Joseph Lloyd McAdams - Chairman, CEO, and President Joseph E. McAdams - CIO and EVP Brett Roth - SVP and Portfolio Manager.

Daniel Altscher - FBR Capital Markets Michael Widner - KBW Howard Henick - Scurlydog Capital.

our business and investment strategy; market trend and risks; assumptions regarding interest rates; and assumptions regarding prepayment rates on the mortgage loans securing our mortgage-backed securities.

These forward-looking statements are subject to various risks and uncertainties, including those relating to changes in interest rates, changes in the market value of our mortgage-backed securities, changes in the yield curve, the availability of mortgage-backed securities for purchase, increases in prepayment rates on mortgage loans securing our mortgage-backed securities, our ability to use borrowing to finance our assets, and if available, the terms of any financing, 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, implementation of or changes in government regulations or programs affecting our business, our ability to maintain our qualification as a real estate investment trust under our Internal Revenue Code, our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, and management's ability to manage our growth.

These and 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.

All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us.

Except as required by law, we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Except as required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement that may be made today or that reflect any change in our expectations or any change 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 and Chief Executive Officer of Anworth. Please go ahead, sir..

Thank you very much, I am Lloyd McAdams. With me today is Joe McAdams, Chief Investment Officer and Director of Company; Chuck Siegel, Senior Vice President of Finance; and Brett Roth, Senior Vice President and Portfolio Manager.

Before our comments about our current portfolio and our outlook, I will briefly summarize three broad subjects about our future.

Number one, the change in our measurement of core earnings which is a non-GAAP measure; number two, our efforts to provide investor income over the long-term that is both above average and relatively stable; and number three, our share repurchases. So, for the first item, change in measurement of core earnings.

In our press release, we presented this recent change in our non-GAAP measure of core earnings. I believe it is now more consistent with definitions used by many of the mortgage REITs and should make comparative analysis easier and more relevant for our shareholders.

As you probably noted, these changes relate mostly to dollar roll income and hedge accounting for swaps and derivatives. The second item, our efforts to provide investor income over the long-term is more stable and above average.

When investing in stocks or bonds, it's my belief that the Holy Grail of income investing for most people has been find investments whose income is both high and stable. That would indeed be the Holy Grail.

And even though mortgage REITs have provided high dividends over their lives, when interest rates were mostly declining, I do understand the anxiety that a mortgage REIT shareholder seeking income could have been wondering how stable his or her currently high mortgage REIT dividend will be over an extended period of time like the next five or so years if interest rates rise rather than decline.

For this reason, providing above average stability of income and above average income level over the longer term, as described, is an important goal for us.

And I believe that our current portfolio is a good start to do this over the longer term period like the next five years or so because, number one, as you noted in the press release, 23% of our assets are fully indexed ARMs whose coupon reset each year at about 1.75% above the financing rate, which I assume most would agree is a nice source of relatively stable income.

Number two, 52%, as you noted, of our assets are hybrid ARMS that will become fully indexed ARMs on average in about three years, during which time, we have put on hedges to provide more stable financing costs while we wait.

The third item is 25% of our current portfolio is invested in 15-year fixed rate MBS and TBAs associated with those same securities. While not as stable as our ARM income, the attractions of the 15-year are its historic faster return on principal and higher income than ARMs.

And the fourth component of our portfolio, which is of course new, is our initiative to invest in higher yielding residential mortgage credit investments that do not require as much interest rate exposure to provide above average income.

Our residential mortgage credit investments we will describe primarily as being non-agency mortgage-backed securities, mortgage loans primarily held for securitization. Two additional items about our mortgage credit strategy I would like to emphasize.

Number one, we believe that Anworth's investments in mortgage credit will provide attractive income to our shareholders and significant additional opportunities as private investments in the residential mortgage market continue to expand in the coming years.

As such we intend to expand our investments in mortgage credit in quarters to come and we expect that Anworth's portfolio will be more like that of a hybrid REIT as opposed to our current strategy as an agency-only REIT.

Number two, for more information about our plans for investment in mortgage credit; on October 1st, Reuters published an article about our plans for mortgage credit based on its interview with a new member of our portfolio management team, Mr. Brett Roth. This article was in response to our press release which was filed as an 8-K on September 24th.

I believe the title of that press release is, Anworth Announces New Hire and Expansion into Residential Mortgage Credit Investments. This Reuters document can be read obviously on Reuters, I think -- I believe it is on Bloomberg and I know it is on anworth.com. My third item to discuss is our share repurchases.

