Anworth Announces Third Quarter 2013 Financial Results

  Anworth Announces Third Quarter 2013 Financial Results

Business Wire

SANTA MONICA, Calif. -- October 31, 2013

Anworth Mortgage Asset Corporation (NYSE: ANH) today reported core earnings
available to common stockholders of $16.6 million, or $0.12 per diluted share,
for the third quarter ended September 30, 2013. Core earnings consisted of $18
million of net income less $1.4 million of dividends paid to our preferred
stockholders. This compares to core earnings of $21.6 million, or $0.15 per
diluted share, for the second quarter ended June 30, 2013.

“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 30,2013, there were no impairment
losses on MBS.

On September 30, 2013, we declared a quarterly common stock dividend of $0.12
per share, which was payable on October 29, 2013 to holders of our common
stock as of the close of business on October 10, 2013.

At September 30, 2013, our book value was $5.89 per share, versus $6.01 per
share at June 30, 2013.

Our investments consist of Agency MBS, which constituted essentially our
entire portfolio at September30, 2013. At September 30, 2013 and June 30,
2013, the fair value of our Agency MBS portfolio and its allocation was
approximately as follows:

                                                             
                                               September 30,     June 30,
                                               2013              2013
                                                                 
Fair value of Agency MBS                       $8.77 billion     $9.45 billion
Adjustable-rate Agency MBS (less than 1 year   18%               18%
reset)
Adjustable-rate Agency MBS (1-2 year reset)    7%                6%
Adjustable-rate Agency MBS (2-3 year reset)    16%               13%
Adjustable-rate Agency MBS (3-4 year reset)    14%               17%
Adjustable-rate Agency MBS (4-5 year reset)    2%                4%
Adjustable-rate Agency MBS (5-7 year reset)    15%               14%
Adjustable-rate Agency MBS (>7 year reset)     8%                7%
15-year fixed-rate Agency MBS                  19%               18%
30-year fixed-rate Agency MBS                  1%                3%
                                               100%              100%
                                                                 

                                          September 30,     June 30,
                                           2013               2013
Weighted Average Coupon:
Adjustable-rate Agency MBS                 2.52           %   2.61           %
Hybrid adjustable-rate Agency MBS          2.66               2.67
15-year fixed-rate Agency MBS              2.64               2.61
30-year fixed-rate Agency MBS              5.74               5.55
CMOs                                       0.99               1.00
Total Agency MBS:                          2.67           %   2.72           %
Average Amortized Cost:
Adjustable-rate and hybrid                 103.25         %   103.20         %
adjustable-rate Agency MBS
15-year fixed-rate Agency MBS              103.47             103.31
30-year fixed-rate Agency MBS              101.28             100.98
Total Agency MBS:                          103.26         %   103.16         %
                                                                             
Current yield (weighted average coupon     2.59           %   2.64           %
divided by average amortized cost)
Unamortized premium                        $274.8 million     $288.5 million
Unamortized premium as a percentage of     3.26           %   3.16           %
par value
Premium amortization expense on Agency     $15.5 million      $16.0 million
MBS
                                                                             

                                                    September 30,  June 30,
                                                     2013            2013
                                                                     
Constant prepayment rate (CPR) of Agency MBS and     23%             24%
Non-Agency MBS
Constant prepayment rate (CPR) of adjustable-rate    22%             26%
and hybrid adjustable-rate Agency MBS
Weighted average term to next interest rate reset    42 months       44 months
on Agency MBS and Non-Agency MBS
                                                                     

                                          September 30,     June 30,
                                           2013               2013
Repurchase Agreements:
Outstanding repurchase agreement balance   $7.575 billion     $8.405 billion
Average interest rate                      0.37           %   0.39           %
Average maturity                           38 days            37 days
Average interest rate after adjusting      1.44           %   0.95           %
for interest rate swap transactions
Average maturity after adjusting for       1,024 days         471 days
interest rate swap transactions
Fair value of Agency MBS pledged to        $8.12 billion      $8.85 billion
counterparties
Interest Rate Swap Agreements:
Notional amount                            $5.185 billion     $3.435 billion
Percentage of outstanding repurchase       68             %   41             %
agreement balance
                                                                             

At September 30, 2013 and June 30, 2013, our swap agreements had the following
notional amounts (in thousands), weighted average interest rates and remaining
terms (in months):

         September 30, 2013                         June 30, 2013
                         Weighted     Remaining                   Weighted     Remaining
           Notional        Average        Term in       Notional        Average        Term in
           Amount          Interest       Months        Amount          Interest       Months
                           Rate                                         Rate
Less
than       $ 325,000       2.31     %     5             $ 325,000       2.31     %     8
12
months
1 year
to 2         510,000       2.17           18              460,000       2.16           20
years
2
years        1,350,000     1.79           30              1,200,000     1.92           32
to 3
years
3
years        1,645,000     1.17           50              1,325,000     1.05           49
to 5
years
5
years        825,000       2.12           78              125,000       1.48           80
to 7
years
7
years       530,000       2.80           109            0             0.00           0
to 10
years
           $ 5,185,000     1.82     %     49            $ 3,435,000     1.64     %     36
                                                                                       

