Anworth Mortgage Asset Corporation Reports Loss of $(0.07) Per Share for Third Quarter of 2006

SANTA MONICA, Calif., Nov. 6 /PRNewswire-FirstCall/ -- For the quarter ended September 30, 2006 and based on a weighted average of 45.4 million fully diluted shares outstanding, Anworth Mortgage Asset Corporation announced today an unaudited net loss to common stockholders of $3.4 million, or $(0.07) per share.

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Agency mortgage-backed securities (or Agency MBS) held at September 30, 2006 were approximately $4.65 billion and were allocated as follows: 29% agency ARMs, 54% agency hybrid ARMs, 17% agency fixed-rate MBS and less than 1% agency floating-rate CMOs.

At September 30, 2006, the current yield on Anworth's Agency MBS was 5.41% based on a weighted average coupon of 5.50% divided by the average amortized cost of 101.6%. The quarter-end unamortized premium was $73 million, or 1.6% of the par value. During the quarter, the expense of amortizing the agency securities premium (based on prepayments and scheduled payments) was $6.8 million, compared to $7.6 million during the second quarter of 2006. During the quarter ended September 30, 2006, the constant prepayment rate (CPR) of the Agency MBS was 26.1% and the CPR of the adjustable-rate and hybrid adjustable-rate Agency MBS was 28.6%. For the agency ARM and hybrid assets, the weighted average term to the next interest rate reset date was 27 months.

At September 30, 2006, the CPR of the residential real estate loans held by Belvedere Trust Mortgage Corporation (or Belvedere Trust), Anworth's wholly-owned subsidiary, was 32% and the CPR of Belvedere Trust's other mortgage-backed securities, or Other MBS, was 14%. The weighted gross coupon on Belvedere Trust's residential real estate loans was 6.06% and 6.18% on its Other MBS. The average cost of Belvedere Trust's residential real estate loans was 101.64% and the average cost of its Other MBS was 88.43%. The weighted average net coupon on Belvedere Trust's mortgage-related assets was 5.74% and the average cost of Belvedere Trust's mortgage-related assets was 101.5%.

Relative to Anworth's Agency MBS portfolio at quarter end, the outstanding repurchase agreement balance was $4.23 billion with an average interest rate of 5.29% and an average maturity of 118 days. After adjusting for collateralized interest rate swap transactions, the average interest rate was 5.13% with an average maturity of 284 days. During the quarter ended September 30, 2006 and relative to average agency earnings assets, interest income earned was 5.37%, amortization of premium was 0.59% and the average cost of funds was 5.08%, resulting in an interest rate spread of (0.30)%.

During the quarter ended September 30, 2006, Anworth's average equity investment in Belvedere Trust was $100 million. At quarter end, Belvedere Trust did not have any residential mortgage loans held for securitization and securitized mortgage loans were $1.83 billion. Belvedere Trust lost $1.3 million during the quarter ended September 30, 2006. At September 30, 2006, the average FICO score of Belvedere Trust's loan portfolio was 727 and the average LTV was 72%.

Total stockholders' equity at September 30, 2006 was $489.7 million, consisting of preferred stockholders' equity of approximately $46.9 million and common stockholders' equity of approximately $442.8 million. The common stockholders' equity resulted in a book value per share of $9.75 based on 45.4 million shares of common stock outstanding at September 30, 2006.

Average common stockholders' equity for the quarter ended September 30, 2006 was $428.2 million.

Commenting on Anworth's operations, Lloyd McAdams, Anworth's Chairman, President and Chief Executive Officer, stated, "Since short-term interest rates did not increase during the third quarter, our average Agency portfolio financing cost has increased to a level which should soon approximate the rate level of our recent new financings. This is likely to produce a more stable overall level of financing cost over the next year. When combined with the expected continued increases in asset yields during this period as our adjustable-rate MBS reset to higher interest rates, this should result in widening net interest spreads on Anworth's Agency MBS portfolio."

About Anworth Mortgage Asset Corporation

Anworth is a mortgage real estate investment trust (REIT) which invests in mortgage assets, including mortgage pass-through certificates, collateralized mortgage obligations, mortgage loans and other real estate securities. Anworth generates income for distribution to shareholders primarily based on the difference between the yield on its mortgage assets and the cost of its borrowings. Through its wholly-owned subsidiary, Belvedere Trust Mortgage Corporation, Anworth also invests in high quality jumbo adjustable-rate mortgages and finances these loans though securitizations.

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

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. 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 increases in the prepayment rates on the mortgage loans securing our mortgage-backed securities, our ability to use borrowings to finance our assets, increases in default rates of the mortgage loans acquired by our mortgage loan subsidiaries, risks 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 for federal income tax purposes, and management's ability to manage our growth. Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings discuss some of the important 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.

