ANH - Earnings call transcript Q4 2019 | Anworth Mortgage Asset Corp

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Operator

Before we begin the call I’d like to introduce Mr. John Hillman, Anworth’s Director of Investor Relations to make a brief introductory statement. Please go ahead.

John Hillman

Thank you, Nick. The Statements made on this earnings call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended and we hereby claim the protection of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to any such forward-looking statements.

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

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

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

speak the are date as forward-looking made. only they All statements of

of not and Except revise you. they any over and risks or to possible information otherwise. or or update in circumstances, law, statements expectations, intend or new publicly events, required time or a New change Thank we events forward-looking to as by may it arise those as is predict future us. result a conditions uncertainties how affect or do whether not

Chief our Joe now like would I introduce Officer. McAdams, to Executive

Joe McAdams

Portfolio results. are me Anworth’s and joining Manager; Chuck Anworth’s Senior for President Bistra today Roth, and President fourth our CFO. Siegel, on thank quarter And to John. and call Vice Thanks, discuss Senior call Brett Vice Manager, Portfolio Pashamova, the you With XXXX today

at coming and Anworth’s quarter quarter. successful overnight the for seen in third on time following the Fed in portfolio. year October positive cut fourth markets The was The spike the rates generally for rates was the largely third the in repo

higher, and with the MBS rates performance. performing significantly our solid similarly in price interest most Agency had general outperformed moved well, holdings securities As our mortgage stock and assets credit at-risk market their hedges

the declines share refinancings rate through prior cost the of prepayments MBS months, portfolio on interest summer higher realized being earnings the quarterly were fourth common the versus per the $X.X follow during for the drag of seen quarter million the primary Core core earnings or and Following was on during the higher with prepayments quarter. later during our $X.XX lower decline how as effects, expense primary down we more portfolio shifts quarter. quarter, higher the to from agency and seasonal will both cost composition. quarter first of the due in in third to driver Again, date this prepayments as in have detail prepayment $X.XX the was the discuss well the realized of been

was our of realized the income MBS quarter. million $X.XX our to net which million shift XX% positions $XX.X Agency XX% from share. with increased agency assets gains $X.XX TBA the or for rate share Agency MBS asset total from per per to Overall, income, and pools. derivatives portfolio investments $XX.X or all of the and was GAAP related unrealized on Comprehensive includes fixed

To due mortgage detail, in loans non-QM primarily downs continue credit portfolio MBS held more the originated non-Agency was to currently like call turn to the the Bistra MBS side, we Pashamova. discuss to newly lower I’d On securitization. add to and Agency over pay for

Bistra Pashamova

Thank you, Joe.

MBS and investments, Total returns adjustable than portfolio, agency arms MBS XX-year portfolio. rate other with declined further securities MBS to TBA resets attractive XX% a the combined see you’ll the coupon Agency XX-year and MBS At of XX-year we including fixed-rate positions our more X%. portfolio. within them our of quarter-end, providing to our comprised XX% Agency allocation sectors. increased as fixed-rate we composition XX-year Agency was to securities Looking fixed at view declined year of XX% risk-adjusted rate

During into coupon prepayment limited to with allocation rate lower we our risk. the XX-year securities fixed continued quarter, rotate

pools were Our prepayments. that loan balance investments mitigate focused with new on or characteristics specified other

We also further exposed reduced higher most to that securities our were XX-year prepayments. exposure to coupon

can coupon quarter points you As see, MBS of X.XX% our XX fixed-rate XX-year almost to at the basis declined end.

one. to overall previous while CPR end to XX portfolio portfolio Our coupon lower prepayment in-flight agency the quarter given small from rate the With in quarter consisting prepayments, XX still was of CPR at in TBA financing. weaker only the XX-year roll securities increased position, regards fourth

Adjustable CPR CPR. rate XX similarly rose MBS from XX to prepayments

the coupon so XX far lower portfolio the to decreased portfolio As declining in repositioning agency have of the and refinancing CPR toward expected, January given quarter overall securities in the February. prepayments for of seasonal the month our and effect, portfolio

coupon focus attractive to protection continue new have We spreads prepayment provide that XX-years our characteristics. on investments lower certain and

Joe McAdams

other takeover. to credit Roth I’d mortgage Brett Thanks like the Bistra. and MBS discuss investments, have to And non-Agency

Brett Roth

Thanks, Joe.

fourth mortgage we did the the offset the on valuation impact at tightened as on During rates assets quarter the increase during did quarter, rose. treasury rates negative credit on reduce swap portfolio not tightening and spreads in saw fully the This of end. but our quarter,

sales. due bond being some During and to quarter, the credit strategic continued the called, securitized bonds portfolio shrink to run-off

continue to value securitized Our therefore space, in space in than the that our loan commit credit is our the more there non-QM reinvestment portfolio. view remains to we and no loan dollars

approximately $XX saw the while loan existing new quarter of rate the our prepayment we area. increase to high on million XX voluntary prepayment loans portfolio closed we on speeds During

in assets, paid. prepayments EPD the impact However, we on of benefit protection did lowering these premium negotiated to dollars assets continue somewhat on our portfolio, the from

non-traditional focus near-miss on quality of type loans to use our higher activities which forms credit non-QM investing continue documentation. the We

XXX and LTV DTI of Our average ARMs, majority XX% current hybrid the seventy ones. of portfolio weighted our of portfolio of is XX% a assets of has FICO of XX%. of CLTV are which Approximately and comprised

in continues performance zero their the to plus credit these defaults XX remain As delinquent bucket. loans assets, strong and we remaining at no with anticipated with CDR

the we quarter, of continued our with network have of the partnerships to expand strategic Over several originators. course

are partners non-QM closely programs. and continued to have to out We our them new working roll to out several with guidelines roll our

