ANH - Earnings call transcript Q3 2018 | Anworth Mortgage Asset Corp

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Operator

Good day. And welcome to the Anworth Third Quarter Earnings Conference Call. All participants today will be in listen-only mode [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note that today’s event is being recorded.

call, make the statement. brief begin we I a will introductory Before of and made may Exchange Section meaning Act call this Act XXA as forward-looking Securities Statements amended. earnings the of contain XXXX, on the XXE Section of statements as within of XXXX, Securities amended, of of claim statements. with provisions respect any Safe forward-looking of Act the And we the Reform XXXX hereby Private of the protection Harbor Securities Litigation to

do events Forward-looking relate statements predict that historical trends solely not are that matters. or describe to or and future those

should rely matters investment control. and our uncertainties trends interest of securing the to assumptions and You regarding regarding strategy, assumptions not statements, our many risks, following the are on business because beyond risks, market they assumptions, mortgage-backed by Statements subjects and mortgage our the regarding unknown and forward-looking rates factors, are subject forward-looking rates their prepayment on other unpredictable nature, loans describe are securities. and which known our

such of time only statements that to speak cause any they our and we those results other actual risks, uncertainties differ from forward-looking various discussed statements Certain with we actual date Form our adversely make. uncertainties. forward-looking may as annual Factors expressed result and materially Risk factors, time forward-looking file Exchange and factors report are those from Our including heading to as and in a under XX-K statements these projected and results in Securities reports All the Commission, and could the of and any differ materially made. the adversely on from

may us. otherwise. law, events not Executive of arise McAdams, it Except or expectations, as to go new uncertainties not and whether any how to Anworth. we statements, and and update or intend Chief ahead, sir. like would or events, do is in conditions risks by or of Officer circumstances publicly possible President or forward-looking result you to New Mr. time a required as predict Joe change I those affect revise they a or now future information introduce Please over

Joe McAdams

today as quarter me joining Thank well President Roth, Manager call Financial Portfolio Officer. Siegel, as Brett Chief here you and our Senior our discuss Also for Chuck results. Vice Anworth's today with to are third

Turning share. for quarter's $XX.X or a hedges our that results. was core were the predominantly our earnings shareholders Anworth's the offset borrowings straight from swap to second to quarter. rate common $X.XX costs $XX interest repo financing the million million and quarter. unrealized by was which of the was related decline $X.XX not million share. by or basis during common during financial and quarter quarter, quarter investment loss earned were their portfolio some This $X.XX decline sectors net net decreased losses $X.XX the in all income portfolio points share, loss gains income increasing interest per of resulting driven effectively also GAAP per MBS and per With includes income, portfolio value Comprehensive or the the during a in agency of as entire reported. liabilities, of our hedges, underperforming and the rising the realized comprehensive offset value in the and our market rates of $X.X XX approximately

including mortgage of mortgage securities, asset investment the quarter-end the side non-agency mortgage backed XX% TBA Looking at consists agency balance XX% to our portfolio and Anworth's securities, the sheet. portfolio positions, of back credit a sensitive loans agency to residential MBS estate. continued XX% investments rate and and from residential mix residential mortgage the prior real similar remained interest between quarter. allocation The sensitive small

little Looking at detail agency our portfolio. with a more MBS

fixed was rate of mortgage than back have in the to XX% one rate allocation with backed in securities agency in our portfolio less interest mortgage of XX year securities. ARMs reset. XX% have total rate year XX% We adjustable that invested

agency to the increase the to of the the would seasonal allocation The securities, and from new at an going During investments prepayment you XX-year rate unchanged XX XX% backed It XX, MBS. average up and ARMs went third agency next slower MBS Agency and bucket. X.XX. higher mortgage coupon coupon our to the at increased With over we our can expected forward winter see of prepayments, reduced purchase continue at general the the $XXX XXX.XX, of in quarter, ARM year June quarter. in the the rate X.XX% XX% fixed on fall The holdings. average in with of from currently average to end majority combined the our activity With to the from were XX rose see agency Overall, several MBS prepayments to cost was expect XX% resulting CPR. resetting X.XX premium months, the in million declined quarters. regards agency unamortized MBS mortgage overall rates to prepayment our X.XX%