Contact: Anworth Mortgage Asset Corporation John T. Hillman (310) 255-4438 or (310) 255-4493 ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) September 30, December 31, 2006 2005 ------------- ------------ (unaudited) ASSETS Agency MBS: Agency MBS pledged to counterparties at fair value $4,475,624 $4,302,139 Agency MBS at fair value 177,323 222,544 ------------- ------------ 4,652,947 4,524,683 Other MBS: Other MBS pledged to counterparties at fair value 133,298 91,153 Other MBS at fair value 14,128 4,776 ------------- ------------ 147,426 95,929 Residential real estate loans 1,832,275 2,497,881 Allowance for loan losses (1,557) (1,655) Cash and cash equivalents 2,526 8,248 Restricted cash -- 1,250 Interest and dividends receivable 34,819 32,740 Derivative instruments at fair value 11,163 12,948 Prepaid expenses and other 10,640 12,225 ------------- ------------ $6,690,239 $7,184,249 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accrued interest payable $39,932 $43,084 Repurchase agreements (Anworth) 4,231,544 4,099,410 Repurchase agreements (Belvedere Trust) 320,798 429,919 Whole loan financing facilities -- 493 MBS issued 1,561,643 2,069,634 Junior subordinated notes 37,380 37,380 Derivative instruments at fair value 7,458 -- Dividends payable on preferred stock 1,011 1,011 Dividends payable on common stock -- 908 Accrued expenses and other 669 19,167 ------------- ------------ $6,200,435 $6,701,006 ------------- ------------ Minority interest $87 $144 Stockholders' equity: Series A Cumulative Preferred Stock: par value $0.01 per share; liquidation preference $25.00 per share; authorized 20,000 shares, 1,876 and 1,876 shares issued and outstanding, respectively $45,397 $45,397 Common Stock: par value $0.01 per share; authorized 100,000 shares, 45,397 and 45,397 issued and outstanding, respectively 454 454 Additional paid-in capital 527,031 527,020 Accumulated other comprehensive loss consisting of unrealized losses and gains (52,495) (75,620) Accumulated deficit (28,892) (12,125) Unearned restricted stock (1,778) (2,027) ------------- ------------ $489,717 $483,099 ------------- ------------ $6,690,239 $7,184,249 ============= ============ ANWORTH MORTGAGE ASSET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands, except for per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 -------- -------- -------- --------- Interest income net of amortization of premium and discount: Interest on Agency MBS $55,295 $38,797 $148,219 $117,455 Interest on Other MBS 1,276 1,216 7,124 2,593 Interest on residential real estate loans 22,611 31,193 73,202 89,681 -------- -------- -------- --------- 79,182 71,206 228,545 209,729 -------- -------- -------- --------- Interest expense: Interest expense on repurchase agreements (Anworth) 54,119 33,869 142,561 91,080 Interest expense on repurchase agreements (Belvedere Trust) 4,105 4,449 12,825 12,803 Interest expense on whole loan financing facilities -- 563 3 3,457 Interest expense on MBS issued 21,645 25,182 68,833 65,705 Interest expense on junior subordinated notes 788 630 2,220 1,309 -------- -------- -------- --------- 80,657 64,693 226,442 174,354 -------- -------- -------- --------- Net interest income (loss) (1,475) 6,513 2,103 35,375 -------- -------- -------- --------- Loss on sale of Agency MBS -- -- (10,207) -- Gain on sale of Other MBS 1,466 -- 2,627 -- Loss on sale of loans -- -- (5) -- Expenses: Compensation and benefits (808) (866) (2,469) (2,638) Incentive compensation -- 143 -- (708) Provision for loan losses (497) (288) (736) (858) Other expenses (1,082) (955) (3,289) (3,046) -------- -------- -------- --------- Total expenses (2,387) (1,966) (6,494) (7,250) -------- -------- -------- --------- (Loss) income from operations before minority interest (2,396) 4,547 (11,976) 28,125 -------- -------- -------- --------- Minority interest in net loss (income) of a subsidiary 3 (35) 57 (276) -------- -------- -------- --------- Net (loss) income $(2,393) $4,512 $(11,919) $27,849 -------- -------- -------- --------- Dividend on Series A Cumulative Preferred Stock $(1,011) $(1,011) $(3,033) $(2,890) -------- -------- -------- --------- Net (loss) income available to common stockholders $(3,404) $3,501 $(14,952) $24,959 -------- -------- -------- --------- Basic (loss) earnings per common share $(0.07) $0.07 $(0.33) $0.53 -------- -------- -------- --------- Weighted average number of shares outstanding 45,392 47,867 45,384 47,451 -------- -------- -------- --------- Diluted (loss) earnings per common share $(0.07) $0.07 $(0.33) $0.53 -------- -------- -------- --------- Weighted average number of diluted shares outstanding 45,392 47,891 45,384 47,481 -------- -------- -------- ---------