Carrying Value of Residential Mortgage Loans (Detail) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | ||
Deductions during period: | |||
Balance at end of period | [1] | $ 585,020 | $ 639,351 |
Variable Interest Entities Primary Beneficiary | Residential Mortgage Backed Securities | |||
Variable Interest Entity [Line Items] | |||
Balance at beginning of period | 611,006 | 744,462 | |
Deductions during period: | |||
Collections of principal | (25,468) | (102,569) | |
Amortization of premium | (518) | (2,542) | |
Balance at end of period | $ 585,020 | $ 639,351 | |
[1] | The consolidated balance sheets include assets of consolidated variable interest entities, or 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 June 30, 2018 and December 31, 2017, total assets of the consolidated VIEs were $587 million and $641 million (including accrued interest receivable of $1.9 million and $2.1 million), respectively (which is recorded above in the line item entitled “Interest and dividends receivable”), and total liabilities were $578 million and $632 million (including accrued interest payable of $1.9 million and $2.0 million), respectively (which is recorded in the line item above entitled “Accrued interest payable”). Please refer to Note 4, “Variable Interest Entities,” for further discussion. |
Variable Interest Entities - 48
Variable Interest Entities - Summary of Residential Mortgage Loans Held-for-Investment (Detail) - Variable Interest Entities Primary Beneficiary - Residential Mortgage Backed Securities $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018USD ($)loan | Dec. 31, 2017USD ($)loan | |
Portfolio Characteristics: | ||
Number of loans | loan | 868 | 931 |
Current principal balance | $ 580,938 | $ 634,219 |
Average loan balance | $ 669 | $ 681 |
Net weighted average coupon rate | 3.86% | 3.86% |
Weighted average maturity (years) | 25 years 9 months 18 days | 26 years 3 months 18 days |
Weighted average FICO score | 761 | 762 |
Current Performance: | ||
Current | $ 576,053 | $ 629,901 |
Bankruptcy/foreclosure | 591 | |
Total | 580,938 | 634,219 |
30 days delinquent | ||
Current Performance: | ||
Delinquent | 2,895 | 2,918 |
60 days delinquent | ||
Current Performance: | ||
Delinquent | 802 | |
90+ days delinquent | ||
Current Performance: | ||
Delinquent | $ 597 | $ 1,400 |
Variable Interest Entities - 49
Variable Interest Entities - Summary of Geographic Concentrations of Residential Mortgage Loans Held-for-Investment (Detail) - Variable Interest Entities Primary Beneficiary - Geographic Concentration Risk - Residential Loans Held For Investment | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk percentage | 100.00% | 100.00% |
California | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 43.10% | 43.80% |
Florida | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 6.30% | 6.30% |
Other states | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 50.60% | 49.90% |
Variable Interest Entities - 50
Variable Interest Entities - Summary of Activity in Allowance for Loan Losses (Detail) - Variable Interest Entities Primary Beneficiary - Residential Mortgage Backed Securities - USD ($) $ in Thousands | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Variable Interest Entity [Line Items] | |||
Balance at beginning of period | $ 186 | $ 203 | $ 203 |
Balance at end of period | $ 186 | $ 186 | $ 203 |
Residential Properties - Additi
Residential Properties - Additional Information (Detail) - Wholly Owned Properties - Florida $ in Millions | Jun. 30, 2018USD ($)item | Dec. 31, 2017USD ($)item |
Real Estate Properties [Line Items] | ||
Number of residential property | item | 88 | 88 |
Cost of residential property | $ | $ 14 | $ 14.1 |
Repurchase Agreements Balances,
Repurchase Agreements Balances, Weighted Average Interest Rates and Remaining Weighted Average Maturities (Detail) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 4,018,480 | $ 4,365,695 |
