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EXCEL - IDEA: XBRL DOCUMENT - ANWORTH MORTGAGE ASSET CORPFinancial_Report.xls

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-13709

 

ANWORTH MORTGAGE ASSET CORPORATION

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

52-2059785

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

1299 Ocean Avenue, Second Floor,
Santa Monica, California

90401

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (310) 255-4493

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer

x

Accelerated Filer

¨

 

 

 

 

Non-Accelerated Filer

¨  (Do not check if a smaller reporting company)

Smaller Reporting Company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

At November 4, 2014, the registrant had 113,270,017 shares of common stock issued and outstanding.

 

 

 

 


ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

FORM 10-Q

INDEX

 

 

 

 

Page

Part I.

 

FINANCIAL INFORMATION

1

 

Item 1.

Consolidated Financial Statements

1

 

 

Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013

1

 

 

Consolidated Statements of Income for the three and nine months ended September 30, 2014 and 2013 (unaudited)

2

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2014 and 2013 (unaudited)

3

 

 

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2014, June 30, 2014 and September 30, 2014 (unaudited)

4

 

 

Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2014 and 2013 (unaudited)

5

 

 

Notes to Unaudited Consolidated Financial Statements

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

 

Item 4.

Controls and Procedures

41

Part II.

 

OTHER INFORMATION

43

 

Item 1.

Legal Proceedings

43

 

Item 1A.

Risk Factors

43

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

 

Item 3.

Defaults Upon Senior Securities

45

 

Item 4.

Mine Safety Disclosures

45

 

Item 5.

Other Information

45

 

Item 6.

Exhibits

45

 

 

Signatures

48

 

 

 


 

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

Part I. FINANCIAL INFORMATION

 

Item 1.

Consolidated Financial Statements

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

September 30,

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Agency MBS:

 

 

 

 

 

 

 

 

Agency MBS pledged to counterparties at fair value

 

$

6,912,185

 

 

$

8,060,567

 

Agency MBS at fair value

 

 

458,398

 

 

 

462,478

 

Paydowns receivable

 

 

40,669

 

 

 

33,401

 

 

 

$

7,411,252

 

 

$

8,556,446

 

Residential properties

 

 

12,362

 

 

 

-

 

Cash and cash equivalents

 

 

1,402

 

 

 

7,368

 

Interest and dividends receivable

 

 

20,069

 

 

 

23,310

 

Derivative instruments at fair value

 

 

662,095

 

 

 

22,551

 

Prepaid expenses and other

 

 

9,972

 

 

 

9,816

 

Total Assets:

 

$

8,117,152

 

 

$

8,619,491

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accrued interest payable

 

$

11,835

 

 

$

30,117

 

Repurchase agreements

 

 

6,550,000

 

 

 

7,580,000

 

Junior subordinated notes

 

 

37,380

 

 

 

37,380

 

Derivative instruments at fair value

 

 

671,288

 

 

 

55,914

 

Dividends payable on Series A Preferred Stock

 

 

1,035

 

 

 

1,035

 

Dividends payable on Series B Preferred Stock

 

 

394

 

 

 

394

 

Dividends payable on common stock

 

 

16,598

 

 

 

11,097

 

Accrued expenses and other

 

 

4,299

 

 

 

1,368

 

Total Liabilities:

 

$

7,292,829

 

 

$

7,717,305

 

Series B Cumulative Convertible Preferred Stock: par value $0.01 per share; liquidating

    preference $25.00 per share ($25,241 and $25,241, respectively); 1,010 and 1,010

    shares issued and outstanding at September 30, 2014 and December 31, 2013,

    respectively

 

$

23,924

 

 

$

23,924

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

          Series A Cumulative Preferred Stock: par value $0.01 per share; liquidating

              preference $25.00 per share ($47,984 and $47,984, respectively); 1,919 and 1,919

              shares issued and outstanding at September 30, 2014 and December 31, 2013,

              respectively

 

$

46,537

 

 

$

46,537

 

          Common Stock: par value $0.01 per share; authorized 200,000 shares, 118,554 and

              138,717 issued and outstanding at September 30, 2014 and December 31, 2013,

              respectively

 

 

1,186

 

 

 

1,387

 

Additional paid-in capital

 

 

1,076,185

 

 

 

1,185,369

 

Accumulated other comprehensive (loss) consisting of unrealized gains and losses

 

 

(46,469

)

 

 

(92,008

)

Accumulated deficit

 

 

(277,040

)

 

 

(263,023

)

Total Stockholders' Equity:

 

$

800,399

 

 

$

878,262

 

Total Liabilities and Stockholders' Equity:

 

$

8,117,152

 

 

$

8,619,491

 


See accompanying notes to unaudited consolidated financial statements.

