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Anworth Announces Third Quarter 2012 Financial Results

Anworth Mortgage Asset Corporation (NYSE: ANH) today reported core earnings available to common stockholders of $20.5 million, or $0.15 per diluted share, for the third quarter ended September 30, 2012. Core earnings consisted of $22 million of net income less $1.5 million of dividends paid to our preferred stockholders. This compares to core earnings of $24.4 million, or $0.18 per diluted share, for the second quarter ended June 30, 2012.

“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 September 30, 2012, there were no impairment losses on MBS.

On September 28, 2012, we declared a quarterly common stock dividend of $0.15 per share, which is payable on October 29, 2012 to holders of our common stock as of the close of business on October 8, 2012.

At September 30, 2012, our book value was $7.45 per share, versus $7.19 per share at June 30, 2012.

Our investments consist of Agency MBS, which constituted essentially our entire portfolio at September 30, 2012. At September 30, 2012 and June 30, 2012, the fair value of our Agency MBS portfolio and its allocation was approximately as follows:

  September 30,

2012

  June 30,

2012

 
Fair value of Agency MBS $9.26 billion $9.15 billion
 
Adjustable-rate Agency MBS (less than 1 year reset) 22 % 24 %
Adjustable-rate Agency MBS (1-2 year reset) 0 % 0 %
Adjustable-rate Agency MBS (2-5 year reset) 51 % 54 %
Adjustable-rate Agency MBS (> 5 year reset) 6 % 3 %
15-year fixed-rate Agency MBS 17 % 14 %
30-year fixed-rate Agency MBS 4 % 5 %
100 % 100 %
 

  September 30,

2012

  June 30,

2012

Weighted Average Coupon:
Adjustable-rate Agency MBS 3.14 % 3.23 %
Hybrid adjustable-rate Agency MBS 2.87 2.94
15-year fixed-rate Agency MBS 3.16 3.35
30-year fixed-rate Agency MBS 5.56 5.56
CMOs 1.03 1.05
Total Agency MBS: 3.09 % 3.18 %
Average Amortized Cost:
Adjustable-rate and hybrid adjustable-rate Agency MBS 102.99 % 102.89 %
15-year fixed-rate Agency MBS 103.11 103.04
30-year fixed-rate Agency MBS 100.86 100.84
Total Agency MBS: 102.92 % 102.82 %
Current yield (weighted average coupon divided by average amortized cost) 3.00 % 3.09 %
Unamortized premium $255.2 million $245.3 million
Unamortized premium as a percentage of par value 2.92 % 2.82 %
Premium amortization expense on Agency MBS $19.4 million $17.4 million
 
      September 30,

2012

  June 30,

2012

 
Fair value of Non-Agency MBS $0.5 million $0.7 million
 
  September 30,

2012

  June 30,

2012

 
Constant prepayment rate (CPR) of Agency MBS and Non-Agency MBS 26% 24%
Constant prepayment rate (CPR) of adjustable-rate and hybrid adjustable-rate Agency MBS 26% 23%
Weighted average term to next interest rate reset on Agency MBS and Non-Agency MBS 36 months 36 months
 
  September 30,

2012

  June 30,

2012

Repurchase Agreements:
Outstanding repurchase agreement balance $7.960 billion $7.822 billion
Average interest rate 0.42 % 0.38 %
Average maturity 34 days 32 days
Average interest rate after adjusting for interest rate swap transactions 1.04 % 1.11 %
Average maturity after adjusting for interest rate swap transactions 437 days 436 days
Fair value of Agency MBS pledged to counterparties $8.51 billion $8.31 billion
 
Interest Rate Swap Agreements:
Notional amount $3.09 billion $3.18 billion
Percentage of outstanding repurchase agreement balance 39 % 41 %
 

At September 30, 2012 and June 30, 2012, our swap agreements had the following notional amounts (in thousands), weighted average interest rates and remaining terms (in months):

  September 30,

2012

  June 30,

2012

Notional

Amount

  Weighted

Average

Interest

Rate

  Remaining

Term in

Months

Notional

Amount

  Weighted

Average

Interest

Rate

  Remaining

Term in

Months

 
Less than 12 months $ 405,000 3.40 % 5 $ 645,000 3.75 % 6
1 year to 2 years 325,000 2.31 17 325,000 2.31 20
2 years to 3 years 510,000 2.17 30 460,000 2.16 32
3 years to 4 years 1,250,000 1.89 42 1,100,000 2.04 44
Over 4 years   600,000 1.16 58   650,000 1.18 55
$ 3,090,000 2.04 % 36 $ 3,180,000 2.25 % 34
 

At September 30, 2012, our leverage multiple was 6.82x, which was a decrease from our leverage multiple of 7.07x at June 30, 2012. The leverage multiple is calculated by dividing our repurchase agreements outstanding by the aggregate of common stockholders’ equity plus Preferred Stock and junior subordinated notes.

  September 30,

2012

  June 30,

2012

Relative to Average Earning Assets During the Quarter:
Interest income earned 3.04 % 3.15 %
Amortization of premium 0.87 0.80
Average cost of funds on repurchase agreements and derivative instruments 1.08   1.08  
Net interest rate spread 1.09 % 1.27 %
 

At September 30, 2012, stockholders’ equity available to common stockholders was approximately $1.056 billion, or a book value of $7.45 per share, based on approximately 141.7 million shares of common stock outstanding at quarter end. The $1.056 billion equals total stockholders’ equity of $1.104 billion less the Series A Preferred Stock liquidating value of $46.9 million and less the difference between the Series B Preferred Stock liquidating value of $26.4 million and the proceeds from its sale of $25 million. At June 30, 2012, stockholders’ equity available to common stockholders was approximately $993 million, or a book value of $7.19 per share, based on approximately 138.1 million shares of common stock outstanding at quarter end. The $993 million equals total stockholders’ equity of $1.041 billion less the Series A Preferred Stock liquidating value of $46.9 million and less the difference between the Series B Preferred Stock liquidating value of $28.8 million and the proceeds from its sale of $27.2 million.

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