Agency MBS | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Weighted average maturity | 39 days | 33 days |
Repurchase agreements | $ 3,475,000 | $ 3,845,000 |
Weighted average interest rate | 2.07% | 1.47% |
Agency MBS | Collateral Pledged | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
MBS pledged as collateral under the repurchase agreements and interest rate swaps | $ 3,691,061 | $ 4,073,852 |
Agency MBS | Less than 30 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 1,595,000 | $ 2,015,000 |
Weighted average interest rate | 1.99% | 1.46% |
Agency MBS | 30 days to 90 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 1,880,000 | $ 1,830,000 |
Weighted average interest rate | 2.13% | 1.48% |
Non-Agency MBS | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Weighted average maturity | 14 days | 14 days |
Repurchase agreements | $ 543,480 | $ 520,695 |
Weighted average interest rate | 3.35% | 2.87% |
Non-Agency MBS | Collateral Pledged | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
MBS pledged as collateral under the repurchase agreements and interest rate swaps | $ 686,962 | $ 661,445 |
Non-Agency MBS | Less than 30 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 543,480 | $ 520,695 |
Weighted average interest rate | 3.35% | 2.87% |
MBS | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Weighted average maturity | 35 days | 31 days |
Weighted average interest rate after adjusting for interest rate swaps | 1.97% | 1.77% |
Weighted average maturity after adjusting for interest rate swaps | 1122 days | 674 days |
Repurchase agreements | $ 4,018,480 | $ 4,365,695 |
Weighted average interest rate | 2.24% | 1.64% |
MBS | Collateral Pledged | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
MBS pledged as collateral under the repurchase agreements and interest rate swaps | $ 4,378,023 | $ 4,735,297 |
MBS | Less than 30 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 2,138,480 | $ 2,535,695 |
Weighted average interest rate | 2.34% | 1.75% |
MBS | 30 days to 90 days | ||
Assets Sold Under Agreements To Repurchase [Line Items] | ||
Repurchase agreements | $ 1,880,000 | $ 1,830,000 |
Weighted average interest rate | 2.13% | 1.48% |
Liabilities and Assets Subject
Liabilities and Assets Subject to Netting Arrangements (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Gross Amounts of Recognized Assets | $ 69,639 | $ 27,793 |
Net Amounts of Assets Presented in the Balance Sheets | 69,639 | 27,793 |
Gross Assets Not Offset Financial instruments | (69,639) | (27,793) |
Gross Amounts of Recognized Liabilities | 4,019,132 | 4,367,030 |
Net Amounts of Liabilities Presented in the Balance Sheets | 4,019,132 | 4,367,030 |
Gross Liabilities Not Offset Financial instruments | (4,019,132) | (4,367,030) |
Derivative Financial Instruments, Assets | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Gross Amounts of Recognized Assets | 69,639 | 27,793 |
Net Amounts of Assets Presented in the Balance Sheets | 69,639 | 27,793 |
Gross Assets Not Offset Financial instruments | (69,639) | (27,793) |
Repurchase Agreements | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Gross Amounts of Recognized Liabilities | 4,018,480 | 4,365,695 |
Net Amounts of Liabilities Presented in the Balance Sheets | 4,018,480 | 4,365,695 |
Gross Liabilities Not Offset Financial instruments | (4,018,480) | (4,365,695) |
Derivative Financial Instruments, Liabilities | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Gross Amounts of Recognized Liabilities | 652 | 1,335 |
Net Amounts of Liabilities Presented in the Balance Sheets | 652 | 1,335 |
Gross Liabilities Not Offset Financial instruments | $ (652) | $ (1,335) |
Liabilities and Assets Subjec54
Liabilities and Assets Subject to Netting Arrangements (Parenthetical) (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Pledged in Agency MBS as collateral | $ 62 | |
Paid swap margin calls on our derivatives | 11,200 | |
Derivative instruments at fair value | $ 69,639 | 27,793 |