As noted earlier, anxiety about mortgage REIT income if interest rates rise over the long-term is something I can clearly understand, particularly as this relates to fixed rate mortgage-backed security portfolios. However, I do not believe that ARMs with hedges want this same level of income anxiety.

Nor do I think that our primarily ARM with hedges portfolio wants its valuation given by the price of our common stock. Notwithstanding my belief, in our press release yesterday, we provided information about how this stock price benefited us tangibly by $0.07 a share from our share repurchases during the quarter.

So nonetheless and in summary, until our shareholders agree with me more about the risk of owning our stock, I expect that accretive share repurchases benefiting the remaining the shareholders will certain continue into the future. With this I would like to turn the call over to Joe McAdams who will discuss our current portfolio and outlook..

Thanks. This was another good quarter for Anworth portfolio. Our GAAP net income was $0.15 per share and our core earnings was -- were $0.13 per share.

As Lloyd indicated, given our increased investment in TBA securities and the election to discontinued hedge accounting for our interest rate swaps, we believe that the company's core earnings as presented would be more reflective of the portfolio's earnings power, both during the quarter, and looking forward.

There is a complete and detailed reconciliation of GAAP net income to core earnings presented in the back of our earnings release, but generally speaking we arrive at core earnings by removing the effect of realized and unrealized gains and losses related to our mortgage backed securities, TBAs, interest rate swaps and futures position from GAAP income as well as the non-cash expense recognized from the amortization of the cumulative other comprehensive income relative to our discontinued swap hedges.

Then in addition we add back in the TBA role income that earned during the quarter and the actual net payments on our current interest rate swaps that are now being accounted for as derivatives going forward.

The company's currently $0.14 dividend was maintained and the book value per share increased net of that dividend just $6.34, resulting in a return on equity to common shareholders of 3.5% for the quarter or 14.8% annualized and that brings the year-to-date return on equity to 13.3% which annualizes to more than 18%.

While the majority of the increase in book value for share was due to accretive share repurchases during the quarter.

I would like to highlight that during a quarter when the five-year treasury yield increased 15 basis points and the five-year swap rate increased by more than 20 basis points, the value of our mortgage backed securities declined by less than the value of our hedges increased.

This provided and additional increase to book value and demonstrated the stability provided by both our predominantly adjustable rate assets as well as our significant interest rate hedges. Turning to the data disclosed in the release, regarding the composition of our asset portfolio.

On the quarter our assets decreased as a result of our smaller equity base due to share repurchase activity during the quarter. You can see that our investment in 15-year fixed TBAs securities increased during the quarter form 3% to 8% of the portfolio.

As was the case in the second quarter, this investment resulted from the sale of specified 15-year MBS pools. We believe would not perform as well at TDAs going forward, especially when you take into account the implied financing advantage of TDAs versus repos.

So it's important to recognize that while a loss of $5.6 million was realized during the quarter from 15-year six MBS sales, the portfolio retained the economic exposure to those assets via the TBA positions and will still benefit if the prices of these assets were to subsequently increase.

Although, now any changes in the fair value and those positions would be reflected in derivative income from TBAs as opposed to accumulated other comprehensive income as with our MBS holders. Overall, the portfolio allocation to fixed rate MBS increased slightly from 23% to 25%.

Apart from the shifts within the fixed rate portion of the portfolio, as Lloyd pointed out the percentage of adjustable rate MBS's interest rate adjust within 12 months and will continue to do so going forward, increased 23%.

Additionally, there is 13% of the portfolio in hybrid ARMs with between one and two years until their initial interest rate reset.

Now, we've added positions in Eurodollar futures during the quarter to further protect our current and near-term resetting ARMs from the effect of an increase in short term rates on our borrowing costs and when you additionally factor in that the total expected principal repayments we will get on the balance of our portfolio, you will see that approximately half of our portfolio will have limited exposure to increases in short term interest rates.

Well, looking to the balance of our longer term reset to ARMs and 15-year fixed rate MBS, our significant interest rate swap position whose balance is equivalent to 58% of our repo borrowings with an average maturity of four years, provide significant protection from rising rates over both the near and longer term.

So while there are concerns over the effect of increase in short term rates on the profitability of mortgage REITs in general, we believe Anworth's portfolio of predominantly ARMs and significant hedges is well positioned to mitigate those effects in such a scenario.

Looking at our other portfolio characteristics, the average coupon increased slightly to 2.67%, the average cost stands at 103.29 which results in an current yield of 2.58% prior to the amortization of purchase premiums.

