SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2002
OR
| o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from ____________ to ______________
Commission File Number: 000-33485
SAXON CAPITAL, INC.
(Exact name of Registrant as specified in its Charter)
| DELAWARE |
|
54-2036076 |
| (State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
4951 LAKE BROOK DRIVE, SUITE
300
GLEN ALLEN, VIRGINIA
(Address of principal executive offices)
23060
(Zip Code)
(804) 967-7400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all documents and 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 July 31, 2002, there were 28,101,245 shares of our common stock, par value $0.01 per share, outstanding.
This document is available on Saxon Capital Inc.’s web site at www.saxoncapitalinc.com.
SAXON CAPITAL, INC.
Table of Contents
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Condensed Consolidated Balance Sheets at June 30, 2002 (Unaudited) and December 31, 2001 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
61 | |||||||
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| PART II – Other Information |
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| Item 1. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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2
Part I. Financial Information
Item 1. Financial Statements
Saxon Capital, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except for share data)
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June 30, 2002 |
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December 31, 2001 |
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| Assets: |
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| Cash |
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$ |
932 |
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$ |
5,629 |
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| Accrued interest receivable on unsecuritized mortgage loans |
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3,022 |
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1,958 |
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| Mortgage loan portfolio: |
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| Mortgage loans held prior to securitization |
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583,425 |
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370,038 |
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| Securitized loans |
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2,130,207 |
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1,371,816 |
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Gross mortgage loan portfolio |
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2,713,632 |
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1,741,854 |
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| Loan loss reserve |
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(36,630 |
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(21,327 |
) | |
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Net mortgage loan portfolio |
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2,677,002 |
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1,720,527 |
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| Servicing related advances, net |
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99,361 |
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104,796 |
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| Mortgage servicing rights, net |
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25,503 |
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33,847 |
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| Deferred tax asset |
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14,600 |
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11,772 |
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| Other assets |
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31,091 |
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20,820 |
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| Total assets |
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$ |
2,851,511 |
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$ |
1,899,349 |
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| Liabilities and Stockholders’ Equity: |
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| Liabilities: |
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| Accrued interest payable |
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$ |
959 |
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$ |
289 |
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| Warehouse financing |
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487,719 |
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283,370 |
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| Securitization financing |
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2,065,573 |
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1,329,568 |
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| Note payable |
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25,000 |
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25,000 |
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| Other liabilities |
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12,967 |
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9,124 |
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| Total liabilities |
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2,592,218 |
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1,647,351 |
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| Commitments and contingencies |
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— |
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— |
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| Stockholders’ Equity: |
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| Common stock, $0.01 par value per share, 100,000,000 shares authorized; 28,101,245 and 28,050,100 shares issued and outstanding, respectively |
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281 |
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281 |
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| Additional paid-in capital |
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258,257 |
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258,004 |
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| Retained earnings (accumulated deficit) |
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755 |
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(6,287 |
) | |
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| Total stockholders’ equity |
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259,293 |
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251,998 |
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| Total liabilities and stockholders’ equity |
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$ |
2,851,511 |
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$ |
1,899,349 |
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The accompanying notes are an integral part of these financial statements.
3
Condensed Consolidated Statements of Operations
(Dollars in thousands, except for share data)
(unaudited)
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Saxon Capital, Inc. |
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SCI Services, Inc. (Predecessor) |
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Saxon Capital, Inc. |
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SCI Services, Inc. (Predecessor) |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2002 |
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2001 |
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2002 |
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2001 |
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| Revenues: |
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Interest income |
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$ |
50,543 |
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$ |
7,513 |
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$ |
91,089 |
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$ |
14,419 |
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Interest expense |
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(20,382 |
) |
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(5,423 |
) |
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(36,621 |
) |
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(10,962 |
) | ||
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Net interest income |
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30,161 |
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2,090 |
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54,468 |
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3,457 |
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Provision for loan losses |
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(7,987 |
) |
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(2,993 |
) |
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(15,081 |
) |
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(7,745 |
) | ||
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Net interest income after provision for loan losses |
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22,174 |
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(903 |
) |
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39,387 |
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(4,288 |
) | ||
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Gain on sale of loans |
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232 |
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3,396 |
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232 |
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33,738 |
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Servicing income, net of amortization |
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7,462 |
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8,570 |
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15,187 |