Derivative instruments at fair value | 652 | 1,335 |
Agency MBS | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Pledged in Agency MBS as collateral | 3,690,000 | 4,070,000 |
Non-Agency MBS | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Pledged in Agency MBS as collateral | 687,000 | 661,400 |
Interest rate swap agreements | Collateral Pledged | ||
Derivative Assets Derivative Liabilities And Repurchase Agreements Subject To Netting Agreements [Line Items] | ||
Derivative instruments at fair value | 67,700 | 27,800 |
Derivative instruments at fair value | $ 652,000 | $ 51,000 |
Junior Subordinated Notes - Add
Junior Subordinated Notes - Additional Information (Detail) - USD ($) | Mar. 15, 2005 | Jun. 30, 2018 |
Subordinated Borrowing [Line Items] | ||
Junior subordinated notes | $ 37,380,000 | |
First interest payment date | Jun. 30, 2005 | |
Trust preferred securities | $ 36,250,000 | |
Junior Subordinated Notes | ||
Subordinated Borrowing [Line Items] | ||
Interest rate above prevailing three-month LIBOR rate | 3.10% | |
Debt, maturity date | 2,035 | |
Trust Preferred Securities | ||
Subordinated Borrowing [Line Items] | ||
Interest rate above prevailing three-month LIBOR rate | 3.10% | |
Debt, maturity date | 2,035 |
Fair Value Measurements on Recu
Fair Value Measurements on Recurring Basis (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Liabilities: | ||
Derivative instruments at fair value | $ 652 | $ 1,335 |
Derivative Financial Instruments, Liabilities | ||
Liabilities: | ||
Derivative instruments at fair value | 652 | 1,335 |
Derivative Financial Instruments, Assets | ||
Assets: | ||
Asset fair value measurement | 69,639 | 27,793 |
Agency MBS | ||
Assets: | ||
Asset fair value measurement | 3,834,344 | 4,278,797 |
Non-Agency MBS | ||
Assets: | ||
Asset fair value measurement | 779,995 | 760,825 |
Level 2 | Derivative Financial Instruments, Liabilities | ||
Liabilities: | ||
Derivative instruments at fair value | 652 | 1,335 |
Level 2 | Derivative Financial Instruments, Assets | ||
Assets: | ||
Asset fair value measurement | 69,639 | 27,793 |
Level 2 | Agency MBS | ||
Assets: | ||
Asset fair value measurement | 3,834,344 | 4,278,797 |
Level 2 | Non-Agency MBS | ||
Assets: | ||
Asset fair value measurement | $ 779,995 | $ 760,825 |
Carrying Value and Estimated Fa
Carrying Value and Estimated Fair Value of Financial Instruments (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | |
Financial Assets: | |||
Residential mortgage loans held-for-investment | [1] | $ 585,020 | $ 639,351 |
Residential mortgage loans held-for-investment, Estimated Fair Value | 573,151 | 641,126 | |
Financial Liabilities: | |||
Asset-backed securities issued by securitization trusts | [1] | 575,653 | 629,984 |
Asset-backed securities issued by securitization trust, Estimated Fair Value | $ 562,689 | $ 630,562 | |
[1] | The consolidated balance sheets include assets of consolidated variable interest entities, or 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 June 30, 2018 and December 31, 2017, total assets of the consolidated VIEs were $587 million and $641 million (including accrued interest receivable of $1.9 million and $2.1 million), respectively (which is recorded above in the line item entitled “Interest and dividends receivable”), and total liabilities were $578 million and $632 million (including accrued interest payable of $1.9 million and $2.0 million), respectively (which is recorded in the line item above entitled “Accrued interest payable”). Please refer to Note 4, “Variable Interest Entities,” for further discussion. |
Series B Cumulative Convertib58
Series B Cumulative Convertible Preferred Stock - Additional Information (Detail) | 6 Months Ended | |
Jun. 30, 2018itemdirector$ / sharesshares | Dec. 31, 2017$ / shares | |
Conversion Of Stock [Line Items] | ||
Series B Cumulative Convertible Preferred Stock, par value | $ / shares | $ 0.01 | $ 0.01 |
