Anworth Mortgage Asset Corporation Q3 2008 Earnings Call Transcript

| About: Anworth Mortgage (ANH)

Anworth Mortgage Asset Corporation (NYSE:ANH)

Q3 2008 Earnings Call

November 06, 2008; 5:00 pm ET


Lloyd McAdams - Chairman of the Board, President, Chief Executive Officer

Joe McAdams - Chief Investment Officer and Director

Thad Brown - Chief Financial Officer

Charles Siegel - Senior Vice President of Finance.


Steve Delaney - JMP Securities

Stephen Laws - Deutsche Bank

Jim Ackor - Sterne Agee

Bose George - KBW

Craig Schwartz - JPMorgan Chase

Steve Delaney - JMP Securities


Before we begin the call, I will make a brief introductory statement. Statements made at this earnings call 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 those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words will, belief, expect, anticipate, intend, estimate, assume or other similar expressions.

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

These forward-looking statements are subject to various risks and uncertainties, including those relating to increases in the prepayment rates on the mortgage loans securing our mortgage-backed securities, our ability to use borrowings to finance our assets and the extent of our leverage, risk associated with investing in mortgage-related assets including changes in business conditions and the general economy, our ability to maintain our qualification as a real estate investment trust under the Internal Revenue Code and management’s ability to manage our growth and planned expansion.

Other risks, uncertainties and factors including those discussed under the heading Risk Factors in our annual report on Form 10-K and other reports that we file from time to time with the Securities and Exchange Commission could cause our actual results to differ materially and adversely from those projected in any forward-looking statements we make.

We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We expressly disclaim any obligation, or undertaking to release publicly any updates or revisions to any forward-looking statements that may be made today or that may reflect any change in our expectations or any changes in events, conditions or circumstances based on which any such statements are made. Thank you.

I would now like to introduce Mr. Lloyd McAdams, Chairman, President and Chief Executive Officer of Anworth Mortgage.

Lloyd McAdams

Good afternoon, ladies and gentlemen. My name is Lloyd McAdams, the Chief Executive Officer of Anworth Mortgage. I welcome you to this conference call. We will discuss the company’s recent activities and look forward to answering your questions.

Anworth reported today, core earnings for the quarter ended September 30, of $23.6 million or $0.27 per share fully diluted, after the exclusions. This compares with $24.3 million or $0.29 per share that we earned over common stockholders in the second quarter of 2008.

The core earnings which I referred to represents a non-GAAP measure and is defined as the net income excluding impairment loss and gains from the disposition of continued operations. Reconciliation to the most directly related GAAP financial measure was included in our earnings release, which was issued earlier today.

On a GAAP basis, the net loss to common stock stockholders for the quarter ended September 30 was approximately $2.8 million or $0.03 per share. This net loss to common stockholders reflects an approximately $34 million non-cash impairment charge on non-agency mortgage-backed securities, which we refer to as non-agency MBS and a one-time $7.7 million gain on the disposition of our continued operations, which represents the activities of Belvedere Trust.

Anworth’s portfolio of agency mortgage-backed securities at fair value at quarter end was approximately $5.4 billion and our portfolio of non-agency MBS at fair value at quarter end was approximately $11 million.

Stockholder’s equity available to common stockholders of Anworth at quarter end was approximately $550 million, or $6.16 per share based on 89.3 million shares of common stock outstanding at quarter end. The $550 million equals total stockholder’s equity of $599 million less the Series A Preferred Stock whose liquidating value is $46.9 million, and less the difference between the Series B Preferred Stock liquidating value of $30.1 million and the proceeds from its sale of $28.1 million.

This book value per share of $6.16 does not include the payment of a common stock dividend of $0.25 per share, which was declared after the end of the quarter specifically on October 16, 2008. The book value per share was $6.16 also includes an adjustment of $0.88 per share minus, which reflects the company’s net unrealized loss at quarter end on its mortgage assets and at maturity and when added back to common stockholder’s equity result in a book value of $7.04 per share.

Just a conformation about the portfolio and its financing, the repurchase agreement balance of $4.73 billion, which we used to finance our mortgage assets, was approximately seven times stockholder equity. Agency and non-agency assets to quarter end were comprised of four categories.