faster at than to paid bonds the fixed significantly portfolio ARM prepaying higher. rates rate been due the interest has resetting Our rates by the a borrowers

turn Subsequent and during XX October a an overall Brett With call in XX%. ARMs prepays CPR the CPR non-agency CPR that, Our XX% over prepayment discuss to in report to declining investments. residential to the credit had to ARM MBS showed quarter-end, to I'd our like quarter. the rate a mortgage portfolio decline to average

Brett Roth

Joe. Thanks

there were beginning and credit in appetite has for of then remained volatility strong. again. investors' mortgage bit the a quarter. of where on quarter, widening action credit the the the at the mortgage ride the general, was end out spreads In in tightening roller-coaster The assets third quarter, a the tightening basically quarter, then spreads. a beginning were By back During was of spreads they that spreads to of some bit back at

to market As new we of moved increase. volume into September, the securitizations brought to began the

see continued to a up deals us continued investors, a being by bit of to the this snapped were of did to in October, at clearing. quickly brought then spread and deals we were number Ultimately, which new widening Assets as into lead market increase. the

to mentioned credit negative portfolio. as Ultimately, saw valuations volatility saw we in increase of the of in moved movement credit offset rates. some the terms which we of non-agency previously, of on value the the spreads, spread offset volatility rates In the the impact on

we approach assets were selectively our to assets attractive to yields quarter, to at we continue disciplined the to portfolio. During maintained able valuing add and the

run-off Our amount overall investment limited off. portfolio. were of our activity reinvestment at the of activity. sector acquisitions acquisition agency and other call Most actions from you'll Alt-A makeup in in sector CUSIP transfer notice with than looking the in portfolio transfer the exceeded quarter-to-quarter, In the and/or portfolio outpaced risk that sectors legacy portfolio risk run of very the the of non-performing

the this continued performance their our issues. continue market risk of of if an returns. experience will portfolio The underlying The prepayments rotate downward voluntary into assets. continues sectors prepayment did during the benefit reinvestments credit attractive us opportunistically assets of general, transfer agency in We with those trend. to portfolio the to increase that from At of experience to In any its quarter, in provide CDRs part credit continue the our portfolio time, negligible same the fees. legacy our

slowing they of prepayments realize fees. voluntary However, did slight

to from the performance positive few current last HPI to is a securitization line The see that our years. strong held to rates, as defaults with benefited environment positive overall run in this we our that zero continues and their original higher assets refinance have elevated and of to assets in at have with continue to these we of Turning expectations. are are trust. mortgages to do opportunities voluntary on in rates mortgage continuing that so The the result spite experienced credit these over economic These continuing still CDR. loans have

funding, of has to counterparties rates. offset us manage costs funds. the to This rise therefore activity to to allowed in we to lenders our of help cost Turning prudently book of interest mix financing add our and continue some to the our of and

are we forward, investment advantage to current we to arise market. as good position take continue opportunities of Looking the in a feel in they that

We all credit. are of credit actively residential opportunities sectors attractive the assets pursuing mortgage across add portfolio to to

of quarter, We sector. residential subsequent an this a noted As opportunity in non-QM our close third loans. mortgage the we release, area of purchased credit mortgage see the news small we the within pool of to as

portfolio We these as sector grow of our assets building for the bid this continue in of market. are footprint to types the to our actively of for on sources loans continue we network these and

Joe McAdams

Brett. Thanks

Turning September XXth of to borrowing look at repos at stood rose our X.XX% overall repo portfolio financing, average billion. at you'll that interest from to see at The on $X total our quarter-end. X.XX% paid rate

swap a fixed similar for However, you'll interest swaps, we each our increased by our floating LIBOR interest paid rate amount. rate average hedges adjusting and interest that receive also quarter. also rate after notice With

of days rising three months LIBOR the the basis quarter, virtually in points of third only last most the unchanged the few During for by X quarter. quarter, was

in a As not those terribly the repo in swaps result, offsetting rates. effective were increases

expect has been would between variability rates some and LIBOR, particularly XXXX. during our cost two volatile the While between repo those we basis