Premium amortization expense increased slightly to $11.8 million on the quarter and the portfolio prepayment rate increased to 18 CPR from 14 CPR the previous quarter.

While the increase in premium amortization is small on an absolute basis, it should be noted that the overall unamortized purchase premium continues to shrink due to both a smaller portfolio as well as increased TBA positions which have no associated premium amortization.

I would also add that the prepayments in our portfolio which were reported in October and not included in these third quarter statistics were at an average rate of 15 CPR annualized.

Turning to our liabilities, the average interest rate on our repo borrowings remained constant at 32 basis points and when you take in account our interest rate swaps, our average interest rate now stands at 1.08% with an average adjusted maturity of approximately 2.3 years.

Given that we estimate our assets portfolio duration at approximately 2.5 years as of September 30th, you can see that we continue to have a narrow duration gap between our assets and liabilities which was reflected in the book value stability of our portfolio on the quarter.

During the third quarter, swaps with the total notional balance of approximately $1.8 billion were terminated. These terminated swaps were primarily the legacy swaps for which we had discontinued hedge accounting earlier in the year.

Our total position in interest rate swaps now stands at approximately $3.8 billion which as I mentioned before is about 58% of our total balance of repo borrowings. These swaps carry an average rate of 1.54% with four years to maturity on average.

As previously mentioned, we've initiated short positions in Eurodollar future contracts to provide additional protection against rising short term interest rates, these contracts hedge 90-borrowing.

So, for example, if you look on the table where you see $4 billion notional amount relative to futures contracts expiring within 12 months, that can be thought off as providing protection for year on approximately $1 billion of assets or liabilities. Our leverage multiple decreased to 7.6 times our long-term capital.

But if we take into account the implied financing embedded in our increasing TBA position, our effective leverage is 8.4 times long-term capital. The average net interest spread for the quarter was 83 basis points based on GAAP net interest income.

The increase that you see quarter-over-quarter was driven primarily by the change in accounting treatment relative to our interest rate swaps. If we take into account TBA role income earned during the quarter, the effective yield on assets net of premium amortization increases to 2.07%.

Similarly, if we adjust the average cost of funds to be reflective of the adjustments made to reconcile GAAP net income to core earnings, we would calculate a slightly different cost to funds coming at 1.09% which would result a net effective spread of 97 basis points for the third quarter.

Lastly, I would like to highlight the investments made to-date, although subsequent to the end of the quarter, a non-agency securities that are listed under subsequent events. As Lloyd discussed and as we previously highlighted we have begun to invest in mortgage credit in addition to agency guaranteed MBS.

The date these investments have been a non-agency mortgage backed securities, the majority of which are related to mortgages originated prior to 2008, but we will also evaluate investments in nearer mortgage originations, either as loans or as MBS, as well as non-performing or re-performing loans or MBS collateralized by those types of loans.

On the investment in non-agency MBS of $52 million made through November 4th, we are expecting to earn a return on equity of approximately 12% with an amount of repo leverage of less than 2 times the allocated equity. With that I think we can turn the call back over to Rocco, our operator, for any question and answers that we have. Thank you. .

Thank you very much, sir. (Operator Instructions) Our first question comes from Daniel Altscher of FBR. Please go ahead..

Hey, thanks. Good afternoon. I appreciate you guys taking my questions today. I first want to talk a little bit about the new residential mortgage strategy.

Can you maybe characterize the type of non-agency MBS that you are looking or thinking about buying? Is it newly issued? Is it legacy? Is it all plays or is it a little bit lower down in the stack? Anything you can kind of give there would be helpful..

Sure, Dan. This is Brett Roth respond to you. An answer to your, the strategy is to invest across the board in actually the various, all the asset classes you talked about. We've initially begun investing in legacy CUSIPs, as Joe highlighted, which have loans originated and securitizations originated predominantly before 2008.

We have also begun to look at some of the securitizations and have invested in some securitization of the non-performing loan pool; as well we are going to be looking at getting involved in the securitization and loans -- newly originated loans. So it is an evolving strategy and we are looking across -- all the asset classes that you described..

Okay.

And do you plan on funding purchases with prepays that come off agency bonds or is there new capital being devoted to the strategy?.

To-date we've utilized the paydowns off our agency portfolio. We haven’t raised any additional capital to-date. Obviously, we could consider potentially even selling some of our agency portfolio if need be to increase the rate of our purchases of our non-agency securities.