A one-year agency adjustable rate mortgage-backed securities means that the coupon will contractually reset within the next 12 months, that represents 16% of the portfolio. A hybrid agency adjustable-rate mortgage-backed securities, whose coupon will reset between one year and five years was 65% of the portfolio. Fixed rate agency mortgage-backed securities represented 19% of the portfolio, and floating-rate mortgage-backed securities issued by agencies and non-agency mortgage-backed securities is less than 1% of the portfolio.

The average coupon on our agency MBS and non-agency MBS was 5.57% at quarter end, and more specifically the coupon rates on Anworth’s agency MBS and non-agency MBS at quarter end were as follows.

The one-year agency adjustable-rate mortgage-backed security category is 5.44%. The hybrid category agency was 5.56%. The agency CMO floater category, which you recall is less than 1% is 3.3%, fixed-rate agency mortgage-backed securities, 5.8% and the non-agency floating-rate mortgage-backed securities, which I referred to earlier relative to the $11 million is 3.45%.

The weighted average term to reset of Anworth’s agency MBS and non-agency adjustable rate mortgage-backed securities was 34 months at quarter end. The outstanding repurchase agreement balance which financed our agency MBS portfolio at quarter end was $4.73 billion.

The average term of our agency MBS related repurchase agreements were 35 days and the average interest rate on other repurchase agreements was 2.93%. After adjusting for interest rate swap transactions, the average interest rate was 3.78% and the average term to interest rate reset was 467 days.

The prepayment of principal on Anworth’s agency MBS and non-agency MBS portfolios during the fourth quarter was as follows as measured in CPR, the one-year agency adjustable-rate mortgage-backed security, 23% CPR. Agency hybrid adjustable-rate maturing between two and five years was 12 CPR. Fixed-rate agency was 11% and the other category less than 1%, was 7% CPR. The CPR of Anworth’s agency and non-agency portfolio together during the quarter was 14 CPR percent.

The average cost of Anworth’s agency MBS was 101.22%, which is the same as it was during the previous quarter. Anworth’s non-agency MBS were acquired at par value. Our stock price closed this afternoon at $5.72 and I’d like to introduce the people here with me as we look forward to answering your questions.

With me today is Joe McAdams, our Chief Investment Officer and Director of the Company; Thad Brown, our Chief Financial Officer; and Charles Siegel, our Senior Vice President of Finance.

What I’d like to do now is turn the call back over to Antoine our conference operator, to begin our question-and-answer session. Thank you very much.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Steve Delaney - JMP Securities.

Steve Delaney - JMP Securities

On the surface of the balance sheet, it looks like there are 5 million more shares outstanding and I was wondering if you could confirm that, are you continuing to use your continuous equity-offering program?

Lloyd McAdams

That is correct.

Steve Delaney - JMP Securities

Could you share with us specifically how many shares and the average price that you were able to sell those at?

Lloyd McAdams

I might be able to share it with you in a few minutes. Any series we sell through the agency sales agreement, we sell at prices above the book value at the time of the event. We do have investors who reinvest their dividends in our direct dividend reinvestment program, DRP plan and they reinvest on the dividend date. So if the stock is below book value they tend to get the below book value, but for the agency sales agreement program, we routinely sell the stock above book value on the day that we sell it.

Steve Delaney - JMP Securities

That answers my follow-up question and that was going to be, do you plan to continue to use that as long as the stock is trading at a reasonable price relative to book? Thank you. I think you answered that for me.

Lloyd McAdams

If it’s sufficiently above book value, the answer would be yes, only if we believe that we have attractive investment opportunities to produce an attractive return for investors.

Steve Delaney - JMP Securities

I think you’ve got that with today’s spreads. Then on the second side of that, the buyback, I know we’ve had some ugly days in the last 30 to 45 days in the market. There certainly were days where your stock and your peers were trading well below what we thought the book value was.

Just as you would look to sell shares when it’s favorable to book, would be reasonable for us to assume that your buy-back plan is there really for defensive purposes and that you likely wouldn’t use capital for that purpose unless the stock was trading at a material discount to book?

Lloyd McAdams

That is correct. The buy-back authorization came recently and the only practical measure that we have to address is sometimes when the stock is significantly well below book value, it’s therefore reasoned that it really isn’t wanted and then other times it’s below book value because there’s massive uncertainty in the market.

