FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000March 31, 2001 or
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: 1-13991
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Maryland 13-3974868
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
399 Park Avenue, 36th Floor, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 935-8760
(Registrant's telephone number, including area code)
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
The number of shares of the Registrant's common stock outstanding on NovemberMay 9,
2000,2001, was 8,850,546.
-i-8,694,164.
- i -
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
BALANCE SHEETS
Sept. 30, 2000March 31, 2001
(Unaudited) Dec. 31, 19992000
--------------- ---------------
Assets
Investment in mortgage securities (Note 3) $ 491,597,709498,998,160 $ 475,719,711470,575,671
Investment in corporate debt securities (Note 4) 14,606,940 8,020,02615,742,926 15,665,727
Investment in corporate equity securities (Note 5) 9,256,382 3,130,8239,936,566 9,010,538
Cash and cash equivalents
Unrestricted 13,981,270 19,895,83314,899,522 8,400,539
Restricted 772,845 3,709,5771,207,428 498,875
Accrued interest and dividends receivable 3,955,016 2,855,3213,845,071 3,433,256
Other investments (Note 6) 3,335,834 3,220,3469,932,146 6,540,570
Goodwill, net 7,438,172 7,587,9487,338,322 7,388,247
Other assets 3,252,807 244,888772,201 976,889
--------------- ---------------
$ 548,196,975562,672,342 $ 524,384,473522,490,312
=============== ===============
Liabilities
Repurchase agreements (Note 7) $ 473,390,262482,148,607 $ 452,101,803448,583,432
Accrued interest payable 2,398,704 2,778,8422,133,455 2,038,887
Accounts payable 983,343 595,8051,082,118 550,209
Dividends payable 1,432,037 1,293,4101,517,862 1,406,288
--------------- ---------------
478,204,346 456,769,860486,882,042 452,578,816
--------------- ---------------
Stockholders' Equity
Stockholders' Equity
Common stock, $.01 par value; 10,000,000375,000,000 shares authorized
8,866,3468,694,164 and 8,978,6428,692,825 issued and outstanding in 2001 and 2000, and 1999, respectively 88,663 89,78686,941 86,928
Additional paid-in capital 75,273,042 75,831,56074,381,228 74,362,801
Retained earnings (687,521) (2,877,971)(accumulated deficit) 2,111,176 (440,084)
Accumulated other comprehensive income (4,681,555) (5,428,762)(789,045) (4,098,149)
--------------- ---------------
69,992,629 67,614,61375,790,300 69,911,496
--------------- ---------------
$ 548,196,975562,672,342 $ 524,384,473522,490,312
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
- 1 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three For the Three
For the Nine For the Nine
Months Ended Months Ended
Months Ended Months Ended
Sept. 30,March 31, 2001 March 31, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
----------------- ---------------
-------------- -------------
Mortgage securities income $ 8,311,2138,020,622 $ 6,512,407 $ 24,923,364 $ 17,100,5828,177,152
Corporate debt securities income 400,671 192,913 897,031 463,628467,355 240,374
Dividend income 263,266 74,969 722,316 252,787250,843 204,031
Interest income on temporary cash investments 180,957 88,551 473,965 225,545and cash equivalents 158,576 152,834
--------------- --------------- -------------- -------------
Total interest and dividend income 9,156,107 6,868,840 27,016,676 18,042,5428,897,396 8,774,391
Interest expense on borrowed funds 7,827,807 4,988,735 22,421,158 12,450,5826,535,736 6,966,395
--------------- --------------- -------------- -------------
Net interest and dividend income 1,328,300 1,880,105 4,595,518 5,591,9602,361,660 1,807,996
--------------- --------------- -------------- -------------
Income from other investments 316,225 2,343,256 818,587 2,592,0782,954,182 148,220
Net gainsloss on sale of investments 2,648,125(80,172) - 2,767,744 54,994
--------------- ---------------
-------------- -------------
2,964,350 2,343,256 3,586,331 2,647,0722,874,010 148,220
--------------- --------------- -------------- -------------
General and administrative expenses 994,723 1,052,855 1,968,683 2,297,448
Minority interest - (327) - 4,3931,167,373 461,465
--------------- --------------- -------------- -------------
994,723 1,052,528 1,968,683 2,301,841
--------------- --------------- -------------- -------------
Net income $ 3,297,9274,068,297 $ 3,170,833 $ 6,213,166 $ 5,937,1911,494,751
=============== =============== ============== =============
Net income, basic, per share $ .370.47 $ .35 $ .70 $ .660.17
=============== =============== ============== =============
Net income, fully diluted, per share $ .370.46 $ .35 $ .70 $ .660.17
=============== =============== ============== =============
Weighted average number of shares outstanding, 8,870,431 9,057,842 8,894,425 9,056,0428,692,840 9,003,083
basic
Weighted average number of shares outstanding, 8,757,435 9,010,290
fully diluted
The accompanying notes are an integral part of the consolidated financial statements.