Series B Cumulative Convertible Preferred Stock, liquidating preference per share | $ / shares | $ 25 | $ 25 |
Series B Preferred Stock | ||
Conversion Of Stock [Line Items] | ||
Preferred Stock, dividend rate | 6.25% | |
Preferred Stock, conversion start date | Jan. 25, 2012 | |
Conversion of preferred stock, conversion rate (in shares) | shares | 5.0453 | |
Number of consecutive trading days used in conversion analysis | 30 | |
Minimum number of quarters with failure to pay dividends, which triggers voting rights for preferred stock, quarters | 6 | |
Number of Board Of Directors that Preferred Stock owners are entitled to vote to elect when there is a failure to pay quarterly dividends for a set period | director | 2 | |
Minimum ratio of votes required to materially and adversely change the terms of preferred stock | 66.67% | |
Series B Preferred Stock | Minimum | ||
Conversion Of Stock [Line Items] | ||
Percentage of common stock price to then-prevailing conversion price in order to exercise conversion option | 130.00% | |
Number of consecutive trading days used in conversion analysis | 20 | |
Series A Preferred Stock | ||
Conversion Of Stock [Line Items] | ||
Preferred Stock, dividend rate | 8.625% | |
Series C Preferred Stock | ||
Conversion Of Stock [Line Items] | ||
Preferred Stock, dividend rate | 7.625% |
Public Offerings and Capital 59
Public Offerings and Capital Stock - Additional Information (Detail) | Apr. 01, 2016USD ($) | Jan. 27, 2015USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($) | Jan. 22, 2016item | Dec. 31, 2017$ / sharesshares | Aug. 05, 2014shares | Oct. 03, 2011shares |
Capital Unit [Line Items] | ||||||||||
Common Stock, authorized | 200,000,000 | 200,000,000 | 200,000,000 | |||||||
Common Stock, issued | 98,303,913 | 98,303,913 | 98,137,000 | |||||||
Common Stock, outstanding | 98,303,913 | 98,303,913 | 98,137,000 | |||||||
Preferred stock, authorized | 20,000,000 | 20,000,000 | ||||||||
Number of shares authorized to repurchase under a share repurchase program | 2,000,000 | |||||||||
Number of common stock repurchased | 0 | |||||||||
Common stock remaining for issuance under the registration statement | $ | $ 490,200,000 | |||||||||
Registration statement declaration effective date | Apr. 13, 2016 | |||||||||
Twenty Eighteen Dividend Reinvestment and Stock Purchase Plan | ||||||||||
Capital Unit [Line Items] | ||||||||||
Common Stock, authorized | 15,303,119 | 15,303,119 | ||||||||
Issuance of stock (in shares) | 91,829 | |||||||||
Stock issued, weighted average price per share | $ / shares | $ 4.71 | |||||||||
Proceeds from issuance of common stock | $ | $ 433,000 | |||||||||
Anworth Mortgage Asset Corporation 2014 Equity Compensation Plan | ||||||||||
Capital Unit [Line Items] | ||||||||||
Maximum authorized shares of common stock under grant of stock options and other stock-based awards | 2,000,000 | |||||||||
Maximum | ||||||||||
Capital Unit [Line Items] | ||||||||||
Common stock, public offering | $ | $ 534,442,660 | |||||||||
Through Six Separate Authorizations Between December 13, 2013 and January 22, 2016 | ||||||||||
Capital Unit [Line Items] | ||||||||||
Number of additional shares authorized to be repurchased | 45,000,000 | 45,000,000 | ||||||||
Number of share repurchase authorizations | item | 6 | |||||||||
FBR Sales Agreement | ||||||||||
Capital Unit [Line Items] | ||||||||||
Stock sales agreement value | $ | $ 196,615,000 | $ 196,615,000 | ||||||||
Stock sales agreement remaining amount | $ | $ 152,100,000 | $ 152,100,000 | ||||||||
Series A Preferred Stock | ||||||||||
Capital Unit [Line Items] | ||||||||||
Preferred stock, authorized | 5,150,000 | 5,150,000 | ||||||||
Preferred stock, par value | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Preferred stock, liquidation preference | $ / shares | 25 | $ 25 | $ 25 | |||||||
Preferred Stock, dividend rate | 8.625% | |||||||||
Preferred stock redemption price | $ / shares | $ 25 | $ 25 | ||||||||
Preferred stock, issued | 1,919,378 | 1,919,378 | ||||||||