But, again, we haven’t done that to-date and we are certainly have ample capital available to expand into the non-agency strategy as market conditions would warrant..

Okay, and kind of with that in mind, I apologize, I don't have the number offhand with me about how much in monthly paydowns or quarterly paydowns you are getting.

But if you were to size that, approximately how much is going to non-agency, how much is going to share buybacks and how much is kind of being reinvested back into the agency bucket?.

Well, again, everything we are talking about is all subsequent to September 30th, because there were no investments in non-agency securities may hit during the third quarter. But to-date in the fourth quarter we have not made any net new investments in agency MBS.

The paydowns we have received, the cash we had on hand has been used for share repurchases as well as -- again there is a also some of the trades we've made in non-agency securities yet to settle, so there hasn’t been a cash requirement there.

And as -- I think I highlighted we are utilizing, what feels like a relatively modest level of leverage as well so that the cash requirement for the non-agency securities is not the full purchase price..

Okay. And I'll just hopefully take the liberty of one more question. With the Eurodollars -- we see a small handful of companies who use Eurodollar features in place of the more traditional interest-rate swap, if you will.

So just curious, what about the Eurodollars are you finding attractive versus maybe the more traditional interest-rate swap?.

Sure. And honestly you had a one question I didn’t answer was, if you look at our principal paydowns on our agency MBS portfolio, it runs around $400 million a quarter.

But relative to the Eurodollars, what we -- what it allows us to do is to get some protection on the short end of the curve without necessarily needing to have an equal amount of protection in each and every quarter.

Like, for example, in the -- the table in the earnings release you will see that there is approximately -- pardon me while I leaf through it, $4 billion notional that expires in less than 12 months. Again, those are quarterly contracts.

But in effect what we have is we have no contracts that expire in the next three months, so we have more than a $1 billion of protection out in the latter half of this first year.

So by utilizing this three months contracts, it's been a more efficient way for us to sort of target these spots on the short end of the yield curve that we want to try to mitigate the effect of short term rates rise in the long-term.

We still are going to utilize interest rate swaps to lock in borrowing cost for a longer period of time, but in that case if you were to enter into a swap with a 1% rate, you would pay that 1% rate each and every quarter between now and the maturity..

Okay. Got it. Thanks very helpful..

Thanks..

Our next question comes from Michael Widner of KBW. Please go ahead..

Hey, thanks guys. I guess let me just follow up on a couple details on the Eurodollar futures. I guess specifically I was wondering if maybe could elaborate a little more on sort of how those are structured. You answered part of it I guess for the -- there is none in the next three months.

But I mean does that imply the other $4 billion is kind of roughly split amongst the following three quarters? Or I don't know -- just any more color you can give us would help us model that. .

Sure. I would say on the $ 4 billion within the next 12 months, there -- we don’t have any outstanding position in the December 2014 contracts and the rest is spread pretty evenly over the remaining three contracts in the next 12 months. I would say the $1.4 billion notional is out from -- in the second year does sort of taper off.

So it's -- I think probably a more than a third of that is in the first contract in that period..

Got you. And then….

Sorry, we also have a number of swaps that are still on the books, as you can see from our table that have that sort of one to two year period covered as well. .

Yes, got you. So I guess you guys are new to these or they are new to your balance sheet and core is also new.

So just wondering if you could talk a little bit about how you think about and how we should expect to see this flow through core earnings?.

These being the Eurodollars…?.

The Eurodollar futures as they reach their maturity. Because, I mean, you obviously have the ability to terminate them at any time just by covering or selling, however you want to look at it, or by letting them settle in which case it's a cash outflow more or less identical to a swap. .

Right. I guess maybe this is a little more of an esoteric question.

But its -- I would think that -- if your goal is to have core income reflect periodic interest cost or interest expense, than you would say that the -- the unrealized gains and losses in the Eurodollar future vary from quarter-to-quarter in a situation where you do have maturing or expiring Eurodollar futures, I think you would want to recognize sort of the net cost over the entire holding period of that future as something that was recognized as a cost relative to that period.

Again, we again -- as you pointed out these are positioned that were initiated during the third quarter and we don’t have any other expiring the fourth quarter. So there hasn’t been that effect to core income as reported for this quarter. And right now my expectation would be that, that would be an effect in the fourth quarter of this year either. .

Right, because you have none that are expiring. What I would anticipate, and just tell me if I am wrong here, but let's say you do have a third of that $4 billion expiring in 1Q 2015. There is an effective fixed pay rate of 55 basis points basically given the price -- again I mean that is going to change depending on how they are spread out.