- 2 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINETHREE MONTHS ENDED September 30, 2000MARCH 31, 2001
(UNAUDITED)
Stockholders' Equity
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Treasury
Other
Common Stock Paid-in Stock Retained Comprehensive
# of Shares Amount Capital At Cost Earnings Income Total
------------ ------------ ------------ ------------ ----- ------- ------------
------------ -------------
Balance at December 31, 1999 8,978,6422000 8,692,825 $ 89,78686,928 $ 75,831,56074,362,801 $ - $(2,877,971) $(5,428,762)(440,084) $ 67,614,613(4,098,149) $ 69,911,496
Comprehensive income:
Net income - - - 4,068,297 - 6,213,166 - 6,213,1664,068,297
Net unrealized holding gains
arising during the period - - - - - 789,863 789,863
Less: reclassification
adjustment for net gains included
in net income - - - - - (42,656) (42,656)3,309,104 3,309,104
------------ ------------ ------------- ------------ ------------ ------------
-------------
Comprehensive income - - - - 6,213,166 747,207 6,960,3734,068,297 3,309,104 7,377,401
Dividends paid or accrueddeclared - - - (1,517,037) - (4,022,716) - (4,022,716)
Common stock issued 7,804 78 39,918(1,517,037)
Stock options
revaluation adjustment - - - 39,996
Purchase of shares for treasury8,437 - - - (599,637)8,437
Issuance of common stock 1,339 13 9,990 - - (599,637)
Retirement of treasury stock (120,100) (1,201) (598,436) 599,637 - - -10,003
------------ ------------ ------------- ------------ ------------ ------------
-------------
Balance at September 30, 2000 8,866,346March 31, 2001 8,694,164 $ 88,66386,941 $ 75,273,04274,381,228 $ -2,111,176 $ (687,521)(789,045) $ (4,681,555) $ 69,992,62975,790,300
============ ============ ============= ============ ============ ============ =============
The accompanying notes are an integral part of the consolidated financial statements.