As positive multiple points overall favorably the and X.XX swap LIBOR times. moving for risen benchmark LIBOR quarter term XX three for the portfolio, going our interest rates has months basis has spread The during between forward, approximately and already been to-date other was by the positions. leverage a third rate short more

in the synthetic these of X.XX leverage between mark-to-market value the total our or to the leverage X.X of agency measures portfolio. financing at of the effective up that in include due quarter-end. were quarter you of at reduction implied transactions, Both TBA is If on stood times our X.X the return

when swaps. position rate collateralized currently we years of increased swaps until the X.XX%, combine total of XXX% short fixed repo swap positions, value total borrowings our that by you billion with and the or and repo agency face either an to that pay on our with over hedged Our are hedge average average our of of ARM borrowings rate $X.X XX% adjustable term X.X maturity swaps These assets. with adjusting of

common point, economic this value based minus stock at at back and the any you declined we like I'd X.X% an yield closing or $X.XX of share quarter, value Book to on and reflected paid share our to common being account $X.XX. over annualized per At the on have per of shareholders for $X.XX common the dividend This time. $X.XX the turn Taking Brian, would book X.X% questions return the XX.X%. is this into and quarter-end. quarter dividend decline, welcome quarter. the declared During we the the at total operator to dividend price

Operator

Thank you.

begin like with Douglas the We Credit now go looks from be question-and-answer Please today's ahead. [Operator Suisse. Instructions]. will session first will question Mr. Harter And

Douglas Harter

seen the given we've agency how what leverage? just see and talk positioned about current comfortable you weakness yourself spread October. with we Joe, you saw are on in or you how Can

Joe McAdams

underlying basis are wider. hedges. MBS of have agency by spreads to a by moved spreads three in rates on up points interest They've about So, in eighth XX that price quarter, underperformed but point the relative roughly

positive the that on new current a the XX% and ROE assets the gross we that marginal given So, see in targets side area we're means our investments, leverage acquiring.

is mentioned, as side creeping we leverage was On little the It at flip of result a declining up bit. to X.XX you X.X mark-to-market. higher see quarter-end than as it do a

so been so not the been pay far reinvestments of significant making We quarter. this have down far

I still times we're think at. X leverage total target what is economic at pointing

So, to gross to attractive level. are our from leverage significant see as towards in I back deploy there investments, target. target I shift our a to less down we don’t leverage have capital think led a new ROEs we expect little maybe available slide do And likewise

Douglas Harter

be below on the about the available a that's you securitization? to talk you size then economic loans the still would that brought. given non-QM financing that Can you're And do

Joe McAdams

spreads actually in. We've in repo these we're we're are this with been seeing come of actually on some and side, looking also this for several on counterparties decreasing the facilities. environment And assets. up warehouse on So time at in this there -- seeing is as setting some we're terms engaged haircuts

on plenty is at interim for sheet these to there us opportunity effectively of attractive So levels. the balance finance in the

Operator

At this more showing not I'm time, questions. Instructions] [Operator current any

any I'd like McAdams So to closing turn over back to remarks. conference Mr. the for

Joe McAdams

Well, Anworth. talking again Great. and forward We Thanks. your next for in your to thank you for continued look call you interest participation in today's to to everyone quarter.

Operator

to today's may want presentation. We now concluded. for And now at disconnect. thank is you you this time, attending conference The

Joe McAdams	President and Chief Executive Officer
Brett Roth	Senior Vice President and Portfolio Manager
Chuck Siegel	Chief Financial Officer
Douglas Harter	Credit Suisse

Anworth Mortgage Asset (RC+C) 5 Nov 182018 Q3 Earnings call transcript