 

 

1


 

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Interest Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on Agency MBS

 

$

37,057

 

 

$

42,646

 

 

$

122,852

 

 

$

131,326

 

Income on rental properties

 

 

197

 

 

 

-

 

 

 

268

 

 

 

-

 

Other interest income

 

 

10

 

 

 

11

 

 

 

31

 

 

 

42

 

 

 

 

37,264

 

 

 

42,657

 

 

 

123,151

 

 

 

131,368

 

Interest Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on repurchase agreements

 

 

19,024

 

 

 

22,484

 

 

 

72,238

 

 

 

63,432

 

Interest expense on junior subordinated notes

 

 

318

 

 

 

321

 

 

 

947

 

 

 

962

 

 

 

 

19,342

 

 

 

22,805

 

 

 

73,185

 

 

 

64,394

 

Net interest income

 

 

17,922

 

 

 

19,852

 

 

 

49,966

 

 

 

66,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) gain on sales of Agency MBS

 

 

(5,617

)

 

 

1,991

 

 

 

(4,022

)

 

 

9,237

 

Gain on interest rate swaps, net

 

 

10,947

 

 

 

-

 

 

 

9,568

 

 

 

-

 

(Loss) gain on derivatives-TBA securities

 

 

(779

)

 

 

-

 

 

 

798

 

 

 

-

 

Derivative income-TBA securities

 

 

366

 

 

 

-

 

 

 

366

 

 

 

-

 

Gain on derivatives-Eurodollar Futures Contracts

 

 

111

 

 

 

-

 

 

 

111

 

 

 

-

 

Recovery on Non-Agency MBS

 

 

37

 

 

 

100

 

 

 

108

 

 

 

333

 

Total other income

 

 

5,065

 

 

 

2,091

 

 

 

6,929

 

 

 

9,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fee to related party

 

 

(2,609

)

 

 

(2,982

)

 

 

(8,248

)

 

 

(9,009

)

General and administrative expenses

 

 

(888

)

 

 

(953

)

 

 

(5,739

)

 

 

(2,905

)

Total operating expenses

 

 

(3,497

)

 

 

(3,935

)

 

 

(13,987

)

 

 

(11,914

)

Net income

 

$

19,490

 

 

$

18,008

 

 

$

42,908

 

 

$

64,630

 

Dividend on Series A Cumulative Preferred Stock

 

 

(1,035

)

 

 

(1,035

)

 

 

(3,105

)

 

 

(3,107

)

Dividend on Series B Cumulative Convertible Preferred Stock

 

 

(394

)

 

 

(394

)

 

 

(1,182

)

 

 

(1,200

)

Net income to common stockholders

 

$

18,061

 

 

$

16,579

 

 

$

38,621

 

 

$

60,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.15

 

 

$

0.12

 

 

$

0.30

 

 

$

0.42

 

Diluted earnings per common share

 

$

0.15

 

 

$

0.12

 

 

$

0.30

 

 

$

0.42

 

Basic weighted average number of shares outstanding

 

 

121,061

 

 

 

142,380

 

 

 

128,174

 

 

 

143,176

 

Diluted weighted average number of shares outstanding

 

 

125,192

 

 

 

146,287

 

 

 

132,254

 

 

 

147,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

2


 

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three Month Ended

September 30,

 

 

Nine Month Ended

September 30,

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,490

 

 

$

18,008

 

 

$

42,908

 

 

$

64,630

 

Available-for-sale Agency MBS, fair value adjustment

 

 

(13,625

)

 

 

10,247

 

 

 

62,104

 

 

 

(198,882

)

    Reclassification adjustment for loss (gain) on sales of Agency MBS included in net income

 

 

5,617

 

 

 

(1,991

)

 

 

4,022

 

 

 

(9,237

)

Unrealized gains (losses) on derivatives

 

 

987

 

 

 

(40,863

)

 

 

(73,959

)

 

 

(10,715

)

    Reclassification adjustment for interest expense on swap agreements included in net income

 

 

13,382

 

 

 

14,633

 

 

 

53,372

 

 

 

38,426

 

Other comprehensive income (loss)

 

 

6,361

 

 

 

(17,974

)

 

 

45,539

 

 

 

(180,408

)

Comprehensive income (loss)

 

$

25,851

 

 

$

34

 

 

$

88,447

 

 

$

(115,778

)

See accompanying notes to unaudited consolidated financial statements.

 

 

 

3


 

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

(unaudited)

 

 

 

Series A

Preferred Stock Shares

 

 

Common Stock Shares

 

 

Series A

Preferred Stock

Par Value

 

 

Common Stock Par Value

 

 

Additional

Paid-In

Capital

 

 

Accum. Other

Comp.