- 3 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the NineThree For the NineThree
Months Ended Months Ended
Sept. 30,March 31, 2001 March 31, 2000 Sept. 30, 1999
--------------- ---------------
Cash flows from operating activities
Net income $ 6,213,1664,068,297 $ 5,937,1911,494,751
Adjustments to reconcile net income to net cash
from operating activities:
Net gainsloss on saleinvestments 80,172 -
Amortization of investments (2,767,744) (54,994)
Minority interestpremium 461,303 352,312
Amortization of goodwill 49,925 49,926
Other amortization 342,394 -
4,393
Other - 43,298
Amortization 1,497,820 1,152,397Changes in assets and liabilities:
Increase in accrued interest and dividends receivable (1,099,695) (1,195,814)(411,815) (617,354)
(Increase) decrease in other assets (2,735,414) 166,336(118,441) 97,926
Increase (decrease) in accounts payable 387,538 196,159531,909 (100,019)
Increase (decrease) in accrued interest payable (380,138) 795,68394,568 (1,886,824)
---------------- ---------------
Net cash provided by (used in) operating activities 1,115,533 7,044,6495,098,312 (609,282)
---------------- ---------------
Cash flows from investing activities
Decrease in restricted cash 2,936,732 -
Principal payments on mortgage securities 72,836,203 83,007,05734,865,556 21,497,100
Proceeds from sale of mortgage securities 5,018,6775,543,828 -
Proceeds from sale of corporate debt securities 372,500 -
Proceeds from sale of corporate equity securities 1,149,644 1,127,500
Proceeds from sale of other investments 2,595,433 -
Increase in other investments (115,488) (2,124,699)
Purchases of mortgage securities (95,081,513) (274,957,850)(67,067,471) (59,419,766)
Purchases of corporate debt securities (6,708,750) (3,307,750)- (978,750)
Purchases of corporate equity securities (6,835,392) (2,403,055)- (4,639,591)
Increase in other investments (3,391,576) (123,260)
---------------- ---------------
Net cash used in investing activities (23,831,954) (198,658,797)(30,049,663) (43,664,267)
---------------- ---------------
Cash flows from financing activities
Net borrowings from repurchase agreements 21,288,459 205,494,14233,565,175 32,491,450
(Increase) decrease in restricted cash (708,553) 3,118,270
Stock purchased for treasury (599,637)retirement - (392,170)
Dividends and distributions paid (3,886,964) (6,038,321)(1,406,288) (1,293,410)
---------------- ---------------
Net cash provided by financing activities 16,801,858 199,455,82131,450,334 33,924,140
---------------- ---------------
Net increase (decrease) increase in unrestricted cash
and cash equivalents (5,914,563) 7,841,673
Cash6,498,983 (10,349,409)
Unrestricted cash and temporary cash investmentsequivalents at
beginning of period 8,400,539 19,895,833 6,045,955
---------------- ---------------
CashUnrestricted cash and temporary cash investmentsequivalents at
end of period $ 13,981,27014,899,522 $ 13,887,6289,546,424
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 22,801,2966,441,168 $ 12,254,423
Supplemental disclosure of non-cash investing activities:
Goodwill of $150,000 was recorded by the Company in 1999 as a result of the Merger.
During the nine months ended September 30, 2000, the Company issued 7,804 shares of its common stock
to its non-employee directors in partial payment of the annual retainer paid by the Company
to such directors. The aggregate value of such common stock issued was $39,996.8,853,219
The accompanying notes are an integral part of the consolidated financial statements.
During the quarter ended March 31, 2001, the Company issued 1,339 shares of
common stock with a value of $10,003 to a non-employee director.
- 4 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000MARCH 31, 2001
(UNAUDITED)
1. Organization
America First Mortgage Investments, Inc. (the Company) was incorporated in
Maryland on July 24, 1997. The Company began operations on April 10, 1998
when it merged with three partnerships: America First Participating/Preferred
Equity Mortgage Fund Limited Partnership (Prep Fund 1), America First Prep
Fund 2 Limited Partnership (Prep Fund 2), and America First Prep Fund 2 Pension
Series Limited Partnership (Pension Fund).
The Company has entered into an advisory agreement with America First Mortgage
Advisory Company (the Advisor) which provides advisory services in connection
with the conduct of the Company's business activities.
2. Summary of Significant Accounting Policies
A) Basis of Presentation
The accompanying interim unaudited financial statements have been prepared
according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted according to such
rules and regulations, although management believes that the disclosures
are adequate to make the information presented not misleading. The
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.2000. In the opinion of
management, all normal and recurring adjustments necessary to present
fairly the financial position at September 30, 2000March 31, 2001 and results of
operations for all periods presented have been made. The results of
operations for the three and nine-month periodsthree-month period ended September 30, 2000March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
The accompanying 2000 financial statements include the
accounts of the Company and the accompanying 1999 consolidated financial
statements include the accounts of the Company and its subsidiaries,
Pension Fund and Pension Fund's general partner, America First Capital
Associates Limited Partnership Six (AFCA 6). All significant intercompany
transactions and accounts have been eliminated in consolidation. Pension
Fund and AFCA 6 were liquidated and dissolved under the terms of their
respective partnership agreements during December 1999. In addition, asAs more fully discussed in Note 6, the Company has an investment in a
corporation and investments in threefour real estate limited partnerships, none
of which are controlled by the Company. These investments are accounted
for under the equity method.