We certainly aren’t into spending our hard-earned, well-kept cash to buy something back when we think there is a major problem facing the market. At the same time, if we feel that the stock is undervalued and the risks in the market are not that great, we as you know in the past, quite a few years ago during a similar environment to this one, we bought back more than 5% of the company.

Steve Delaney - JMP Securities

It’s hard to believe, Lloyd that was only two years ago.

Lloyd McAdams

That was sometimes, yes and it added about $0.15 a share to the book value of the company.


Your next question comes from Stephen Laws - Deutsche Bank.

Stephen Laws - Deutsche Bank

I wanted to touch base. Obviously, the leverage has continued to drift a little lower. Are we going to see that continue, or are you guys retaining your prepayment proceeds as they come in, even with where spreads are, and then I guess kind of coupled with that, can you talk for a few minutes on the availability of repo financing?

I guess it is available for your asset class of agency securities, but the cost of that financing. How we’ve seen that move since quarter end? Has it come down and what you expect to happen here at year-end and we also tend to see one-month LIBOR rates spike.

Joe McAdams

I will try to hit on those points for you. The first question about our leverage, we did retain our pay down during the third quarter to carry a higher cash balance then we’d normally carry during that period and also to reduce slightly our overall repo balance.

During the month of October, the short-term rates went higher than they were at September 30. The liquidity problems that really started at/or around the Lehman bankruptcy time but continued to get worse during the month of October, and they have started to abate over the past several weeks. So during the month of October retain our principal payments as well.

Our hope has been to begin to move our leverage up from this seven times area. It has drifted down somewhat. I think it was in the mid to high sevens at June 30, and it was in the low sevens at September 30. So there’s not as much principal coming back into the portfolio because of the decline in CPRs, down to 14% on average during the third quarter, but that has been what has taken place during the third quarter as well as the month of October and I think it’s related to your second question, which is the availability of repo-finance as well as the rates that they are available with.

We continue to borrow money from between 12 to 13, 14 counterparties. The only counterparty that we had been dealing with prior to the third quarter that we are no longer having any exposure to is Lehman Brothers. We had a very small balance about $25 million was all we had on the Lehman.

So there’s no real change in the roster of counterparties we’re currently dealing with. We are working to expand that list of counterparties moving forward, but not all of the counterparties we have been dealing with over the history of our firm have been as active in the repo market over the past month and a half or so and what we have seen is a much wider range of rates between counterparties than we really have ever seen at any time in the past.

So on one hand, I believe we’re seeing very competitive rates from the majority of our counterparties and those are the counterparties that we are doing the most business with and other counterparties have gone through some periods of time in September and October where their rates have been significantly higher and those have been counterparties we’ve been reducing our exposure to and I think that situation still persists, although rates in general have been coming down.

One-month LIBOR averaged about 260 during the third quarter, even though it was almost 4% at September 30, and reached a high of over 4.5% during the first few weeks of October. One-month LIBOR is down to 1.75 now.

We have not seen repo rates decline quite that significantly over the period of time, but repo rates in general have moved back down into the repo two handle, although there are still some outliers who are only willing to do repo at higher rates.

So I think we will see our overall repo expense come down from where it was in October, although I think October will be higher than it was in the third quarter. We talked about how our average repo borrowing, not the total cost of funds as described in the press release, but the average repo borrowing during the third quarter was 264. Our cost of funds was higher because we have almost 60% of our repo balance hedged with swaps.

That rate went up 50 basis points to about 310 on average during the month of October. Hedges, you would expect to offset about half of that change, but that’s been about the magnitude of our average cost of funds change. The actual repo is up about 50 basis points, now they should be coming down and again because of our fairly significant swap position, about 60% of the overall balance.

We didn’t see our overall cost of funds, but it rose by a magnitude of a little less than half of that 50-basis-point increase during October.


Your next question comes from Jim Ackor - Sterne Agee.

Jim Ackor - Sterne Agee

A couple of questions. First of all, I guess with the swap balance relative to your overall repo exposure, given sort of the declining LIBOR curve and expectations being pushed way out for any kind of secular environment where rates would be rising, does it make any sense or do you think about maybe reducing your swap exposure relative to your repos?

