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, 2004
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 6, 2004, the Registrant had 45,728,258 shares of Common Stock outstanding.
ANWORTH MORTGAGE ASSET CORPORATION
FORM 10-Q
| Page | ||||||
| Part I. |
FINANCIAL INFORMATION | 1 | ||||
| Item 1. |
1 | |||||
| 1 | ||||||
| Statements of Operations for the three and six months ended June 30, 2004 and 2003 |
2 | |||||
| Statements of Stockholders’ Equity for the three months ended March 31, 2004 and June 30, 2004 |
3 | |||||
| Statements of Cash Flows for the three and six months ended June 30, 2004 and 2003 |
4 | |||||
| Statements of Comprehensive Income for the three and six months ended June 30, 2004 and 2003 |
5 | |||||
| 6 | ||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 | ||||
| Item 3. |
34 | |||||
| Item 4. |
34 | |||||
| Part II. |
OTHER INFORMATION | 37 | ||||
| Item 1. |
37 | |||||
| Item 2. |
37 | |||||
| Item 3. |
37 | |||||
| Item 4. |
37 | |||||
| Item 5. |
38 | |||||
| Item 6. |
39 | |||||
| 41 | ||||||
i
| Item 1. | Consolidated Financial Statements |
ANWORTH MORTGAGE ASSET CORPORATION
BALANCE SHEETS
(in thousands)
(unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Agency mortgage-backed securities: |
||||||||
| Agency mortgage-backed securities pledged to counterparties at fair value |
$ | 3,695,846 | $ | 3,954,019 | ||||
| Agency mortgage-backed securities at fair value |
269,782 | 291,834 | ||||||
| $ | 3,965,628 | $ | 4,245,853 | |||||
| Other mortgage-backed securities pledged to counterparties at fair value |
55,410 | — | ||||||
| Residential real estate loans |
988,911 | — | ||||||
| Allowance for loan losses |
(32 | ) | — | |||||
| Cash and cash equivalents |
11,345 | 196 | ||||||
| Restricted cash |
1,361 | — | ||||||
| Interest and dividends receivable |
19,635 | 17,007 | ||||||
| Derivative instruments at fair value |
7,087 | — | ||||||
| Prepaid expenses and other |
394 | 218 | ||||||
| $ | 5,049,739 | $ | 4,263,274 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Liabilities: |
||||||||
| Accrued interest payable |
$ | 21,493 | $ | 14,684 | ||||
| Repurchase agreements (Anworth Mortgage) |
3,535,523 | 3,775,691 | ||||||
| Repurchase agreements (Belvedere Trust) |
251,294 | — | ||||||
| Payable for purchase of mortgage-backed securities |
8,033 | — | ||||||
| Whole loan financing facilities |
335,802 | — | ||||||
| Long-term debt |
401,075 | — | ||||||
| Dividends payable |
— | 14,093 | ||||||
| Accrued expenses and other |
9,972 | 1,409 | ||||||
| $ | 4,563,192 | $ | 3,805,877 | |||||
| Minority interest |
153 | — | ||||||
| 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; 45,622 and 42,707 issued and outstanding |
456 | 427 | ||||||
| Additional paid-in capital |
525,182 | 488,909 | ||||||
| Accumulated other comprehensive (loss) income consisting of unrealized (losses) gains |
(42,380 | ) | (21,933 | ) | ||||
| Retained earnings (deficit) |
3,771 | (9,331 | ) | |||||
| Unearned restricted stock |
(635 | ) | (675 | ) | ||||
| 486,394 | 457,397 | |||||||
| $ | 5,049,739 | $ | 4,263,274 | |||||
See accompanying notes to financial statements.
1
ANWORTH MORTGAGE ASSET CORPORATION
(in thousands, except for per share amounts)
(unaudited)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Interest income net of amortization of premium and discount |
$ | 32,904 | $ | 24,370 | $ | 68,150 | $ | 47,697 | ||||||||
| Interest expense |
(19,346 | ) | (10,802 | ) | (34,286 | ) | (21,013 | ) | ||||||||
| Net interest income |
13,558 | 13,568 | 33,864 | 26,684 | ||||||||||||
| Gain on sale of securities |
102 | 2,140 | 259 | 2,791 | ||||||||||||
| Net gain on derivative instruments |
532 | — | 329 | — | ||||||||||||
| Expenses: |
||||||||||||||||
| Compensation and benefits |
(470 | ) | (361 | ) | (866 | ) | (747 | ) | ||||||||
| Incentive compensation |
(457 | ) | (1,188 | ) | (1,582 | ) | (2,406 | ) | ||||||||
| Provision for credit losses |
(32 | ) | — | (32 | ) | — | ||||||||||
| Legal and accounting services |
(250 | ) | (102 | ) | (398 | ) | (177 | ) | ||||||||
| Other expenses |
(662 | ) | (485 | ) | (1,329 | ) | (751 | ) | ||||||||
| Total expenses |
(1,871 | ) | (2,136 | ) | (4,207 | ) | (4,081 | ) | ||||||||
| Income from operations before income taxes and minority interest |
12,321 | 13,572 | 30,245 | 25,394 | ||||||||||||
| Income taxes |
(28 | ) | — | (79 | ) | — | ||||||||||
| Minority interest in net income of a subsidiary |
(103 | ) | — | (103 | ) | — | ||||||||||
| Net income |
$ | 12,190 | $ | 13,572 | $ | 30,063 | $ | 25,394 | ||||||||
| Basic earnings per share |
$ | 0.27 | $ | 0.45 | $ | 0.68 | $ | 0.91 | ||||||||
| Average number of shares outstanding |
45,016 | 29,925 | 44,346 | 27,861 | ||||||||||||
| Diluted earnings per share |
$ | 0.27 | $ | 0.45 | $ | 0.68 | $ | 0.91 | ||||||||
| Average number of diluted shares outstanding |
45,101 | 30,147 | 44,463 | 28,052 | ||||||||||||
| Dividends declared per share (see Note 12) |
$ | 0.38 | $ | 0.45 | $ | 0.38 | $ | 0.45 | ||||||||
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 |
Accumulative Other Comprehensive Derivatives |
Accumulative Other Comprehensive Income (Loss) Available-For- Agency |
Accumulative Other Comprehensive Other MBS |
Retained Earnings (deficit) |
Unearned Restricted Stock |
Comprehensive Income |
Total |
||||||||||||||||||||||||||
| Balance, December 31, 2003 |
42,707 | $ | 427 | $ | 488,909 | $ | — | $ | (21,933 | ) | $ | — | $ | (9,331 | ) | $ | (675 | ) | $ | — | $ | 457,397 | |||||||||||||
| Issuance of common stock |
1,584 | 16 | 21,124 | 21,140 | |||||||||||||||||||||||||||||||
| Available-for-sale securities, fair value adjustment |
950 | 13,963 | (18 | ) | 14,895 | 14,895 | |||||||||||||||||||||||||||||
| Net income |
17,873 | 17,873 | 17,873 | ||||||||||||||||||||||||||||||||
| Total comprehensive income |
$ | 32,768 | |||||||||||||||||||||||||||||||||
| Amortization of restricted stock |
20 | 20 | |||||||||||||||||||||||||||||||||