The financial statements are prepared on the accrual basis of accounting
in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid
investments with original maturities of three months or less. The
carrying amount of cash equivalents approximates their fair value.
Restricted cash represents amounts held with certain lending
institutions with which the Company has repurchase agreements. Such
amounts may be used to make principal and interest payments on the related
repurchase agreements. - 5 -
C) Mortgage Securities, Corporate Debt Securities and Corporate Equity
Securities
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115), requires
the Company to classify its investments in mortgage securities,
corporate debt securities and corporate equity securities (collectively
referred to as investment securities) as either held-to-maturity,
available-for-sale or trading.
- 5 -
Although the Company generally intends to hold most of its mortgage
securities until maturity, it may, from time to time, sell any of its
mortgage securities as part of its overall management of its business.
In order to be prepared to respond to potential future opportunities in the
market, to sell mortgage securities in order to optimize the portfolio's
total return and to retain its ability to respond to economic conditions
that require the Company to sell assets in order to maintain an appropriate
level of liquidity, the Company has classified all its mortgage securities
as available-for-sale. Likewise, the Company has classified all its
corporate equity securities as available-for-sale. Mortgage securities and
corporate equity securities classified as available-for-sale are reported
at fair value, with unrealized gains and losses excluded from earnings and
reported in other comprehensive income. Corporate debt securities are
classified as held-to-maturity and are carried at amortized cost.
Unrealized losses on investment securities that are considered
other-than-temporary, as measured by the amount of decline in fair value
attributable to factors other than temporary, are recognized in income and
the cost basis of the investment security is adjusted. Other-than-temporary
unrealized losses on mortgage securities are based on management's assessment of various factors
affecting the expected cash flow from suchthe investment securities, including
an other-than-temporary deterioration of the credit quality of the
underlying mortgages and/or the credit protection available to the related
mortgage pool.
Gains or losses on the sale of investment securities are based on the
specific identification method.
Interest income is accrued based on the outstanding principal amount
of the investment securities and their contractual terms. Premiums
and discounts associated with the purchase of the investment securities
are amortized into interest income over the lives of the securities using
the effective yield method based on, among other things, anticipated estimated
prepayments.method. Such calculations are periodically adjusted for actual
prepayment activity.
Dividend income is recognized based on the ex-dividend date.
D) Credit Risk
The Company limits its exposure to credit losses on its investment
portfolio by requiring that at least 70%50% of its investment portfolio
consist of adjustable rate mortgage securities or mortgage loans that are:
(i)are insured or
guaranteed as to principal and interest by an agency of the U.S.
government, such as the Government National Mortgage Association (GNMA),
the Federal National Mortgage Association (FNMA), or the Federal Home Loan
Mortgage Corporation (FHLMC), (ii) rated in one of the two
highest rating categories by either Standard & Poor's or Moody's, or
(iii) considered to be of equivalent credit quality as determined by the
Advisor and approved by the Company's investment committee.. The remainder of the Company's assets may be:be
either: (i) mortgage assets rated at least
investment grade or considered to be of equivalent credit quality by the
Advisor with approval from the Company's investment committee; (ii) direct
investment (mezzanine or equity)investments in multifamily projects collateralizing
mortgage loans owned by the Company; (iii)apartment properties; (ii)
investments in limited partnerships, equities, real estate investment trusts or
closed-end funds owning a portfolio of mortgage and/or real estate assets; or (iv)(iii) other
corporatefixed-income instruments (corporate debt or corporate equity securities or government fixed-income
instrumentsmortgage
backed securities) that provide increased call protection relative to the
Company's securities.mortgage assets. Corporate debt that is rated below
investment gradeinvestment-grade will be limited to less than 5% of the Company's total
assets. As of September 30, 2000,March 31, 2001, and December 31, 1999,2000, approximately 79%77% and
75%, respectively, of the Company's total assets consisted of adjustable
rate mortgage securities insured or guaranteed by the U.S. government or an
agency thereof. At September 30,
2000,March 31, 2001, management determined no allowance for
credit losses was necessary.