At September 30, 2013, our leverage multiple was 8.0x, which was a decrease
from our leverage multiple of 8.7x at June 30, 2013. 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,    June 30,
                                                  2013              2013
Relative to Average Earning Assets During the
Quarter:
Interest income earned                            2.62          %   2.67     %
Amortization of premium                           0.68              0.69
Average cost of funds on repurchase agreements    1.12              0.98
and derivative instruments
Net interest rate spread                          0.82          %   1.00     %
                                                                             

The following table represents our common stockholders’ equity with and
without AOCI, which is a non-GAAP financial measure, at September 30, 2013 and
December31, 2012, respectively. The Company’s management believes that this
financial measure, when considered together with our GAAP financial measures,
provides information that is useful to investors in understanding the
differences between our common stockholders’ equity including AOCI and our
common stockholders’ equity without AOCI and the effect of each on our book
value per share. This financial measure should not be used as a substitute in
assessing the Company’s financial condition at September 30, 2013 and December
31, 2012, respectively. An analysis of any non-GAAP financial measure should
be used in conjunction with results presented in accordance with GAAP.

                                                               
                                                September 30,     December 31,
                                                2013              2012
                                                (in thousands)
Common stockholders’ equity without AOCI        $   935,088       $  934,354
AOCI – unrealized (loss) income                    (100,632  )     79,776
Common stockholders’ equity                     $   834,456       $  1,014,130
Series A Preferred Stock liquidation value          47,984           46,935
Series B Preferred Stock liquidation value          25,241           26,652
Less: Series B Preferred Stock proceeds from       (23,924   )     (25,222
issuance
Total stockholders’ equity per Balance Sheet    $   883,757       $  1,062,495
                                                                     
Common shares outstanding                           141,603          142,013
                                                                     
Per Share Amounts:
Common stockholders’ equity without AOCI        $   6.60          $  6.58
AOCI                                               (0.71     )     0.56
Common stockholders’ equity                     $   5.89          $  7.14
                                                                     

During the quarter ended September 30, 2013, we had repurchased an aggregate
of 1,472,710 shares of common stock at a weighted average price of $4.53 per
share under our share repurchase program. During the quarter ended September
30, 2013, we issued an aggregate of 723,499 shares of common stock at a
weighted average price of $4.98 per share under our 2012 Dividend Reinvestment
and Stock Purchase Plan.

We will host a conference call on Friday, November 1, 2013 at 1:00 PM Eastern
Time, 10:00 AM Pacific Time, to discuss third quarter 2013 results. The
dial-in number for the conference call is 888-317-6016 for U.S. callers
(international callers should dial 412-317-6016 and Canadian callers should
dial 855-669-9657). When dialing in, participants should ask to be connected
to the Anworth Mortgage earnings call. Replays of the call will be available
for a 7-day period commencing at 3:00 PM Eastern Time on November 1, 2013. The
dial-in number for the replay is 877-344-7529 for U.S. callers (Canadian
callers should dial 855-669-9658 and international callers should dial
412-317-0088) and the conference number is 10036187. The conference call will
also be webcast live over the Internet, which can be accessed on our website
at http://www.anworth.com through the corresponding link located on the home
page.

Investors interested in participating in our Dividend Reinvestment and Stock
Purchase Plan, or the Plan, or receiving a copy of the Plan’s prospectus, may
do so by contacting the Plan Administrator, American Stock Transfer & Trust
Company, at 877-248-6410. For more information about the Plan, interested
investors may also visit the Plan Administrator’s website at
http://www.investpower.com or our website at http://www.anworth.com.

About Anworth Mortgage Asset Corporation

Anworth is an externally-managed mortgage real estate investment trust. We
invest primarily in securities guaranteed by the U.S. Government, such as
Ginnie Mae, or guaranteed by federally sponsored enterprises, such as Fannie
Mae or Freddie Mac. We seek to generate income for distribution to our
shareholders primarily based on the difference between the yield on our
mortgage assets and the cost of our borrowings. We are managed by Anworth
Management, LLC, or the Manager, pursuant a management agreement. The Manager
is subject to the supervision and direction of our Board of Directors and is
responsible for (i) the selection, purchase and sale of our investment
portfolio; (ii) our financing and hedging activities; and (iii) providing us
with management services and other services and activities relating to our
assets and operations as may be appropriate. Our common stock is traded on the
New York Stock Exchange under the symbol “ANH.” Anworth is a component of the
Russell 2000® Index.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995

This news release may contain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are based upon our current expectations
and speak only as of the date hereof. Forward-looking statements, which are
based on various assumptions (some of which are beyond our control) may be
identified by reference to a future period or periods or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"anticipate," "continue," or similar terms or variations on those terms or the
negative of those terms. Our actual results may differ materially and
adversely from those expressed in any forward-looking statements as a result
of various factors and uncertainties, including but not limited to, changes in
interest rates, changes in the yield curve, the availability of
mortgage-backed securities for purchase, increases in the prepayment rates on
the mortgage loans securing our mortgage-backed securities, our ability to use
borrowings to finance our assets and, if available, the terms of any
financing, changes in the market value of our assets, risks associated with
investing in mortgage-related assets, changes in business conditions and the
general economy, including the consequences of actions by the U.S. government
and other foreign governments to address the global financial crisis, changes
in government regulations affecting our business, our ability to maintain our
qualification as a real estate investment trust for federal income tax
purposes, our ability to maintain an exemption from the Investment Company Act
of 1940, as amended, and the Manager’s ability to manage our growth. Our
Annual Report on Form 10-K and other SEC filings discuss the most significant
risk factors that may affect our business, results of operations and financial
condition. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason.

                                                              
ANWORTH MORTGAGE ASSET CORPORATION

BALANCE SHEETS
(in thousands, except per share amounts)
                                                                 
                                                 September 30,   December 31,
                                                 2013            2012
                                                 (unaudited)
ASSETS
Agency MBS:
Agency MBS pledged to counterparties at fair     $ 8,124,478     $ 8,523,557
value
Agency MBS at fair value                           595,159         668,726
Paydowns receivable                               46,613        52,410    
                                                   8,766,250       9,244,693
Cash and cash equivalents                          13,003          2,910
Interest and dividends receivable                  23,603          25,839
Derivative instruments at fair value               13,003          111
Prepaid expenses and other                        12,927        11,552    
Total Assets:                                    $ 8,828,786    $ 9,285,105 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued interest payable                         $ 23,915        $ 20,376
Repurchase agreements                              7,575,000       8,020,000
Junior subordinated notes                          37,380          37,380
Derivative instruments at fair value               81,347          96,144
Dividends payable on Series A Preferred Stock      1,035           1,011
Dividends payable on Series B Preferred Stock      394             414
Dividends payable on common stock                  16,963          21,302
Payable for securities purchased                   182,722         0
Accrued expenses and other                        2,349         761       
Total Liabilities:                               $ 7,921,105    $ 8,197,388 
Series B Cumulative Convertible Preferred
Stock: par value $0.01 per share; liquidating
preference $25.00 per share ($25,241 and         $ 23,924       $ 25,222    
$26,652, respectively); 1,010 and 1,066 shares
issued and outstanding at September 30, 2013
and December 31, 2012, respectively
Stockholders' Equity:
Series A Cumulative Preferred Stock: par value
$0.01 per share; liquidating preference $25.00
per share ($47,984 and $46,935, respectively);   $ 46,537        $ 45,447
1,919 and 1,877 shares issued and outstanding
at September 30, 2013 and December 31, 2012,
respectively
Common Stock: par value $0.01 per share;
authorized 200,000 shares, 141,603 and 142,013     1,416           1,420
issued and outstanding at September 30, 2013
and December 31, 2012, respectively
Additional paid-in capital                         1,198,024       1,197,793
Accumulated other comprehensive income (loss)      (100,632  )     79,776
consisting of unrealized losses and gains
Accumulated deficit                               (261,588  )    (261,941  )
Total Stockholders' Equity:                      $ 883,757      $ 1,062,495 
Total Liabilities and Stockholders' Equity:      $ 8,828,786    $ 9,285,105 
                                                                             

ANWORTH MORTGAGE ASSET CORPORATION

STATEMENTS OF INCOME
(in thousands, except for per share amounts)
(unaudited)
                                                  
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2013         2012          2013         2012
Interest income:
Interest on Agency MBS   $ 42,646      $ 47,177      $ 131,326     $ 150,753
Other income              11          14          42          44      
                          42,657      47,191      131,368     150,797 
Interest expense:
Interest expense on        22,484        21,408        63,432        62,651
repurchase agreements
Interest expense on
junior subordinated       321         339         962         1,024   
notes
                          22,805      21,747      64,394      63,675  
Net interest income       19,852      25,444      66,974      87,122  
Gain on sales of           1,991         0             9,237         0
Agency MBS
Recovery on Non-Agency     100           299           333           1,272
MBS
Expenses:
Management fee to          (2,982  )     (2,892  )     (9,009  )     (8,603  )
related party
Other expenses            (953    )    (900    )    (2,905  )    (2,907  )
Total expenses            (3,935  )    (3,792  )    (11,914 )    (11,510 )
Net income               $ 18,008     $ 21,951     $ 64,630     $ 76,884  
Dividend on Series A
Cumulative Preferred       (1,035  )     (1,011  )     (3,107  )     (3,033  )
Stock
Dividend on Series B
Cumulative Convertible    (394    )    (412    )    (1,200  )    (1,311  )
Preferred Stock
Net income to common     $ 16,579     $ 20,528     $ 60,323     $ 72,540  
stockholders
Basic earnings per       $ 0.12        $ 0.15        $ 0.42        $ 0.53
common share
Diluted earnings per     $ 0.12        $ 0.15        $ 0.42        $ 0.52
common share
Basic weighted average
number of shares           142,380       139,209       143,176       137,120
outstanding
Diluted weighted
average number of          146,287       143,148       147,118       141,252
shares outstanding

Contact:

Anworth Mortgage Asset Corporation
John T. Hillman
(310) 255-4438 or (310) 255-4493
jhillman@anworth.com
http://www.anworth.com