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16,785 |
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Total net revenues |
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29,868 |
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11,063 |
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54,806 |
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46,235 |
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| Expenses: |
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Payroll and related expenses |
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12,274 |
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10,679 |
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24,153 |
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23,072 |
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General and administrative expenses |
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8,846 |
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8,835 |
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17,652 |
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15,492 |
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Depreciation and amortization |
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394 |
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1,764 |
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684 |
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3,669 |
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Impairment of assets, net |
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— |
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49,681 |
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— |
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52,590 |
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Other expense (income) |
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357 |
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(1,356 |
) |
|
795 |
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(1,931 |
) | ||
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Total expenses |
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21,871 |
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69,603 |
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43,284 |
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92,892 |
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Income (loss) before taxes |
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7,997 |
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(58,540 |
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11,522 |
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(46,657 |
) | ||
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Income tax expense (benefit) |
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2,940 |
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(20,848 |
) |
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4,480 |
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(19,121 |
) | ||
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Net Income (Loss) |
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$ |
5,057 |
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$ |
(37,692 |
) |
$ |
7,042 |
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$ |
(27,536 |
) | ||
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| Earnings Per Common Share:(1) |
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Average common shares – basic |
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28,088,753 |
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28,050,100 |
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28,079,960 |
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28,050,100 |
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Average common shares – diluted |
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29,692,793 |
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28,050,100 |
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29,375,574 |
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28,050,100 |
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Basic earnings per common share |
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$ |
0.18 |
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$ |
(1.34 |
) |
$ |
0.25 |
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$ |
(0.98 |
) | ||
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Diluted earnings per common share |
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$ |
0.17 |
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$ |
(1.34 |
) |
$ |
0.24 |
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$ |
(0.98 |
) | ||
| (1) |
|
Earnings per common share for the periods prior to July 6, 2001 was calculated based upon the assumption that the shares issued at the end of the period were outstanding throughout the periods presented. |
The accompanying notes are an integral part of these financial statements.
4
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
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Saxon Capital, Inc. |
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SCI Services, Inc. |
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Six Months Ended |
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Six Months Ended |
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| Operating Activities: |
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| Net income (loss) from operations |
|
$ |
7,042 |
|
$ |
(27,536 |
) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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7,439 |
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15,794 |
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Deferred income tax (benefit) expense |
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(2,828 |
) |
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10 |
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Permanent impairment on assets |
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|
— |
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52,590 |
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Purchase and origination of mortgage loans, including premiums |
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|
— |
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|
(1,209,283 |
) | |
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Proceeds from securitization of mortgage loans |
|
|
— |
|
|
661,456 |
| |
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Principal collections and liquidations on mortgage loans |
|
|
— |
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|
11,140 |
| |
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Interest-only residual assets retained from securitizations |
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— |
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(37,509 |
) | |
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Cash received from residuals |
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— |
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25,542 |
| |
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Payments received on subordinate bonds |
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|
— |
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|
462 |
| |
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Provision for loan losses |
|
|
15,081 |
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|
7,745 |
| |
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Charge-off of mortgage loans |
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(3,025 |
) |
|
(6,095 |
) | |
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Provision for advanced interest losses |
|
|
3,247 |
|
|
— |
| |
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Net increase in fair value of mortgage loans and related derivative instruments |
|
|
(16,721 |
) |
|
— |
| |
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Decrease (increase) in servicing related advances |
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|
5,435 |
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(56,267 |
) | |
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Increase in accrued interest receivable on securitized loans |
|
|
(5,571 |
) |
|
— |
| |
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Increase in accrued interest payable on securitization financing |
|
|
1,713 |
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— |
| |
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Net change in other assets and other liabilities |
|
|
(2,672 |
) |
|
(12,458 |
) | |
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Net cash provided by (used in) operating activities |
|
|
9,140 |
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(574,409 |
) | |
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| Investing Activities: |
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| Origination of mortgage loans |
|
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(1,148,342 |
) |
|
— |
| ||
| Principal payments on loans |
|
|
171,304 |
|
|
— |
| ||
| Proceeds from the sale of mortgage loans |
|
|
21,031 |
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|
— |
| ||
| Acquisition of mortgage servicing rights |
|
|
— |
|
|
(8,230 |
) | ||
| Net capital expenditures |
|
|
(1,997 |
) |
|
(3,791 |
) | ||
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Net cash used in investing activities |
|
|
(958,004 |
) |
|
(12,021 |
) | |
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| |
| Financing Activities: |
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| Securitization financing: |
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Proceeds from issuance of securitization financing |
|
|
921,689 |
|
|
— |
| |
|
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Principal payments on securitization financing |
|
|
(182,446 |
) |
|
— |
| |
| Proceeds from warehouse financing, net |
|
|
204,349 |
|
|
520,190 |
| ||
| Proceeds received from issuance of stock |
|
|
575 |
|
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— |
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