- 6 -
E) Other Investments
Other investments consist of:of certain non-consolidated investments
accounted for under the equity method, including: (i) non-voting preferred
stock of a corporation owning interests in real estate limited
partnerships, and (ii) investments in unconsolidated limited partnerships owning real
estate.
F) Net income per Share
Net income per share is based on the weighted average number of common
shares and common equivalent shares (e.g., stock options), if dilutive,
outstanding during the period. Basic net income per share is computed by
dividing net income available to shareholders by the weighted average
number of common shares outstanding during the period. Diluted net
income per share is computed by dividing the diluted net income available
- 6 -
to common shareholders by the weighted average number of common shares and
common equivalent shares outstanding during the period. The common
equivalent shares are calculated using the treasury stock method which
assumes that all dilutive common stock equivalents are exercised and the
funds generated by the exercise are used to buy back outstanding common
stock at the average market price during the reported period.
As more fully discussed in Note 8, options to purchase 520,000 and
300,000 shares of common stock were granted on April 6, 1998, and August
13, 1999, respectively. During the quarterquarters ended September 30,March 31, 2001 and 2000,
the average price of the Company's stock was greater than the exercise
price of the options granted on August 13, 1999. As such, exercise of such
options under the treasury stock method is dilutive. Accordingly,
these dilutive securities were considered in fully diluted earnings per
share. For the quarter ended September 30, 1999, the average price of the Company's
stock was less than the exercise price; therefore exercise of such options
under the treasury stock method would be anti-dilutive. Accordingly, for
the quarter ended September 30, 1999, these potentially dilutive securities
were not considered in fully diluted earnings per share. With regard to the options granted on April 6, 1998, the exercise
price iswas greater than the average stock price during the quarters ended
September 30, 2000,March 31, 2001, and September 30, 1999;March 31, 2000; therefore, exercise of such options
under the treasury stock method would be anti-dilutive. Accordingly,
these potentially dilutive securities were not considered in fully diluted
earnings per share.
The following table sets forth the reconciliation of the weighted average
shares outstanding for the calculation of basic earnings per share to the
weighted average shares outstanding for the calculation of fully diluted
earnings per share for each period presented (unaudited):presented:
For the Three For the Three
For the Nine For the Nine
Months Ended Months Ended
Months Ended Months Ended
Sept. 30,March 31, 2001 March 31, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
------------- -------------
Weighted average shares outstanding for
basic earnings per share 8,870,431 9,057,842 8,894,425 9,056,0428,692,840 9,003,083
Add effect of assumed shares issued under
treasury stock method for stock options 24,602 - 15,865 -64,595 7,207
Weighted average shares outstanding for -------------- --------------- ------------- --------------
diluted earnings per share 8,895,033 9,087,842 8,910,290 9,056,0428,757,435 9,010,290
============== =============== ============= ==============
G) Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires the Company to display and report
comprehensive income, which includes all changes in Stockholders' Equity
with the exception of additional investments by or dividends to
shareholders. Comprehensive income for the Company includes net income and
the change in net unrealized holding gains (losses) on investments.
