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Anworth Announces Fourth Quarter 2011 Financial Results

Stocks in this article: ANH

Anworth Mortgage Asset Corporation (NYSE: ANH) reported today core earnings available to common stockholders of $26.9 million, or $0.20 per diluted share, for the fourth quarter ended December 31, 2011, consisting primarily of $28.4 million of net income less $1.5 million of dividends paid to our preferred stockholders. This compares to core earnings of $29.1 million, or $0.22 per diluted share, for the third quarter ended September 30, 2011.

“Core earnings” represents a non-GAAP financial measure, which we define as GAAP net income excluding impairment losses on mortgage-backed securities, or MBS. For the three months ended December 31, 2011, there were no impairment losses on MBS.

On December 15, 2011, we declared a quarterly common stock dividend of $0.21 per share, which was payable on January 27, 2012 to our holders of common stock as of the close of business on December 30, 2011.

On a non-GAAP basis and during the three months ended December 31, 2011, our estimated taxable income, on which we base our common stock dividends, was $29 million, or $0.21 per diluted share. The difference between net income and our estimate of taxable income earned during the three months ended December 31, 2011 reflects the non-deductibility for income tax purposes of executive compensation of approximately $1.6 million, or $0.01 per share. A reconciliation of taxable earnings to net income available to common stockholders appears at the end of this news release.

At December 31, 2011 and September 30, 2011, our book value per share was $6.96 and $6.93, respectively.

Our investments consist of Agency MBS, which constituted essentially all of our portfolio at December 31, 2011. At December 31, 2011 and September 30, 2011, the fair value of our Agency MBS portfolio and its allocation was approximately as follows:

December 31, 2011 September 30, 2011
Fair value of Agency MBS $8.76 billion $8.74 billion
Adjustable-rate Agency MBS (less than 1 year reset) 24% 23%
Adjustable-rate Agency MBS (1-2 year reset) 4% 7%
Adjustable-rate Agency MBS (2-7 year reset) 53% 50%
15-year fixed-rate Agency MBS 13% 14%
30-year fixed-rate Agency MBS 6% 6%
Agency floating-rate collateralized mortgage obligations (CMOs) <1% <1%
100% 100%
December 31, 2011 September 30, 2011
Weighted Average Coupon:
Adjustable-rate 3.27 % 3.36 %
Hybrid adjustable-rate 3.22 3.40
15-year fixed-rate 3.66 3.68
30-year fixed-rate 5.55 5.54
CMOs 1.09 1.02
Total Agency MBS: 3.42 % 3.56 %
Average Amortized Cost:
Adjustable-rate and hybrid adjustable-rate 102.83 % 102.78 %
15-year fixed-rate 103.29 103.22
30-year fixed-rate 100.82 102.59
Total Agency MBS: 102.78 % 102.72 %
Current yield (weighted average coupon divided by average amortized cost) 3.33 % 3.47 %
Unamortized premium $231.5 million $227.4 million
Unamortized premium as a percentage of par value





Premium amortization expense on Agency MBS $16.7 million $16.5 million
December 31, 2011 September 30, 2011
Fair value of Non-Agency MBS $1.6 million $2.2 million
December 31, 2011 September 30, 2011
Constant prepayment rate (CPR) of Agency MBS and Non-Agency MBS 25% 28%
Constant prepayment rate (CPR) of adjustable-rate and hybrid adjustable-rate Agency MBS 25% 29%
Weighted average term to next interest rate reset on Agency MBS and Non-Agency MBS 36 months 34 months

December 31, 2011 September 30, 2011
Repurchase Agreements:
Outstanding repurchase agreement balance $7.595 billion $7.435 billion
Average interest rate 0.36% 0.26%
Average maturity 38 days 38 days
Average interest rate after adjusting for interest rate swap transactions 1.18% 1.15%
Average maturity after adjusting for interest rate swap transactions 436 days 452 days
Fair value of Agency MBS pledged to counterparties $8.07 billion $7.9 billion
Interest Rate Swap Agreements:
Notional amount $3.03 billion $2.93 billion
Percentage of outstanding repurchase agreement balance 40% 39%

At December 31, 2011, our swap agreements had the following notional amounts (in thousands), weighted average interest rates and remaining terms (in months):

December 31, 2011
Notional Amount   Weighted Average Interest Rate   Remaining Term in Months
Less than 12 months $520,000 3.92 % 5
1 year to 2 years 375,000 3.32 14
2 years to 3 years 410,000 2.07 28
3 years to 4 years 680,000 2.07 42
Over 4 years 1,045,000 1.98 54
$3,030,000 2.51 % 34

At December 31, 2011, our leverage multiple was 7.25x, which was an increase from our leverage multiple of 7.18x at September 30, 2011. The leverage multiple is based on common stockholders’ equity plus all Preferred Stock and the junior subordinated notes.

December 31, 2011 September 30, 2011
Relative to Average Earning Assets During the Quarter:
Interest income earned 3.39 % 3.52 %
Amortization of premium 0.79 % 0.80 %
Average cost of funds on repurchase agreements and derivative instruments 1.18 % 1.15 %
Net interest rate spread 1.42 % 1.57 %

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