Anworth Mortgage (ANH) reported below expected third quarter
performance on October 25, 2012. Analysts were expecting a consensus mean
earnings per share of $0.17, whereas the company reported an EPS figure of
$0.15 per share, about 12% below expectations.
The company generated $47 million in interest income during
the third quarter of the current year, which was 14% below the interest income
that it generated during the third quarter of the previous year. Despite a 5.6%
year over year increase in the interest yielding assets, the interest income
declined. Much of the decline in interest income was attributed to the decline
in asset yields, from 3.15% in the linked quarter to 3.04% at the end of the
third quarter. This represents a direct impact of the implementation of the
third round of easing conducted by the Fed, where the Fed is buying agency
bonds that are fixed rate in nature. Around 21% of Anworth's entire portfolio
is invested in such fixed rate mortgage backed securities that the Fed is
buying. As a result of Fed bond buying, the prices of these bonds have
increased, resulting in a decrease in the yields.
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