- 7 -
Comprehensive income for the three and nine months ended September 30,March 31, 2001, and March
31, 2000 and 1999 was as follows:
For the Three For the Three
For the Nine For the Nine
Months Ended Months Ended
Months Ended Months Ended
Sept. 30,March 31, 2001 March 31, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
--------------- ---------------
------------- -------------
Net income $ 3,297,9274,068,297 $ 3,170,833 $ 6,213,166 $ 5,937,191
Other comprehensive income (loss)
Unrealized holding gains (losses)
Net unrealized holding gains (losses) arising
during the period 3,165,750 (1,447,339) 789,863 (2,995,955)
Less: reclassification adjustment for net gains
included in net income (121,652) - (42,656) -
--------------- ---------------- -------------- --------------1,494,751
Change in net unrealized holding gains (losses) 3,044,098 (1,447,339) 747,207 (2,995,955)3,309,104 (2,515,588)
--------------- ---------------- -------------- -----------------------------
Comprehensive income $ 6,342,0257,377,401 $ 1,723,494 $ 6,960,373 $ 2,941,236(1,020,837)
=============== ================ ============== =============================
H) Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust
(REIT) under the provisions of the Internal Revenue Code and the
corresponding provisions of state law. As such, no provision for income
taxes has been made in the accompanying consolidated financial statements.
- 7 -
I) New Accounting Pronouncement
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities " (FAS 133). Certain provisions of FAS
133 were amended by Financial Accounting Standards No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" (FAS 138)
in June, 2000. TheThese statements provide new accounting and reporting
standards for the use of derivative instruments. Adoption of thethese
statements is required by the Company effective January 1, 2001.
Management intends to adopt thethese statements as required in fiscal 2001. Management believes that the impact
of such adoption will not be material to the financial statements.
Although the Company has not historically used such derivative instruments, it is not
precluded from doing so. In the future, management anticipates using such
derivative instruments only as hedges to manage interest rate risk.
Management does not anticipate entering into derivatives for speculative or
trading purposes. As of January 1, 2001, the Company had no outstanding
derivative hedging instruments nor any imbedded derivatives requiring
bifurcation and separate accounting under FAS 133, as amended.
Accordingly, there was no cumulative effect upon adoption of FAS 133, as
amended, on January 1, 2001.
J) Certain prior period amounts have been reclassified to conform with the
current period presentation.
3. Mortgage Securities
The following table presents the Company's mortgage securities as of September
30, 2000March 31,
2001 and December 31, 1999:2000.
September 30, 2000As of
March 31, 2001 As of
(Unaudited) December 31, 19992000
----------------- -----------------
FNMA Certificates $ 387,862,235420,073,485 $ 359,891,164377,668,990
GNMA Certificates 33,776,589 43,678,89716,787,093 24,529,046
FHLMC Certificates 9,812,599 13,220,8848,280,470 8,981,226
Commercial mortgage-backed securities 17,136,960 16,650,54411,696,424 17,135,031
Private label CMOs 43,009,326 42,278,22242,160,688 42,261,378
----------------- -----------------
$ 491,597,709498,998,160 $ 475,719,711470,575,671
================= =================
At September 30, 2000,March 31, 2001, and December 31, 1999,2000, mortgage securities consisted of
pools of adjustable-rate mortgage securities with carrying values of
$461,717,719$486,018,154 and $444,140,267,$450,992,165, respectively, and fixed-rate mortgage
securities with carrying values of $29,879,990$12,980,006 and $31,579,444,$19,583,506,
respectively. - 8 -
The Federal National Mortgage Association (FNMA) Certificates are backed by
first mortgage loans on pools of single-family properties. The FNMA
Certificates are debt securities issued by FNMA and are guaranteed by FNMA as
to the full and timely payment of principal and interest on the underlying
loans.
The Government National Mortgage Association (GNMA) Certificates are backed by
first mortgage loans on multifamily residential properties and pools of
single-family properties. The GNMA Certificates are debt securities issued
by a private mortgage lender and are guaranteed by GNMA as to the full and
timely payment of principal and interest on the underlying loans.
The Federal Home Loan Mortgage Corporation (FHLMC) Certificates are backed by
first mortgage loans on pools of single-family properties. The FHLMC
Certificates are debt securities issued by FHLMC and are guaranteed by FHLMC
as to the full and timely payment of principal and interest on the underlying
loans.
The commercial mortgage securities are rated AA or A by Standard and Poor's.