But the anticipation is that would be expect -- we could treat that as basically $1.3 billion of swaps with a 55 basis point fixed day rate and that is how we should expect it to kind of flow-through -- if that makes sense. .

Right. So what would flow through would be the difference between 55 basis points and where the contract finally settles.

Right?.

Right. Which is I mean on a swap it is the equivalent of you receive back floating, right, I mean where it is going to settle is a floating equivalent. So basically we can think of that as swaps with a 55 basis point. I think you….

I think you explained it better than I did, but we are on the same page..

I don't know about that. But I just wanted to make sure because there is -- not everybody treats those quite the same way with regard to core earnings. I just wanted to make sure we are on the same page. I guess -- I think that's pretty much most of my questions.

I guess the only other one -- with regard to the swaps you terminated, I am just trying to figure out what got terminated there. If I look back at last quarter, there was 3-point-something billion dollars of swaps that you still had hedge accounting treatment on. And those had a remaining term of 59 months.

And when I look at what you have got now, it is 48 months. So clearly some of the stuff you terminated was actually longer duration because -- so I'm just trying to figure out you sort of attributed it to most of the stuff that you terminated was the stuff you had previously de-designated.

But I mean just doing the math there had to be some longer duration stuff at least three plus years out there that got terminated as well..

That’s correct..

We can see it on the table as well, just a Q over Q what has changed. So I wonder if you could talk about that a little bit. .

Sure. Again, the majority of the terminated swaps were these legacy swaps as you pointed out which were generally fairly short. There were approximately 300 million notional longer term swaps that had not been previous de-designated.

That were terminated near the end forward the quarter and that was a function really of keeping the portfolio sort of sized appropriately as that was getting smaller. .

I mean it just looks like a bigger amount than that. Because even if I just look at the table -- the swaps table here I've got June 30th compared to September 30th, I mean you dropped..

There is also the issue, Mike, is of -- sometimes -- from quarter-to-quarter sometimes a swap will roll from one bucket to the other..

Yes, I mean fair enough. That is a lot of rolling. But okay, I will jump out and let somebody else answer questions. Thank you for the clarity..

Sure..

(Operator Instructions) Our next question comes from Howard Henick of Scurlydog Capital. Please go ahead..

Hey, guys, good quarter. And I appreciate the stock buyback which I what I want to talk about. The first question is regard to the buybacks this quarter in the October month. Who did you execute them through? $5.09 seemed a little high, stock spent a lot of time below $5 -- $4.80 to $5.

So I'm questioning who you book these trades through and what commission or fee do you pay either per share or otherwise?.

We -- as we report this in our 10-Q this quarter, we repurchased the shares through a syndicated capital and we pay and penny and a half a share and we -- the stock was below -- as you look at the price for -- the chart for the third quarter it had a sharp rise coming of the bottom at September 30th.

And I will just say that’s a period of time when since we buy on the bid side, stocks going up dramatically, it's more difficult to put a full order in a every -- complete a full order every day.

So I think it would be accurate that we were able to purchase more shares as a percentage of the available amount toward the middle and the end of the quarter than we were during the first two weeks of the quarter when it spent most of its time at the lower price that you are making reference to..

Got you..

I also think that -- I mean, I could be wrong. It's easy to check, but I do believe that $5.09 is close to or below the VWAP for the quarter-to-date..

Okay. Thanks. Fair enough. Next question is on the -- do you plan on continuing these buybacks at the same pace? That was an aggressive pace. And I point out that despite the buybacks, again which I applaud, you're still roughly, even after today, trading at roughly 81% to 82% of book, which is -- if it's not the largest in the space it is close..

Once upon a time it didn’t use to be close. So the answer is, we never know what pace we are going to go at and I just to have to say it that way. What we know is that its beneficial to purchase shares. We are looking at all different types of investments.

I think we have been saying for the last year that this was an integral part of what we were doing as long as we have the opportunity to make purchase at such attractive prices that are so accretive to remaining stockholders. So, I can't say what we will do during November and December.

I just know that I hope we've got enough credibility now with you and others that buying shares back is important part of what we do. I hope it's perceived as it's more important to us than anybody else because you are right, there is a couple of mortgage REITs that were 2% below and -- but we think it's an important thing to do.

And we will continue and if we should -- not everybody shares back or buy very small number of shares back, I think we expect to have an awfully good reason why we did so..

