Good afternoon, and welcome to the Anworth Mortgage Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions] Before we begin the call, I will make a brief introductory statement. Statements made on this earnings call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and we hereby claim the protection of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 with respect to any such forward-looking statements. 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 statement containing the words may, will, believe, expect, anticipate, intend, estimate, assume, continue or other similar terms or variations on those terms or the negative of those terms. You should not rely on our forward-looking statements because the matters they describe are subject to assumptions, 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 loan 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 the prepayment rates on the 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…

Good morning, or good afternoon, ladies and gentlemen. I'm Lloyd McAdams and I'm welcoming you to this conference call in which we will summarize the company's recent activities and answer your questions about the past and the future during our question-and-answer session. So first, let me briefly describe our recent results and then we will discuss our plans for the future. During the fourth quarter of 2013, Anworth earned net income to common stockholders of $9.7 million, which is $0.07 per diluted common share. Stockholder equity available to our common stockholders at quarter end was approximately $829 million, which equates to a book value of $5.98 per share. This is based on approximately 138.7 million shares of common stock outstanding at December 31. This represents an increase of approximately 2% from our book value of $5.89 per share at September 30, 2013. The unrealized loss component of our AOCI, accumulated other comprehensive income, in our book value is $92 million, which consist of an unrealized loss on our MBS portfolio of $58.6 million, an unrealized loss on our swap portfolio of $33.4 million. This means that the balance of our book value, excluding this $92 million component, is $921 million or $6.64 per share, which loosely defines our book value estimate if all of our mortgage-backed securities repaid and all of our swaps matured. Like to discuss briefly the income earned during the quarter and the details. During our fourth quarter, our net interest rate spread was 57 basis points compared to 82 basis points during the quarter ended September 30. This decline in the fourth quarter's interest rate spread occurred primarily as the result of the increase in our interest rate swap positions during primarily the third but also the fourth quarter's. At December 31, our average borrowing rate…

[Operator Instructions] The first question comes from Dan Altscher of FBR. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: There is a point that was made about the swaps that I thought was good about how some of the book value accretion or gain this quarter was from a portion of the swaps rolling off. Is there any way to size maybe how much that was? I mean, if memory serves me correctly, maybe the unrealized gain was maybe more, maybe $56 million or maybe even closer to $60 million last quarter. Now it's sounds like it's down to $50 million -- I'm sorry, unrealized loss from before.

I'll just make a comment. It's literally that the swaps maturity is getting shorter. And as maturity gets shorter, if interest rates are unchanged, the swaps will -- the unrealized loss will decline. And I have not calculated what the exact amount is, maybe Joe can comment on this also.

Yes, Dan. This is Joe. I don't -- we don't have the exact number for the specific swaps that Lloyd mentioned. But in effect, what takes place and from the -- if you look at the table of our swap maturities, in effect, each quarter, the cash flows on any particular swap or any particular group of swaps is going to involve a payment of the fixed rate. If we're just going to look at the less-than-12-month swaps, that fixed rate is 2.07, net of 3-month LIBOR, which is currently around 24 basis points. So that net payment each quarter is, in effect, the amount of that negative mark-to-market that is going to be reversed out during a period of time, so the net of what the current market rate would be. And for the short -- for the short swaps, the current market rate would basically be almost on top of 3-month LIBOR. So in the case of the shortest bucket, almost the full payment made on those swaps is coming out of the negative mark-to-market. The calculation is a little more complicated for the longer buckets because, for example, the 2- to 3-year swap bucket where the average rate is 1.82, you'd have a market rate that would probably be 60 to 70 basis points. So it would be the amount of the excess payment over the current market rate is, in effect, what comes out of the mark-to-market. I hope that makes sense. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Yes. No, that's perfect. And sticking with that part of the discussion. I mean, again, looking at the under 12-month remaining bucket for swaps, that's $410 million, looks like. When those actually do mature, is your intent to replace those swaps with the same duration or the same remaining tenure? Or is it kind of thinking to reload and say, well, that was maybe originally a 5-year swap and now, we have to put back on new 5-year tenure as opposed to putting on 1-year tenure at, say, 30 basis points.

The closest answer would simply be to say those swaps will mature and they would only be replaced if the new swaps would be put on versus new investments that were being made with the P&I coming off of the portfolio. At the time we make investments, we put on swaps that we think will best hedge and manage both the cash flow and market value risk of the securities. Over time, those -- the reality can be different than our estimates. And in many cases, with some of these shorter swaps, given that we have, in previous years, had significantly higher-than-expected levels of prepayments, we actually haven't been at less of those remaining bonds that were purchased 3, 4, 5 years ago than we would have expected, although we still have basically the same overall swap balance. So there's not going to be -- there will be new swaps put on, but typically those new swaps are put on relative to new purchases. So both the assets and the liabilities are coming on to the balance sheet at current market rates. Daniel K. Altscher - FBR Capital Markets & Co., Research Division: Okay. That's perfect. And then just one more, if I may. Understood that you all sound pretty happy, I guess, of where the portfolio is positioned more or less today and maintaining, I guess, more of a defensive stance. But is it you are thinking to maybe get even more defensive here and increase the swap load continually or reduce the overall duration on the asset side of the portfolio? Or is it kind of just static and status quo?