Preferred stock, outstanding | 1,919,378 | 1,919,378 | 1,919,378 | |||||||
Series B Preferred Stock | ||||||||||
Capital Unit [Line Items] | ||||||||||
Preferred stock, authorized | 3,150,000 | 3,150,000 | ||||||||
Preferred stock, liquidation preference | $ / shares | $ 25 | $ 25 | ||||||||
Preferred Stock, dividend rate | 6.25% | |||||||||
Preferred stock, issued | 779,743 | 779,743 | ||||||||
Preferred stock, outstanding | 779,743 | 779,743 | ||||||||
Series C Preferred Stock | ||||||||||
Capital Unit [Line Items] | ||||||||||
Preferred stock, authorized | 5,000,000 | 5,000,000 | ||||||||
Preferred stock, par value | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Preferred stock, liquidation preference | $ / shares | $ 25 | $ 25 | $ 25 | |||||||
Preferred Stock, dividend rate | 7.625% | |||||||||
Preferred stock, issued | 2,010,278 | 2,010,278 | 1,989,000 | |||||||
Preferred stock, outstanding | 2,010,278 | 2,010,278 | 1,989,000 | |||||||
Issuance of stock (in shares) | 300,000 | |||||||||
Preferred stock, par value | $ / shares | $ 24.50 | |||||||||
Public offering net proceeds | $ | $ 7,000,000 | |||||||||
Proceeds on Preferred Stock issued | $ | $ 22,065,000 | $ 525,000 | $ 26,920,000 |
Transactions with Affiliates -
Transactions with Affiliates - Additional Information (Detail) | Jul. 01, 2012$ / mo | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jul. 02, 2012item$ / ft² |
Related Party Transaction [Line Items] | ||||||
Description of management fee | In exchange for services provided, our Manager receives a management fee, paid monthly in arrears, in an amount equal to one-twelfth of 1.20% of our Equity (as defined in the Management Agreement). | |||||
Annual management fee as a percent of equity | 1.20% | |||||
Number of days prior notice of non-renewal of the Management Agreement | 180 days | |||||
Termination fees description | We are required to provide 180-days' prior notice of non-renewal of the Management Agreement and must pay a termination fee on the last day of any automatic renewal term equal to three times the average annual management fee earned by our Manager during the prior 24-month period immediately preceding the most recently completed month prior to the effective date of termination. | |||||
Sublease agreement, square feet leased | item | 7,300 | |||||
Rent paid for leased office space per square foot | $ / ft² | 67.40 | |||||
Sublease with PIA, expiration date | Sep. 30, 2022 | |||||
New sublease agreement, base monthly rent | $ / mo | 41,001.44 | |||||
Sublease agreement, base monthly rent percentage increase starting July 1, 2017 | 3.00% | |||||
Rent | $ 139,000 | $ 124,000 | $ 278,000 | $ 250,000 | ||
Fees paid for administrative services | On July 25, 2008, we entered into an administrative services agreement with PIA, which was amended and restated on August 20, 2010. Under this agreement, PIA provides administrative services and equipment to us including human resources, operational support and information technology, and we pay an annual fee of 5 basis points on the first $225 million of stockholders' equity and 1 basis point thereafter (paid quarterly in arrears) for those services. The administrative services agreement had an initial term of one year and renews for successive one-year terms thereafter unless either party gives notice of termination no less than 30 days before the expiration of the then-current annual term. | |||||
Basis points on equity for the annual fee | 5 basis points on the first $225 million of stockholders' equity and 1 basis point thereafter (paid quarterly in arrears) for those services. | |||||
Stockholders equity amount used to calculate administrative service fees | 225,000,000 | $ 225,000,000 | ||||
Prior written notice to terminate administrative agreement | 30 days | |||||
Administrative service fees | $ 39,000 | $ 38,000 | $ 78,000 | $ 76,000 | ||
First $225 million of Stockholders' Equity | ||||||