Lloyd McAdams

I think we are comfortable with our repos where they are. In the current environment we are seeing lower forward rates. I think that we will see some curves steepening as we go forward and there is a very significant rate difference between where a three-year or a five-year swap is priced versus where short-term rates are.

I do think it is a valuable asset to the company to have a significant hedge on, that can offset changes in fair value of the portfolio and in the near term while mortgage spreads are wide and home prices are down significantly. We’re seeing this significant drop-off in prepayment rates, while our overall tenor of our liabilities is, as we discussed in the press release about 15 months.

The duration of our portfolio has been extending some based on these slower prepayments, so our average duration of our portfolio is a little over two years at this point, based on these slow levels of prepayment.

I do believe that has the situation works itself out over whatever timetable that’s going to be, we will see a resumption of a little higher level of prepayments and sensitivity to interest rates, but we are sort of near the wide end of our historical asset liability mismatch at about a year.

So I think from that position, I’m comfortable being at the wide end of our asset liability mismatch given our outlook for interest rates, but I think in terms of having a disciplined risk management process, I don’t think it’s our intention to push that gap out significantly wider, than where it is now.

Jim Ackor - Sterne Agee

With regard to some of the trends that are going on in the mortgage market right now, because I’m getting some really crazy questions, but have you guys done any analysis as to what if any impact renegotiation of terms on underlying mortgages might have on cash flows, both principal and interest from your securities or agency securities?

My understanding is that the holder of the securities in the instance of Fannie Mae does not have any exposure to any renegotiation of terms, but it may be a little less clear with regard to Freddie Mac. I don’t know if you guys have thought about that or talked about that or have any comments?

Lloyd McAdams

I don’t have any concrete comments because a lot of the impact is really going to come through the details of how these loan modifications work. The easiest loan modifications that will be made will be made by banks relative to loans that they continue to hold on their balance sheet. They will be free to negotiate with the borrowers to do whatever they feel they need to do to minimize their risk of loss.

Once the loan is then securitized, it is more difficult to renegotiate the term of the loan without in effect prepaying that loan by buying it out of the pool and given the lack of capital willing to be deployed into the mortgage market that seems to be by large sort of a nonstarter for that sort of a loan modification.

Given the significant portion of mortgages that are either in a Fannie Mae or Freddie Mac securitization or a non-agency securitization, I think there’s a lot of work going on to figure out ways to effect some sort of loan modification without requiring that loan to be funded by an entirely new mortgage or a new source of capital that goes to pay off the existing securitization.

So that is the challenge with the loan modification and most of the programs that seem to be moving forward now involve a class of loans that are held by a bank on their balance sheet where they funded it with their own liabilities or deposits, as opposed to loans that have been sold into either an agency or non-agency securitization.

Jim Ackor - Sterne Agee

So is that your understanding then, with Fannie and Freddie securities that if a loan is going to be renegotiated, it has to be bought out of the pool, is that --?

Lloyd McAdams

No. The easiest way for that to take place, if you have a loan that becomes significantly delinquent and the servicer believes that both Fannie as the guarantor or the servicer has the ability to buy that loan out, as opposed to waiting for it to be foreclosed upon. I think the problem is that unless you’re refinancing that loan into another one with new terms, no one is really putting up the capital to pay off the original accrual, but again, I think a fluid process and I think the way it’s going to work out will probably involve a good deal of negotiation.

Jim Ackor - Sterne Agee

I’ve just got one more quick question, if you guys wouldn’t mind making a comment or two on any efforts that are being made to diversify sources of financing on borrowings away from what I would describe I guess as an exclusive reliance sort of on the primary dealer community which is the case for virtually all the agency REITs, but have you guys made any progress with regard to looking at other sources of financing, whether it be direct or through some of the smaller-tier brokerage firms?

Joe McAdams

We’re making progress in those areas. We have not entered into any new repurchase agreement borrowings with counterparties that we have not dealt with in the past to date.

One of the issues is that both from our perspective as a cash borrower and a securities lender, as well as the kind of folks that you mentioned who are looking to lend cash against the securities is that by and large the large broker-dealers have acted as not just a clearinghouse putting two trading participants together, but have also acted as a creditworthy counterparty that both sides by and large feel comfortable with and I think that many of the small cash lenders have historically dealt with large counterparties because of their size and being well-known and sort of either implied AAA or implied investment-grade ratings that those counterparties held and/or if it’s not a rated entity.