Okay, that is a good -- I appreciate that answer. And as a follow-up, obviously when you buy back shares you shrink your balance sheet. So my question is -- and not to be too straightforward -- but the smaller your balance sheet is the lesser the compensation is for the external manager, which is basically you guys.

So my question is, how much are you willing to continue to shrink the balance sheet, which again at 81% or 82% of book I think you should. I'm certainly not wanting to discourage you, I want to encourage you.

But I will -- I'm questioning is how much are you willing to do that? I mean, it looks like you shrunk it about $400 million this quarter, which is call it just under 5%.

Would you be willing to continue that pace if the stock continues to languish in this low 80% of book?.

Well, on this issue and the way you say it and having talked with you many times in the past, I probably tend to think the way you do at this level, particularly when I look at what I think is the attractiveness of our portfolio itself. So my comments I made earlier were meant to mean what they said.

You bring up an important that I guess, I would say that the Board of Directors is probably concerned about. We keep shrinking the balance sheet. We keep having less ability to retain all the employees we want to retain. And I think that's really the issue you are talking about.

As long as we can continue to have a proper staff I don’t think it's an issue. If should ever become an issue for the ability to have the proper staff, then I think the Board of Directors would act in some way to address that issue. .

And I've got two more quick questions.

What is the max discount to book you would accept? Where do you think you think -- what level do you think that buybacks are no longer an optimal thing to do? Is it 10%, is it 5%, is it 15%? Do you have a number in mind or not really?.

Well, one thing I have seen happen is some mortgage REITs buy -- they mortgage the shares of other mortgage REITs to trade a bigger discount than they do..

That was once in the history of mortgage REITs..

No, actually it happened to Anworth before. So -- for sure….

Okay..

Someone once bought 10% of our company..

Okay.

So I'm familiar it happens off and on. So that’s -- I don’t have a number.

The problem is, that’s a very valuable piece of information and I'm going to say for the -- what is the majority of annual stockholders, me announcing to the world at what price we won't stand there and basically provide some type of put option for investors, is not a good idea for --to tell all shareholders that. So….

That is a fair -- so there is a number but you don't want to share that is fair enough. .

Yeah, and I -- yeah, I think that way, that’s for sure..

Okay. And my last point is, first of all, congrats to Brett Roth. I don't know if Brett Roth still remembers me, but I covered him way back when in the old days. So congrats, Brett. .

…and he even smiled..

He is good man. He is good hire. I applaud that. And my follow-up question for that is, regarding non-agencies. I mean, Lloyd, again, not to bring up bad news. But in the old days, or in the last five years non-agencies have railed dramatically, I mean dramatically. And for long time we asked you about non-agencies and you treated them like Kryptonite.

So my question is why now? Why all of a sudden do we like non-agencies? Not that I think you are wrong now, to be honest, but why now and why not two years ago, three years ago, four years ago where you have to agree they were substantially cheaper than they are today..

I would agree with you, they were substantially cheaper. Everybody, I think in the universe will agree with you on that one.

The question comes, when you look at a group of securities that you say, do we feel that we are -- or would be comfortable buying these securities believing that we have all the knowledge that we need, I guess, you can say, maybe that was part of the issue.

Remember, we had a lot of experience with non-agency mortgage backed securities, but the staff that worked with us on that who were employed by the Belvedere Trust subsidiary, they all left the firm when their part of the portfolio didn’t do well. So we didn’t have access to all those people.

I guess that had had we access to them or maybe it would have been differently. But bottom-line is, you don’t buy things because you think you might learn about it over time. You do it when you are highly confident that you know how to do a really good job..

Why did you hire Brett today versus three years ago? What made the Board or you guys change your mind?.

I didn’t. What -- you just said what changed our mind? The buying securities five years ago was on the belief that someday housing prices might go up.

Buying securities today is tied largely to what I said in my comments, the belief that the private sector will be much more involved in the residential mortgage market in United States than it has been in the past. It hasn’t happened yet, obviously, Fannie Mae and Freddie Mac still dominate things. But I think it will happen in the future.

And laying the ground work for us to be a participant in that market, I think is very, very important..

Okay. And again, good hire with Brett. Brett, I wish you the best. Good luck. .

Now, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. McAdams for any closing remarks. .

Well, thank you very much everybody for attending. We appreciate your question and we appreciate the opportunity to give you answers that will help you better address Anworth and all the things that we are doing. So with that thank you very much. We look forward to visiting with you this time next quarter. Goodbye..

Thank you, sir. And the conference has now concluded. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening..