_________________
_________________
OR
Commission File Number: 000-33485
Incorporated pursuant to the Laws of Delaware
_________________
Internal Revenue
Service
Employer Identification No. 54-2036376
_________________
4860 Cox Road, Suite 300,
Glen Allen, Virginia, 23060
(804) 967-7400
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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No
As of May 8, 2003 there were 28,508,006 shares of our common stock, par value $0.01 per share, outstanding.
SAXON CAPITAL, INC.
Table of Contents
| Page | |
|---|---|
| PART I - Financial Information | |
Item 1. Financial Statements | |
Unaudited Condensed Consolidated Balance Sheets at March 31, 2003 and | |
| December 31, 2002 | 2 |
Unaudited Condensed Consolidated Statements of Operations for the three months | |
| ended March 31, 2003 and 2002 | 3 |
Unaudited Condensed Consolidated Statement of Stockholders´ Equity for the three | |
| months ended March 31, 2003 | 4 |
Unaudited Condensed Consolidated Statements of Cash Flows for the three months | |
| ended March 31, 2003 and 2002 | 5 |
Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. Management´s Discussion and Analysis of Financial Condition and Results | |
| of Operations | 24 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
61 |
Item 4. Controls and Procedures |
66 |
PART II - Other Information | |
Item 1. Legal Proceedings |
66 |
Item 2. Changes in Securities and Use of Proceeds |
66 |
Item 3. Defaults Upon Senior Securities |
67 |
Item 4. Submission of Matters to a Vote of Security Holders |
67 |
Item 5. Other Information |
67 |
Item 6. Exhibits and Reports on Form 8-K |
67 |
1
Part I. Financial Information
Item 1. Financial Statements
Saxon Capital, Inc.
Condensed Consolidated
Balance Sheets
(Dollars in thousands, except
for share data)
(unaudited)
| March 31, 2003 |
December 31, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets: | ||||||||
| Cash | $ | 5,212 | $ | 8,098 | ||||
| Accrued interest receivable | 43,586 | 38,630 | ||||||
| Trustee receivable | 51,821 | 44,128 | ||||||
| Mortgage loan portfolio | 4,057,521 | 3,612,473 | ||||||
| Allowance for loan loss | (42,999 | ) | (40,227 | ) | ||||
| Net mortgage loan portfolio | 4,014,522 | 3,572,246 | ||||||
| Restricted cash | 804 | 301,435 | ||||||
| Servicing related advances | 105,142 | 102,558 | ||||||
| Mortgage servicing rights, net | 31,683 | 24,971 | ||||||
| Deferred tax asset | 20,210 | 17,588 | ||||||
| Real estate owned | 17,361 | 14,563 | ||||||
| Other assets | 40,670 | 38,945 | ||||||
| Total assets | $ | 4,331,011 | $ | 4,163,162 | ||||
| Liabilities and stockholders' equity: | ||||||||
| Liabilities: | ||||||||
| Accrued interest payable | $ | 9,231 | $ | 7,431 | ||||
| Warehouse financing | 119,897 | 474,442 | ||||||
| Securitization financing | 3,857,891 | 3,347,251 | ||||||
| Note payable | 25,000 | 25,000 | ||||||
| Other liabilities | 25,498 | 22,692 | ||||||
| Total liabilities | 4,037,517 | 3,876,816 | ||||||
| Commitments and contingencies - Note 11 | -- | -- | ||||||
| Stockholders' equity: | ||||||||
| Common stock, $0.01 par value per share, 100,000,000 shares | ||||||||
| authorized; 28,392,756 and 28,235,781 shares issued and | ||||||||
| outstanding, respectively | 284 | 282 | ||||||
| Additional paid-in capital | 260,862 | 259,267 | ||||||
| Other comprehensive (loss) income, net of tax of $(980) and $3,649 | (1,626 | ) | 5,707 | |||||
| Retained earnings | 33,974 | 21,090 | ||||||
| Total stockholders' equity | 293,494 | 286,346 | ||||||
| Total liabilities and stockholders' equity | $ | 4,331,011 | $ | 4,163,162 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Saxon Capital, Inc.
Condensed Consolidated
Statements of Operations
(Dollars in thousands, except
for share data)
(unaudited)
| Three Months Ended March 31, 2003 |
Three Months Ended March 31, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Interest income | $ | 70,188 | $ | 40,546 | ||||
| Interest expense | (26,792 | ) | (16,239 | ) | ||||
| Net interest income | 43,396 | 24,307 | ||||||
| Provision for mortgage loan losses | (8,614 | ) | (7,094 | ) | ||||
| Net interest income after provision for | ||||||||
| mortgage loan losses | 34,782 | 17,213 | ||||||
| Servicing income, net of amortization | 12,647 | 7,725 | ||||||
| Gain on sale of mortgage assets | 6 | -- | ||||||
| Total net revenues | 47,435 | 24,938 | ||||||
| Expenses: | ||||||||
| Payroll and related expenses, net | 14,278 | 11,879 | ||||||
| General and administrative expenses | 10,927 | 8,806 | ||||||
| Depreciation and amortization | 667 | 290 | ||||||
| Other expenses | 658 | 438 | ||||||
| Total expenses | 26,530 | 21,413 | ||||||
| Income before taxes | 20,905 | 3,525 | ||||||
| Income tax expense | 8,021 | 1,540 | ||||||
| Net income | $ | 12,884 | $ | 1,985 | ||||
| Earnings per common share: | ||||||||
| Average common shares - basic | 28,283,640 | 28,071,073 | ||||||
| Average common shares - diluted | 29,059,078 | 28,855,990 | ||||||
| Basic earnings per common share | $ | 0.46 | $ | 0.07 | ||||
| Diluted earnings per common share | $ | 0.44 | $ | 0.07 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Saxon Capital, Inc.