We acquire also partner to loans with partnership the basis months. flow over new strategic a XX on a a new entered in into next order

expand of continuing are on the partnerships We these future. in to types focused

On the funding funds. side, we continue of our to our prudently and manage therefore book cost financing

Over the spread quarter, the further we were improve funds. on pay able to on we

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

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

market. continuing in that our footprint anticipate and non-QM of activities investment to Joe. to sector sector we of our increase continue sources growing We will the Our mortgage this expand. these network assets for is continue Thanks, the in loan will

Joe McAdams

Thank you, Brett.

account on Turning The X.XX%. an to increased holdings rate After borrowings to average years. XX hedge $X.X interest Repo TBAs year-end, approximately at interest borrowings billion our down borrowings taking of portfolio financing. relative average September term to basis was as from hedges, with of rate we our the MBS pool Agency into these these our XX. increased effective points cost borrowing X.XX%, was X.X

financed from leverage capital MBS X.X we to with Agency as moved quarter. Our total up multiple repos X.X pools times the during times added

over positions we As TBA quarter. reduced the Agency discussed,

year-end. X.X leverage, borrowing total less X.X includes times capital the at the economic our times purchases So effective synthetic to applied in which from TBA increased

portfolio lower $X.X on maturity from well rate quarter increase swaps the as billion as Our remaining increased years. $X.X swap balance interest agency This rate MBS. in around balance billion the duration agency the with larger swap coupon, higher to the coupon both duration lower offset fixed from shift from increased four average into the agency helped asset

rate basis net rate annualized. points The average X.XX%. to on tightened two swap the basis book to fell XX pay basis points overall The spread overall effective interest X points

evident statements, expense spread, follows is of breakdown spread the of on Agency As basis this components narrowed paydown this by the points. the an MBS XX financial higherly from our annualized which non-GAAP quarterly

resulted with $X.XX this to might call for book declared have. up you value value quarter dividend We shareholders December, in dividend, economic common based the XXXX. a resulted year-end in return $X.XX. X.X% closing for common When economic combined for on open and yield $X.XX X.X% the $X.XX any which price. questions in increased With stock XX.X% a the like share Book I’d a increase to return for per dividend that annualized

So I operator. will our back turn to over Nick, the call

Operator

and question the begin question comes Goberman, JMP [Operator now Instructions] Mikhail from go Please answer-session. We’ll First ahead. Securities.

Mikhail Goberman

Thanks give any months for taking if value where of call. everybody. book into morning the trending solid value insight Good this two through performance. could very is year? on was a I book first you the wondering Congratulations

Joe McAdams

decline in underperforming this Sure. book Obviously, down down good week, would area. rates X.X% be we’ve value a of estimate with a and deal but Thanks volatility quarter-to-date MBS had their hedges Mikhail. Agency approximately our

Mikhail Goberman

Okay, thanks for that.

in quarter, $X.XX now came question I the guys this cuts down, going that’s on a of dividend. reductions I the in earnings a a core sort question? dividend row guess of know Just with that rates given dividend are light a level and How little three you dividend. current the going currently forward sort sustainable we’re the thinking in seeing market my about below

Joe McAdams

drivers that we when the the the earnings, the side. quarter-to-quarter think of has on Well, agency fact the of prepayment primary volatility recognize actual we core one in about earnings Sure. core been costs the

as the those drove that the during paydowns we of the in fourth decline summer quarter And higher so pointed Bistra out. rates clearly the sharp during those, saw – cost

clearly in come prepayments quarter. We’re for down seeing likewise, substantially reasons. rate rates of quarter several And so far the first have first the lower a during now

quarters prepayments. see down in we similarly another So road few would to and a increase expect the

longer-term that as like our next I’d potential, to now. prepayments over feel time, we would is long-term at see in earning if we or to are earnings So also a as based for we right set portfolio. the arise the the potential expect of what stay quarter rates low on terms think the while two they do dividend

this fourth having some agency more moved fixed quarter to may Bistra won’t paydown our quarter during that coupon to perhaps would XXXX. hope than lower pointed the expect out, we to expense earnings during into core see quarter during saw new As by those due continuing and and be as investments be that volatile, with to from period, we fluctuations rate muted

Mikhail Goberman

Is prepay that’s XX% mentioned you. to was Agency that Thank Got And that XX% speed speed? right? comparable you. MBS prepay that the

Joe McAdams

correct. that’s correct, That’s

Mikhail Goberman

Okay.

percentage in agency is of What one pools? your me. curious, book more specified now right for Just

Joe McAdams

In believe number specific balance is terms and terms a in XX% have XX%? characteristics of between FICO, low of pools that the I

Bistra Pashamova

Yes. XX%. Around

Joe McAdams

other think relatively sort what the of might We of but market lower prepayment of have sort some other those TBAs that also they because have significantly or lower terms characteristics, protected we prepayments as I specified in views a pools WAC gross than count generally wouldn’t have pools.

Mikhail Goberman

Understood. Thank Thank your time. much. for you very you

Joe McAdams

Thanks, Mikhail.

Operator

back conference ahead. the This question-and-answer concludes turn session. remarks. closing would any to McAdams Please our Mr. go I Joe over to like for

Joe McAdams

Thank talking And look you you you, Anworth. your call to for Thanks. interest forward and quarter. Nick. thank to today’s again to next We your everyone continued in in participation

Operator

Conference is Thank now the for concluded. you presentation. attending

You now disconnect. may

Anworth Mortgage Asset (RC+C) 27 Feb 202019 Q4 Earnings call transcript