Income (Loss)

Agency MBS

 

 

Accum. Other Comp. (Loss) Derivatives

 

 

Accum. (Deficit)

 

 

Total

 

Balance, December 31, 2013

 

 

1,919

 

 

 

138,717

 

 

$

46,537

 

 

$

1,387

 

 

$

1,185,369

 

 

$

(58,646

)

 

$

(33,362

)

 

$

(263,023

)

 

$

878,262

 

Issuance of common stock

 

 

 

 

 

 

56

 

 

 

 

 

 

 

1

 

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

258

 

Redemption of common stock

 

 

 

 

 

 

(5,281

)

 

 

 

 

 

 

(53

)

 

 

(26,465

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,518

)

Other comprehensive income, fair value adjustments

   and reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

29,722

 

 

 

(9,200

)

 

 

 

 

 

 

20,522

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,371

 

 

 

13,371

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,805

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,805

)

Amortization of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Dividend declared - $0.539063 per Series A

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,035

)

 

 

(1,035

)

Dividend declared - $0.390625 per Series B

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(394

)

 

 

(394

)

Dividend declared - $0.14 per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,708

)

 

 

(18,708

)

Balance, March 31, 2014

 

 

1,919

 

 

 

133,492

 

 

$

46,537

 

 

$

1,335

 

 

$

1,157,380

 

 

$

(28,924

)

 

$

(42,562

)

 

$

(269,789

)

 

$

863,977

 

Issuance of common stock

 

 

 

 

 

 

82

 

 

 

 

 

 

 

1

 

 

 

389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

390

 

Redemption of common stock

 

 

 

 

 

 

(9,776

)

 

 

 

 

 

 

(98

)

 

 

(51,802

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51,900

)

Other comprehensive income, fair value adjustments

   and reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,412

 

 

 

(25,756

)

 

 

 

 

 

 

18,656

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,047

 

 

 

10,047

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,805

 

Amortization of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Dividend declared - $0.539063 per Series A

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,035

)

 

 

(1,035

)

Dividend declared - $0.390625 per Series B

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(394

)

 

 

(394

)

Dividend declared - $0.14 per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,332

)

 

 

(17,332

)

Balance, June 30, 2014

 

 

1,919

 

 

 

123,798

 

 

$

46,537

 

 

$

1,238

 

 

$

1,107,796

 

 

$

15,488

 

 

$

(68,318

)

 

$

(278,503

)

 

$

824,238

 

Issuance of common stock

 

 

 

 

 

 

76

 

 

 

 

 

 

 

1

 

 

 

299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

300

 

Redemption of common stock

 

 

 

 

 

 

(5,320

)

 

 

 

 

 

 

(53

)

 

 

(27,365

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,418

)

Other comprehensive income, fair value adjustments

   and reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,008

)

 

 

14,369

 

 

 

 

 

 

 

6,361

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,490

 

 

 

19,490

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,569

)

Amortization of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Dividend declared - $0.539063 per Series A

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,035

)

 

 

(1,035

)

Dividend declared - $0.390625 per Series B

   preferred share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(394

)

 

 

(394

)

Dividend declared - $0.14 per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,598

)

 

 

(16,598

)

Balance, September 30, 2014

 

 

1,919

 

 

 

118,554

 

 

$

46,537

 

 

$

1,186

 

 

$

1,076,185

 

 

$

7,480

 

 

$

(53,949

)

 

$

(277,040

)

 

$

800,399

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

4


 

ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,490

 

 

$

18,008

 

 

$

42,908

 

 

$

64,630

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of premium and discounts (Agency MBS)

 

 

11,768

 

 

 

15,478

 

 

 

33,382

 

 

 

50,481

 

Depreciation on rental properties

 

 

85

 

 

 

-

 

 

 

149

 

 

 

-

 

Loss (Gain) on sales of Agency MBS

 

 

5,617

 

 

 

(1,991

)

 

 

4,022

 

 

 

(9,237

)

Amortization of restricted stock

 

 

24

 

 

 

51

 

 

 

72

 

 

 

152

 

Recovery on Non-Agency MBS

 

 

(37

)

 

 

(100

)

 

 

(108

)

 

 

(333

)

Periodic net settlements on interest rate swaps, net of amortization

 

 

(5,643

)

 

 

-

 

 

 

(6,644

)

 

 

-

 

(Gain) on interest rate swaps, net

 

 

(10,947

)

 

 

-

 

 

 

(9,568

)

 

 

-

 

Loss (gain) on derivatives, net of derivative income - TBA Securities

 

 

413

 

 

 

-