Consolidated Statement
of Stockholders’ Equity
(Dollars in thousands)
(unaudited)
| Common Shares Outstanding |
Common Stock |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings |
Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at December 31, 2002 | 28,235,781 | $ | 282 | $ | 259,267 | $ | 5,707 | $ | 21,090 | $ | 286,346 | |||||||||
| Issuance of common stock | 156,975 | 2 | 1,595 | -- | -- | 1,597 | ||||||||||||||
| Comprehensive income: | ||||||||||||||||||||
| Net income | -- | -- | -- | -- | 12,884 | 12,884 | ||||||||||||||
| Unrealized gain on mortgage | ||||||||||||||||||||
| securities | -- | -- | -- | 187 | -- | 187 | ||||||||||||||
| Less: accretion of unrealized gain | ||||||||||||||||||||
| on mortgage securities | -- | -- | -- | (119 | ) | -- | (119 | ) | ||||||||||||
| Less: tax effect of above | ||||||||||||||||||||
| unrealized gain on mortgage securities | -- | -- | -- | (14 | ) | -- | (14 | ) | ||||||||||||
| Loss on cash flow hedging instruments | -- | -- | -- | (11,144 | ) | -- | (11,144 | ) | ||||||||||||
| Less: accretion of gain on cash | ||||||||||||||||||||
| flow hedging instruments | -- | -- | -- | (887 | ) | -- | (887 | ) | ||||||||||||
| Less: tax effect of above hedging | ||||||||||||||||||||
| activities | -- | -- | -- | 4,644 | -- | 4,644 | ||||||||||||||
| Total comprehensive income | -- | -- | -- | (7,333 | ) | 12,884 | 5,551 | |||||||||||||
| Balance at March 31, 2003 | 28,392,756 | $ | 284 | $ | 260,862 | $ | (1,626 | ) | $ | 33,974 | $ | 293,494 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Saxon Capital, Inc.
Condensed Consolidated
Statements of Cash Flows
(Dollars in thousands)
(unaudited)
| Three Months Ended March 31, 2003 |
Three Months Ended March 31, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Operating Activities: | ||||||||
| Net income | $ | 12,884 | $ | 1,985 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization | 5,222 | 4,179 | ||||||
| Deferred income taxes | (2,622 | ) | (6,365 | ) | ||||
| Temporary impairment of mortgage servicing rights | 500 | -- | ||||||
| Impairment of real estate owned | 439 | -- | ||||||
| Provision for loan losses | 8,614 | 7,094 | ||||||
| Provision for advanced interest losses | 440 | 1,754 | ||||||
| (Increase) decrease in servicing related advances | (2,584 | ) | 2,327 | |||||
| Increase in accrued interest receivable | (4,956 | ) | (5,556 | ) | ||||
| Increase in accrued interest payable | 1,800 | 2,887 | ||||||
| Increase in trustee receivable | (7,693 | ) | (10,493 | ) | ||||
| Net change in other assets and other liabilities | 4,649 | 9,781 | ||||||
| Net cash provided by operating activities | 16,693 | 7,593 | ||||||
| Investing Activities: | ||||||||
| Purchase and origination of mortgage loans | (726,057 | ) | (524,511 | ) | ||||
| Principal payments on mortgage loan portfolio | 248,075 | 57,837 | ||||||
| Proceeds from sale of mortgage loans | 10,766 | -- | ||||||
| Proceeds from sale of real estate owned | 4,389 | 528 | ||||||
| Decrease in restricted cash | 300,631 | -- | ||||||
| Purchases of derivative instruments | -- | (540 | ) | |||||
| Purchases of mortgage bonds | (3,000 | ) | (1,955 | ) | ||||
| Principal payments received on mortgage bonds | 973 | -- | ||||||
| Acquisition of mortgage servicing rights | (8,697 | ) | -- | |||||
| Net capital expenditures | (1,783 | ) | (807 | ) | ||||
| Net cash used in investing activities | (174,703 | ) | (469,448 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from issuance of securitization financing | 770,396 | 635,488 | ||||||
| Bond issuance costs | (2,587 | ) | (2,866 | ) | ||||
| Principal payments on securitization financing | (250,994 | ) | (62,359 | ) | ||||
| Repayment of warehouse financing, net | (354,545 | ) | (113,890 | ) | ||||
| Purchases of derivative instruments | (8,743 | ) | -- | |||||
| Proceeds received from issuance of stock | 1,597 | 401 | ||||||
| Net cash provided by financing activities | 155,124 | 456,774 | ||||||
| Net decrease in cash | (2,886 | ) | (5,081 | ) | ||||
| Cash at beginning of period | 8,098 | 5,629 | ||||||
| Cash at end of period | $ | 5,212 | $ | 548 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | 33,439 | $ | 15,733 | ||||
| Cash paid for taxes | $ | 5,634 | $ | 7,944 | ||||
| Non-Cash Financing Activities: | ||||||||
| Transfer of mortgage loans to real estate owned | $ | 3,836 | $ | 1,823 | ||||
| The accompanying notes are an integral part of these condensed consolidated financial statements. |
5
Notes to Condensed
Consolidated Financial Statements
March 31, 2003 (unaudited)
(1) Organization and Summary of Significant Accounting Policies
(a) The Company and Principles of Consolidation |
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United Stat