ANWORTH MORTGAGE ASSET CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

Commission File Number: 001-13709

ANWORTH MORTGAGE ASSET CORPORATION
(Exact Name of Registrant as Specified in its Charter)

MARYLAND					52-2059785

(State or other jurisdiction of Incorporation or organization)					(I.R.S. Employer Identification No.)

1299 Ocean Avenue, #200, Santa Monica, California					90401

(Address of principal executive offices)					(Zip Code)

Registrant’s telephone number, including area code:					(310) 394-0115

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

As of June 30, 2002, the Registrant had 22,935,150 shares of Common Stock issued and outstanding.

ANWORTH MORTGAGE ASSET CORPORATION

FORM 10-Q

INDEX

		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Balance Sheets as of June 30, 2002 and December 31, 2001	1

	Statements of Operations for the three and six months ended June 30, 2002 and 2001	2

	Statement of Stockholders’ Equity for the three months ended March 31, 2002 and June 30, 2002	3

	Statements of Cash Flows for the three and six months ended June 30, 2002 and 2001	4

	Notes to Unaudited Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 2.	Changes in Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 5.	Other Information	30

Item 6.	Exhibits and Reports on Form 8-K	30

Signatures		32

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ANWORTH MORTGAGE ASSET CORPORATION

BALANCE SHEETS
(in thousands, except for per share amounts)
(unaudited)

		June 30, 2002			December 31, 2001


Assets
	Mortgage backed securities	$	1,686,643		$	420,214
	Other marketable securities		—			1,803
	Cash and cash equivalents		12,924			290
	Accrued interest and dividend receivable		9,116			2,293
	Prepaid expenses and other		44			10

		$	1,708,727		$	424,610

LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
	Reverse repurchase agreements	$	1,449,537		$	325,307
	Payable for purchase of mortgage-backed securities		21,560			40,819
	Accrued interest payable		4,182			1,293
	Dividends payable		6,268			1,329
	Accrued expenses and other		1,873			865

		$	1,483,420		$	369,613

Stockholders’ Equity (in thousands)
	Preferred stock, par value $.01 per share; authorized 20,000 shares; no shares issued and outstanding		—			—
	Common stock; par value $.01 per share; authorized 100,000 shares; 22,935,150 and 7,000,765 issued and 22,885,150 and 6,950,765 outstanding respectively		229			70
	Additional paid in capital		227,097			54,324
	Accumulated other comprehensive income (loss), unrealized gain (loss) on available for sale securities		3,440			705
	Retained earnings		(4,436	)		127
	Unearned restricted stock		(794	)		—
	Treasury stock at cost (50,000 shares)		(229	)		(229	)

			225,307			54,997

		$	1,708,727		$	424,610

See accompanying notes to financial statements

-1-

ANWORTH MORTGAGE ASSET CORPORATION

STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)

		Three months ended						Six months ended
		June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001

Interest and dividend income net of amortization of premium and discount		$	12,217		$	2,518		$	20,142			5,075
Interest expense			(5,114	)		(1,650	)		(8,121	)		(3,571	)

Net interest income			7,103			868			12,021			1,504
Gain on sales			1,433			81			1,656			152
Expenses:
	External base management fee		(192	)		(49	)		(400	)		(96	)
	External incentive fee		(1,013	)		(88	)		(1,741	)		(144	)
	Compensation and benefits		(18	)		—			(18	)		—
	Incentive compensation		(324	)		—			(324	)		—
	Cost incurred in acquiring external manager (Note 4)		(3,180	)		—			(3,180	)		—
	Other expense		(120	)		(118	)		(210	)		(177	)

Net income		$	3,689		$	694		$	7,804		$	1,239

Basic earnings per share		$	0.29		$	0.29		$	0.71		$	0.52

Dividends declared per share		$	1.00		$	0.24		$	1.00		$	0.44

Average number of shares outstanding			12,733			2,368			10,974			2,361

Diluted earnings per share		$	0.29		$	0.29		$	0.71		$	0.52

Average number of diluted shares outstanding			12,823			2,368			11,041			2,361

See accompanying notes to financial statements.

-2-

ANWORTH MORTGAGE ASSET CORPORATION

STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

		Common Stock Shares		Common Stock Par Value		Additional Paid-in Capital		Accum. Other Compre- hensive Income (Loss)			Retained Earnings			Unearned Restricted Stock			Treasury Stock at Cost			Compre- hensive Income			Total

Balance, December 31, 2001		6,951	$	70	$	54,324	$	705		$	127		$			$	(229	)				$	54,997
	Issuance of common stocks	4,882		49		40,103																	40,152
	Available-for-sale securities, Fair value adjustment							(4,448	)											(4,448	)		(4,448	)
	Net income										4,115									4,115			4,115

	Other comprehensive income (loss)																			(333	)		—

Balance, March 31, 2002		11,833	$	119	$	94,427	$	(3,743	)	$	4,242		$			$	(229	)				$	94,816
	Issuance of common stock	10,992		109		131,877																	131,986
	Available-for-sale securities, fair value adjustment							7,574												7,574			7,574
	Unrealized gain on cash flow hedge recognized in net income							(391	)											(391	)		(391	)
	Issuance of restricted stock	60		1		793								(794	)								—
	Net income										3,689									3,689			3,689

	Other comprehensive income (loss)																		$	10,872

	Dividends declared - $1.00 per share										(12,367	)											(12,367	)

Balance, June 30, 2002		22,885	$	229	$	227,097	$	3,440		$	(4,436	)	$	(794	)	$	(229	)					225,307

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