Related Party Transaction [Line Items] | ||||||
Basis points on equity for the annual fee | 0.05% | |||||
Above $225 million of Stockholders' Equity | ||||||
Related Party Transaction [Line Items] | ||||||
Basis points on equity for the annual fee | 0.01% | |||||
Mr. Joseph E. McAdams | ||||||
Related Party Transaction [Line Items] | ||||||
Outstanding membership interests | 47.40% | |||||
Mr. Thad M. Brown | ||||||
Related Party Transaction [Line Items] | ||||||
Outstanding membership interests | 5.20% | |||||
Mr. Brett Roth | ||||||
Related Party Transaction [Line Items] | ||||||
Change in Control and Arbitration Agreements, description | Under these agreements, in the event that a change in control occurs, each of these persons will receive a lump sum payment equal to (i) 12 months annual base salary in effect on December 31, 2011, plus (ii) the average annual incentive compensation received for the two complete fiscal years prior December 31, 2011, plus (iii) the average annual bonus received for the two complete fiscal years prior to December 31, 2011, as well as other benefits. For one of the Senior Vice Presidents and Portfolio Managers of our Manager, in the event that a change in control occurs, in addition to other benefits, he will receive a lump sum payment equal to (i) 12 months of the annual base salary (in effect on September 18, 2014) paid by our Manager plus (ii) $350,000. | |||||
Additional payment for change in control and arbitration agreements | $ 350,000 |
Future Minimum Lease Commitment
Future Minimum Lease Commitment (Detail) | Jun. 30, 2018USD ($) |
Transactions with Affiliates | |
2,018 | $ 253,389 |
2,019 | 514,374 |
2,020 | 529,800 |
2,021 | 545,697 |
2,022 | 276,882 |
Total Commitment | $ 2,120,142 |
Equity Compensation Plan - Addi
Equity Compensation Plan - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
Dec. 31, 2017 | Aug. 31, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Aug. 05, 2014 | Aug. 04, 2014 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Paid or accrued compensation related to dividend equivalent right issued | $ 98 | $ 104 | $ 203 | $ 207 | ||||
Performance-Based Restricted Stock Units | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Grant of restricted stock | 162,613 | 146,552 | ||||||
Restricted shares, vesting term | 3 years | 3 years | ||||||
Closing price of common stock on grant date | $ 5.66 | $ 4.96 | ||||||
Unrecognized stock compensation expense | 156 | 156 | ||||||
Compensation expense related to restricted stock grant | $ 4 | $ 8 | ||||||
Dividend equivalent rights, granted | 0 | 0 | ||||||
Performance-Based Restricted Stock Units | Return to Capital Exceeds 10% | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Restricted shares, vesting term | 10 years | 10 years | ||||||
Performance-Based Restricted Stock Units | Involuntary Termination | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Restricted shares, vesting term | 3 years | 3 years | ||||||
Performance-Based Restricted Stock Units | Minimum | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Percentage of total return to stockholders | 10.00% | 10.00% | ||||||
Anworth Mortgage Asset Corporation 2014 Equity Plan | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Maximum authorized shares of common stock under grant of stock options and other stock-based awards | 2,000,000 | |||||||
Anworth Mortgage Asset Corporation 2004 Equity Plan | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Maximum authorized shares of common stock under grant of stock options and other stock-based awards | 3,500,000 | |||||||
Anworth Mortgage Asset Corporation 2007 Dividend Equivalent Rights Plan | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Dividend equivalent right issued, term | 5 years | |||||||
Dividend equivalent right issued | 734,348 | 734,348 | ||||||
Dividend equivalent rights outstanding | 734,348 | 734,348 | ||||||
Paid or accrued compensation related to dividend equivalent right issued | $ 98 | 104 | $ 203 | 207 | ||||