Well, the duration of our portfolio at December 31 was 3.0 years. And I believe 2.8 years was the all-in sort of fixed rate period of our swap and repo position. So -- and that's pretty much unchanged from where we were at September 30. So we expect to continue to maintain a narrow asset-liability mismatch. Clearly, the market has improved over the last several months relative to where it was in the summer in terms of both overall interest rate volatility and the performance of mortgage -- mortgages versus swaps. That basis has been improving for us. I don't expect it to incrementally be adding more interest rate exposure by widening our interest rate GAAP. Again, just to sort of go back in time, at the beginning of 2013, we also had a very narrow asset-liability mismatch. And what took place during the year was as interest rates grow sharply, as mortgages underperformed other fixed income instruments, our interest rate GAAP widened significantly. And we went from having virtually no asset-liability mismatch to over a year of asset-liability mismatch on our existing portfolio. So these incremental swaps that have been put on have been to bring that GAAP back down to a low level, a prudent level, and one that we feel will best serve us going forward. So I don't expect any change in our asset-liability mismatch. One point I would make as we move forward is -- and I had alluded to that there's sort of 2 purposes of having an asset-liability and risk management program. One is to try to maintain a stability of book value by having a reasonably matched asset and duration -- asset and liability side of the balance sheet. And the other is to try to provide a relatively stable level of income if interest rates and financing costs were to rise and fall. So I do think the trend going forward, as we're slowly moving towards a place where we might see short-term interest rates rise again, with -- to try to be in a position where through the combination of prepayments on our portfolio and interest rate swap agreements, that we felt we were well protected against short-term moves in the short-term interest rates. And I think -- so I would expect the overall swap position relative to our repos to continue to sort of -- it has increased and I would expect it to continue to stay at a fairly high level as we move forward.

The next question comes from Stephen Sdutchlik [ph], a private investor.

Yes. With regard to share repurchases, if you don't have enough CPR to fund this, do you sell existing mortgage-backed securities and swaps? And if so, does this change your discount-to-book value hurdle rate to repurchase shares?

I think the answer to the question is we have not obviously approached -- since we do purchase new securities each quarter, we've not reached the stage where we think that the entire cash flow of the company during the quarter would be best invested in repurchasing shares at some large discount. And so, the answer to the question is it doesn't seem likely to happen. But if it were to happen, clearly, and you thought it was worthwhile actually selling a security and realizing probably a loss to do that, I guess that's what would take place. But that has not happened and it doesn't seem likely that it would, but it could happen.

Okay. And in a prior conference call, you made reference to legacy ARMs that had 1.75% margin upon reset. How much of these legacy ARMs are left in the portfolio? And can you give me some color on what the margins are on new purchases? And do you have an average margin for the entire portfolio?

This is Joe McAdams. The margin of 175 basis points is the stated margin on the mortgage-backed security over the benchmark LIBOR rate. The portion of the portfolio that is in this process of being -- of resetting on an annual or more frequent basis, that has a reset of 1 year or less, is 19% of the portfolio. I would point out that those securities were not purchased at par and, in many cases, have a premium of approximately 3%. And so, the effective margin that we earn on those securities, net of the purchase premium as well as the amortization of that premium as those securities were to refinance, brings that margin over our financing costs to something definitely lower than 175 basis points. On the portfolio as a whole and new investments, this spread between the yield on our new investments, which include both adjustable-rate mortgages and fixed-rate, over our all-in financing cost is approximately 90 basis points. That -- and that's similar to where our portfolio as a whole would be if it were mark-to-market. Again, as we reported on a GAAP basis, this spread on our portfolio during the fourth quarter was 50 basis points. But a significant factor there, as we've made reference to already, was some of these shorter legacy swap positions that are significantly above market interest rates.

But now, when you're making these new ARM purchases, are the longer ARMs, do they have a higher margin, like a 7-year versus a 3- versus a 5-?

Typically, the margin -- while there can be different margins on different sorts of loans, you don't typically get a larger, again, I think, margin over the benchmark interest rate just because it's 5 years or 7 years to reset. When the ARM security resets to a floating interest rate, typically it's anywhere from a 1.5% to 2% would be the margin over the benchmark at that point.

Okay. So the longer-rated ARMs, the benefit of that is you might be purchasing at a lower cost even if the margin is the same because you're taking more risk on a term?

That's correct. Or in many cases, what you will see is the coupon rate during the fixed period is slightly higher for the longer fixed hybrids than the shorter hybrids. But the effect is the same, you're correct.

As I see that there are no other questions, this concludes our question-and-answer session. I would like to turn the conference back over to Lloyd McAdams for any closing remarks.

Well, thank you very much, everyone, for attending. And we are glad we had the opportunity to answer the questions. We look forward to meeting with you next quarter at the same time. Goodbye, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.