There’s going to be more work involved from both our side, as well as the other counterparty’s side in getting comfortable with the credit exposure there and I think if the current situation persists where there is potentially two percentage point spread between where repo borrowers are borrowing and cash lenders are lending into this market, everyone is going to be more than willing to spend the time and effort to work around that problem. Whether that happens, that spread of 2% is going to come down.

Whether it happens by the market settling down or whether it happens through the large broker dealers being disintermediated. I think it is unknown at this time, I guess it all depends on how long the problems with the big banks persists. But we’re working under the assumption that we’re continuing to develop additional sources of repo funding, but funding away from our traditional large bank and broker-dealer counterparties.

If it turns out that before significant progress is made there, things settle down in the repo market and we are able to borrow at more reasonable rates from larger a number of those counterparties, then that will be great too.


Your next question comes form Bose George - KBW.

Bose George - KBW

Good afternoon, this is Bose George. I had a couple of follow-up questions. First on the repo, have you guys been able to roll repo over year-end at reasonable terms?

Joe McAdams

Starting in September, we have been pushing to keep as much of our repo balance rolling 90 days at a time through 2008 as possible and for several quarters of this year, almost every repo we rolled was for a 90-day term.

In early September, the counterparties that were doing three-month trade basically all stopped and we have seen very little activity during the latter part of the third quarter and into the first part of October at anything other than 30 days. We haven’t been doing any overnight repo of any large amounts. We continue to try to roll repo 30 days at a time.

Since the end of the quarter, we have seen a few counterparties come back in looking to do 90-day trades at what we think are rates that seem reasonable and consistent with other sources of funding, but so far that percentage has been very small to date that we have put in to 2009, but the trend seems to be that additional counterparties are willing to do 90-day trades now.

A lot of our decision is one looking at a significant amount of spread between three-month LIBOR and one-month LIBOR, and also that we have been funding one-month repo trades back at spreads that are below one-month LIBOR, where many of the three-month repo trades that we’re offered are still at or above three-month LIBOR.

So we’re still seeing a pretty significant rate difference between the two, which I guess is the bad news for now. The good news is that we have an increase in number of counterparties who are willing to entertain the idea of a 90-day repo trade.

Bose George - KBW

Thanks for the detail. Just in terms of your spread, given the higher cost of funds in October. Do you think your spread in 4Q could be lower than the third quarter before it picks up again next year?

Joe McAdams

A lot of is going to have to do with where repo rates go for the next seven weeks. We had a spread of close to 170 basis points in the third quarter. The mortgage spreads in general have widened. Asset yields that are available in the market are not significantly different than the yield in our portfolio, in sort of a 5.25% area. So there’s not going to be a big move on the asset side of our balance sheet during the fourth quarter.

As I mentioned, we saw during October our rates on our repos go up by about 50 basis points on average, which would mean that probably about 20 to 25 basis points of that increase would be passed through to our cost of funds, net of our hedging. That will obviously impact our spread for October.

Now in November we are seeing repos roll back down into the lower levels. Some of those trades are not going to come off till halfway through November or the third week of November. My sense is we will be at a point where the spread -- and then we move into December where there may be some uncertainty as to where cost of funding goes over the end of the year.

So if I had to make a guess as to what is going to happen to LIBOR and the repo rates between now and the end of the year, I think that we will be back to a point by the end of this quarter where spreads will probably be at or wider than they were in the third quarter, but whether that’s wide enough to pull up our average spread, I really don’t know.

I think it will probably be similar, if not maybe 5, 10 basis points tighter than it was during the fourth quarter. Again, that would be a guess based on what happens to repo rates for the balance of the year, which is pretty uncertain.

Bose George - KBW

Finally just a question just out of curiosity, that $11.4 million carrying value of the non-agency stuff, does that equate to about $0.25 now on AAA non-agency MBS?

Joe McAdams

That’s correct. The securities in our non-agency portfolio, the fair value as of September 30 was about $0.25 on the dollar. The securities were still rated AAA at September 30, but I think all the details on this are going to be in the 10-Q, but subsequent to September 30, in the month of October, one of the two rating agencies, I believe Standard & Poor’s have downgraded the various securities that we held from AAA to either, B in one case and BB in the other.

So the ratings of these certain securities are certainly in flux right now. We have securities that are rated AAA by one agency and B on the other. So that’s what happened to subsequent to September 30 in terms of rating.

I think everything that was considered by the ratings agencies in October was in the market in terms of the valuation as of September 30.

Lloyd McAdams

Also I mentioned, in the 10-Q which we will be publishing in the next day or so, we included a lot of statistical information about delinquencies 30, 60, 90 REO, losses to-date, subordination all of that information about that, but is its now $11 million non-agency portfolio. So it’s all in the 10-Q.


Your next question comes from Craig Schwartz - JPMorgan Chase.

Craig Schwartz - JPMorgan Chase

I’ve got a question on share repurchase. Your preferred A stock that’s currently yielding 11.5% and trades for $0.75 on the dollar. It would seem to be common sense to re buy some of the preferred stock and increase your book value per share and cash flow per share.

Lloyd McAdams

We do, do the calculation. We try to figure out when is it appropriate to repurchase preferred stock. We have two different classes of preferred stock, and they both have different ways of doing the analysis. One is just a straight yield, as he mentioned and the other has a conversion feature with a substantially lesser yield.

The spread we earn on that money is the ROE to the common stockholders is very wide because of what amounts to. The low financing costs on that equity we earn substantially more than that financing cost and so the return on each of those dollars to common stockholders is the highest of any dollars we have in the company.

So that is how we look at it and we will make the decision, if we are to buy any back we will purchase the shares of preferred stock back also. I don’t think I put it in the press release, but we are allowed to purchase preferred stock back, if we chose to.


(Operator Instructions) Your final question is a follow up question from Steve Delaney -JMP Securities.

Steve Delaney - JMP Securities

Just the one quick follow-up, I missed this earlier. Looking over the P&L, I’m seeing the $900,000 loss item on derivatives and I know your notional swaps stayed the same, so you didn’t terminate anything. I was just wondering whether this is some kind of hedge, ineffectiveness charge or whether it maybe a swap collateral thing with Lehman or something like that.

Joe McAdams

This is Joe, Steve. It is related to some hedge inefficiency and I’ll get into as much detail if you like.

Steve Delaney - JMP Securities

No, no. That’s that FAS 133.

Joe McAdams

As we mentioned on an earlier question, we have been rolling a significant number of repos in September and into early October for 30 days at a time, whereas a number of the swaps that are related to some of those borrowings have their rate reset quarterly. So we have some basis risk between one-month and three-month LIBOR. What happened when LIBOR spiked up on September 30, was that it became our expectation that we were going to have higher LIBOR rates when those one month trades rolled over without getting a compensating increase from the swap, which was going to have its rate set for three months.

So at the time of September 30, it appears that we might have $900,000 of more interest expense from LIBOR rising at the end of September than we would have had had we been perfectly hedged and that’s where that number comes from. It is the part of the fair value of those derivatives flowed through income as a derivative loss instead of going into OCI.

What happened subsequent to that is LIBOR has come back down. So as of today we actually expect that we’re probably going to have a little lower interest expense as a result of these one-month trades rolling over versus the three month.

So there is some volatility associated with having this basis risk, but the fact that it got to be as big a number as it was $900,000, is really a function of the big run-up in LIBOR we had right around quarter end.

Steve Delaney - JMP Securities

So what you’re saying is it’s really with respect to book value that the market to market was either going to be in AOCI or whether it was going to be in the P&L. So it really is a non-issue as far as your book, it’s just how you adjust your book.

Joe McAdams

I guess the latter point I would add is, given what LIBOR has done since, the reality is we will probably have, not only will that $900,000 be reversed by having $900,000 more in net income, because we took that in the third-quarter P&L, but also that that basis risk has sort of swung around in our favor.


There are no further questions at this time. I will now turn the call back over to Mr. McAdams.

Lloyd McAdams

Well, we thank you very much for your attendance at today’s conference call. More specifically we appreciate your interest in Anworth. We look forward to visiting with you again during our next conference call, which should take place about the same time next quarter.


Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the Presentation. You may now disconnect. Good day.

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