2016 Award Grants | Performance-Based Restricted Stock Units | ||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||||||
Unrecognized stock compensation expense | 102 | 102 | ||||||
Compensation expense related to restricted stock grant | $ 21 | $ 20 | $ 42 | $ 41 |
Derivative Insturments - Fair v
Derivative Insturments - Fair value of Derivative Instruments (Detail) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018USD ($)item | Jun. 30, 2018USD ($) | Dec. 31, 2017USD ($) | |
Derivative [Line Items] | |||
Fair value of derivative assets | $ 69,639 | $ 69,639 | $ 27,793 |
Fair value of derivative liabilities | 652 | 652 | 1,335 |
AOCI relating to interest rate swaps | 13,600 | ||
Interest rate cash flow hedge gain (loss) to be reclassified during next 12 months | 4,100 | 4,100 | |
Interest rate swaps | |||
Derivative [Line Items] | |||
Fair value of derivative assets | 67,735 | 67,735 | 27,793 |
Fair value of derivative liabilities | $ 652 | $ 652 | 51 |
Interest rate swap agreements | |||
Derivative [Line Items] | |||
Derivative contract, weighted average maturity (in months) | 48 months | ||
Number of new swap agreements | item | 4 | ||
TBA Agency MBS | |||
Derivative [Line Items] | |||
Fair value of derivative assets | $ 1,904 | $ 1,904 | |
Fair value of derivative liabilities | $ 1,284 | ||
Eurodollar Future | |||
Derivative [Line Items] | |||
Derivative contract, weighted average maturity (in months) | 3 months | ||
Minimum | Interest rate swap agreements | |||
Derivative [Line Items] | |||
Fixed interest rate | 1.001% | 1.001% | |
Minimum | TBA Agency MBS | |||
Derivative [Line Items] | |||
Fixed interest rate | 3.50% | 3.50% | |
Maximum | Interest rate swap agreements | |||
Derivative [Line Items] | |||
Fixed interest rate | 3.0295% | 3.0295% | |
Maximum | TBA Agency MBS | |||
Derivative [Line Items] | |||
Fixed interest rate | 4.00% | 4.00% |
Notional Amounts of Swap Agreem
Notional Amounts of Swap Agreement, Weighted Average Interest Rates and Remaining Term (Detail) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Derivative [Line Items] | ||
Notional Amount | $ 3,146,000 | $ 2,681,000 |
Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 3,146,000 | $ 2,681,000 |
Weighted Average Fixed Rate | 1.99% | 1.65% |
Remaining Term in Months | 48 months | 37 months |
Less than 1 year | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 250,000 | $ 410,000 |
Weighted Average Fixed Rate | 1.55% | 0.96% |
Remaining Term in Months | 5 months | 4 months |
1 year to 2 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 766,000 | $ 725,000 |
Weighted Average Fixed Rate | 1.62% | 1.60% |
Remaining Term in Months | 16 months | 19 months |
2 years to 3 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 550,000 | $ 516,000 |
Weighted Average Fixed Rate | 1.78% | 1.62% |
Remaining Term in Months | 28 months | 33 months |
3 years to 4 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 300,000 | $ 350,000 |
Weighted Average Fixed Rate | 1.87% | 1.90% |
Remaining Term in Months | 39 months | 43 months |
4 years to 5 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 170,000 | $ 220,000 |
Weighted Average Fixed Rate | 1.83% | 1.92% |
Remaining Term in Months | 52 months | 56 months |
5 years to 7 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 485,000 | $ 260,000 |
Weighted Average Fixed Rate | 2.32% | 1.98% |
Remaining Term in Months | 73 months | 74 months |
7 years to 10 years | Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 625,000 | $ 200,000 |
Weighted Average Fixed Rate | 2.63% | 2.08% |
Remaining Term in Months | 105 months | 101 months |
Derivative Instruments - Swap A
Derivative Instruments - Swap Agreements by Counterparty (Detail) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Derivative [Line Items] | ||
Notional Amount | $ 3,146,000 | $ 2,681,000 |
Chicago Mercantile Exchange | ||
Derivative [Line Items] | ||
