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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, 2003

 

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, #250, Santa Monica, California   90401
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (310) 255-4493

 

 

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  ¨

 

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 August 7, 2003, the Registrant had 33,238,817 shares of Common Stock outstanding.

 

Table of Contents

Table of Contents

 

ANWORTH MORTGAGE ASSET CORPORATION

 

FORM 10-Q

 

INDEX

 

              Page

Part I.

        FINANCIAL INFORMATION    1
   

Item 1.

    Financial Statements    1
         Balance Sheets as of June 30, 2003 and December 31, 2002    1
         Statement of Operations for the three and six months ended June 30, 2003 and 2002    2
         Statement of Stockholders’ Equity for the three months ended March 31, 2003 and June 30, 2003    3
         Statements of Cash Flows for the three and six months ended June 30, 2003 and 2002    4
         Notes To Unaudited Financial Statements    5
   

Item 2.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations    15
   

Item 3.

    Qualitative and Quantitative Disclosures About Market Risk    30
   

Item 4.

    Controls and Procedures    33

Part II.

        OTHER INFORMATION    34
   

Item 1.

    Legal Proceedings    34
   

Item 2.

    Changes in Securities and Use of Proceeds    34
   

Item 3.

    Defaults Upon Senior Securities    34
   

Item 4.

    Submission of Matters to a Vote of Security Holders    34
   

Item 5.

    Other Information    34
   

Item 6.

    Exhibits and Reports on Form 8-K    35
   

Signatures

    37

 

 

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Table of Contents

Part I.     FINANCIAL INFORMATION

 

Item 1.     Financial Statements

 

ANWORTH MORTGAGE ASSET CORPORATION

 

BALANCE SHEETS

(in thousands)

 

    

June 30,

2003

     December 31,
2002
  
     (unaudited)        

ASSETS

                 

Mortgage-backed securities at fair market value

    $ 3,444,182     $ 2,430,103  

Cash and cash equivalents

      267       906  

Interest receivable

      13,878       11,673  

Prepaid expenses and other

      674       1,202  
    
 
     $ 3,459,001     $ 2,443,884  
    
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Liabilities

                 

Reverse repurchase agreements

    $ 3,008,008     $ 2,153,870  

Payable for purchase of mortgage-backed securities

      70,681       —    

Accrued interest payable

      10,848       9,944  

Dividends payable

      —         12,673  

Accrued expenses and other

      1,554       1,875  
    
 
       3,091,091       2,178,362  
    
 

Stockholders’ Equity

                 

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; 32,878 and 25,396 issued and 32,828 and 25,346 outstanding respectively

      328       253  

Additional Paid in Capital

      354,339       256,610  

Accumulated other comprehensive income consisting of unrealized gains on available-for-sale securities

      6,369       14,860  

Retained earnings (deficit)

      7,818       (5,218 )

Unearned restricted stock

      (715 )     (754 )

Treasury stock at cost (50 shares)

      (229 )     (229 )
    
 
       367,910       265,522  
    
 
     $ 3,459,001     $ 2,443,884  
    
 

 

See accompanying notes to financial statements.

 

1

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ANWORTH MORTGAGE ASSET CORPORATION

 

STATEMENT OF OPERATIONS

(in thousands, except for per share amounts)

(unaudited)

 

    

Three months ended

June 30,

    

Six months ended

June 30,

  
     2003
     2002
     2003
     2002
  

Interest income net of amortization of premium and discount

    $ 24,370     $ 12,217     $ 47,697     $ 20,142  

Interest expense

      (10,802 )     (5,114 )     (21,013 )     (8,121 )
    
 
 
 

Net interest income

      13,568       7,103       26,684       12,021  
    
 
 
 

Gain on sale of securities

      2,140       1,433       2,791       1,656  

Expenses:

                                 

External base management fee

      —         (192 )     —         (400 )

External incentive fee

      —         (1,013 )     —         (1,741 )

Compensation and benefits

      (361 )     (18 )     (747 )     (18 )

Incentive compensation

      (1,188 )     (324 )     (2,406 )     (324 )

Cost incurred in acquiring external manager (Note 4)

      —         (3,180 )     —         (3,180 )

Other expenses

      (587 )     (120 )     (928 )     (210 )
    
 
 
 

Total expenses

      (2,136 )     (4,847 )     (4,081 )     (5,873 )
    
 
 
 

Net income

    $ 13,572     $ 3,689     $ 25,394     $ 7,804  
    
 
 
 

Basic earnings per share

    $ 0.45     $ 0.29     $ 0.91     $ 0.71  
    
 
 
 

Average number of shares outstanding

      29,925       12,733       27,861       10,974  
    
 
 
 

Diluted earnings per share

    $ 0.45     $ 0.29     $ 0.91     $ 0.71  
    
 
 
 

Average number of diluted shares outstanding

      30,147       12,823       28,052       11,041  
    
 
 
 

Dividends declared per share

    $ 0.45     $ 1.00     $ 0.45     $ 1.00  
    
 
 
 

 

See accompanying notes to financial statements.

 

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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

    

Retained

Earnings

(Deficit)

    

Unearned

Restricted

Stock

    

Treasury

Stock at

Cost

    

Compre-
hensive

Income

     Total
  

Balance, December 31, 2002

   25,346   $ 253   $ 256,610   $ 14,860     $ (5,218 )   $ (754 )   $ (229 )         $ 265,522  

Issuance of common stock

   1,213     12     14,623                                           14,635  

Available-for-sale securities, fair value adjustment

                     836                             836       836  

Net income

                             11,822                     11,822       11,822  
                                                   
       

Total comprehensive income

                                                   12,658          
                                                   
       

Amortization of restricted stock

                                     20                     20  
   
 
 
 
 
 
 
       

Balance, March 31, 2003

   26,559   $ 265   $ 271,233   $ 15,696     $ 6,604     $ (734 )   $ (229 )         $ 292,835  
   
 
 
 
 
 
 
       

Issuance of common stock

   6,269     63     83,106                                           83,169  

Available-for-sale securities, fair value adjustment

                     (9,327 )