Notional Amount | 3,146,000 | 2,421,000 |
JPMorgan Securities | ||
Derivative [Line Items] | ||
Notional Amount | 50,000 | |
Deutsche Bank Securities | ||
Derivative [Line Items] | ||
Notional Amount | 75,000 | |
RBS Greenwich Capital | ||
Derivative [Line Items] | ||
Notional Amount | 115,000 | |
Bank of New York | ||
Derivative [Line Items] | ||
Notional Amount | 20,000 | |
Interest rate swap agreements | ||
Derivative [Line Items] | ||
Notional Amount | $ 3,146,000 | $ 2,681,000 |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Derivative [Line Items] | |||||
Gain (loss) on derivatives | $ 9,930 | $ (4,422) | $ 23,342 | $ (2,044) | |
Aggregate notional amount | 3,146,000 | $ 3,146,000 | $ 2,681,000 | ||
Interest rate swap agreements | |||||
Derivative [Line Items] | |||||
Derivative contract, weighted average maturity (in months) | 48 months | ||||
Aggregate notional amount | 3,146,000 | $ 3,146,000 | $ 2,681,000 | ||
Aggregate Amount Of Swaps Matured In Period | $ 135,000 | ||||
Interest rate swap agreements | Minimum | |||||
Derivative [Line Items] | |||||
Fixed interest rate | 1.001% | 1.001% | |||
Interest rate swap agreements | Maximum | |||||
Derivative [Line Items] | |||||
Fixed interest rate | 3.0295% | 3.0295% | |||
Eurodollar Future | |||||
Derivative [Line Items] | |||||
Notional value of euro dollar future contract | $ 1,000 | $ 1,000 | |||
Derivative contract, weighted average maturity (in months) | 3 months | ||||
Gain (loss) on derivatives | (14) | (300) | |||
TBA Agency MBS | |||||
Derivative [Line Items] | |||||
Gain (loss) on derivatives | (3,926) | $ 1,552 | $ (15,907) | $ 3,181 | |
Term of contract | 15 years | ||||
Aggregate notional amount | $ 750,000 | $ 750,000 | |||
TBA Agency MBS | Minimum | |||||
Derivative [Line Items] | |||||
Fixed interest rate | 3.50% | 3.50% | |||
TBA Agency MBS | Maximum | |||||
Derivative [Line Items] | |||||
Fixed interest rate | 4.00% | 4.00% |
Other Expenses (Detail)
Other Expenses (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Legal and professional fees | $ 187 | $ 135 | $ 342 | $ 315 |
Printing and stockholder communications | 113 | 46 | 129 | 109 |
DERs expense | 98 | 104 | 203 | 207 |
Amortization of restricted stock | 25 | 20 | 50 | 41 |
Software implementation and maintenance | 103 | 73 | 180 | 194 |
Administrative service fees | 39 | 38 | 78 | 76 |
Rent | 139 | 124 | 278 | 250 |
Stock exchange and filing fees | 43 | 39 | 91 | 79 |
Custodian and clearing fees | 226 | 60 | 372 | 130 |
Sarbanes-Oxley consulting fees | 30 | 30 | 51 | 60 |
Board of directors fees and expenses | 80 | 79 | 160 | 157 |
Securities data services | (110) | (103) | (259) | (223) |
Recovery on Lehman receivable | (18) | (18) | ||
Other | 43 | 40 | 68 | 79 |
Total of other expenses | 1,324 | 968 | 2,434 | 2,122 |
Directors and Officers | ||||
Directors and Officers insurance | $ 88 | $ 95 | $ 173 | $ 220 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) $ / shares in Units, $ in Millions | Jun. 15, 2018$ / shares | Aug. 03, 2018USD ($)item | Jun. 30, 2018USD ($)item$ / sharesshares | Mar. 31, 2018$ / shares | Jul. 02, 2018shares |
Subsequent Event [Line Items] | |||||
Dividend declared common share, per share | $ / shares | $ 0.14 | $ 0.14 | $ 0.15 | ||
Interest rate swap agreements | |||||
Subsequent Event [Line Items] | |||||
Number of new swap agreements | item | 4 | ||||
Derivative notional amount of interest rate swap agreements | $ | $ 200 | ||||
Series B Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Conversion of preferred stock, conversion rate (in shares) | shares | 5.0453 | ||||
Subsequent Event | Interest rate swap agreements | |||||
Subsequent Event [Line Items] | |||||
Number of new swap agreements | item | 2 | ||||
Derivative notional amount of interest rate swap agreements | $ | $ 50 | ||||
Subsequent Event | Series B Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Conversion of preferred stock, conversion rate (in shares) | shares | 5.1021 |