The private label CMOs (collateralized mortgage obligations) are rated AAA by
Standard and Poor's.
At September 30, 2000,March 31, 2001, and December 31, 1999,2000, all mortgage securities were
- 8 -
classified as available-for-sale and as such are carried at their fair value.
The following table presents the amortized cost, gross unrealized gains, gross
unrealized losses and fair value of mortgage securities as of September 30,
2000,March 31, 2001, and
December 31, 1999,2000, respectively:
As of
September 30, 2000March 31, 2001 As of
(Unaudited) DecemberDec. 31, 1999
-----------------2000
------------------ ------------------
Amortized cost $ 496,577,725500,801,848 $ 481,176,498474,638,436
Gross unrealized gains 640,759 461,675841,921 351,662
Gross unrealized losses (5,620,775) (5,918,462)
-----------------(2,645,609) (4,414,427)
------------------ ------------------
Fair value $ 491,597,709498,998,160 $ 475,719,711
=================470,575,671
================== ==================
4. Corporate Debt Securities
Corporate debt securities are classified as held-to-maturity. The following
table presents the amortized cost, gross unrealized gains, gross unrealized
losses and fair value of the corporate debt securities as of September 30,
2000,March 31, 2001,
and December 31, 1999:2000:
As of
September 30, 2000March 31, 2001 As of
(Unaudited) December 31, 19992000
------------------ ------------------
Amortized cost $ 14,606,94015,742,926 $ 8,020,02615,665,727
Gross unrealized gains 99,905 92,21144,689 24,900
Gross unrealized losses (1,551,345) (174,487)(6,009,365) (3,795,002)
------------------ ------------------
Fair value $ 13,155,5009,778,250 $ 7,937,75011,895,625
================== ==================
- 9 -
5. Corporate Equity Securities
Corporate equity securities are classified as available-for-sale. The
following table presents the cost, gross unrealized gains, gross unrealized
losses and fair value of the corporate equity securities as of September 30,
2000,March 31,
2001 and December 31, 1999:2000:
As of
September 30, 2000March 31, 2001 As of
(Unaudited) December 31, 19992000
------------------ ------------------
Cost $ 8,957,9218,921,923 $ 3,102,7989,045,923
Gross unrealized gains 703,609 224,8651,269,770 613,843
Gross unrealized losses (405,148) (196,840)(255,127) (649,228)
------------------ -------------------------------------
Fair value $ 9,256,3829,936,566 $ 3,130,8239,010,538
================== ==================
The Company recognized a permanent impairment loss of $124,000 for the three
months ended March 31, 2001, on one of its investments in corporate equity
securities. The cost basis of such security was adjusted accordingly.
- 9 -
6. Other Investments
Other investments consisted of the following as of September 30, 2000March 31, 2001 and December
31, 1999:2000:
As of
September 30, 2000March 31, 2001 As of
(Unaudited) DecemberDec. 31, 1999
------------------ -----------------2000
-------------- -------------
Investment in Retirement Centers Corporation $ 2,505,4685,421,429 $ 2,389,9802,540,180
Investment in and advances to unconsolidated real estate limited partnerships 830,366 830,366
------------------ -----------------4,510,717 4,000,390
------------- -------------
Total $ 3,335,8349,932,146 $ 3,220,346
================== =================6,540,570
============= =============
The Company's investment in Retirement Centers Corporation (RCC) represents a
95% ownership interest in such corporation. The Company owns 100% of the
non-voting preferred stock of RCC and a third party owns 100% of the common
stock. The Company accounts for its investment in RCC on the equity method.
As of September 30,March 31, 2001, RCC owned (i) a 128-unit apartment property located in
Omaha, Nebraska, which was acquired on January 12, 2000 and (ii) an 88.3%
undivided interest in a 192-unit apartment property located in Lawrenceville,
Georgia, which was acquired on January 18, 2001.
At December 31, 2000, RCC owned (i) the 128-unit apartment property referenced
above and (ii) a limited partnership interest in a real estate limited
partnership which operates an assisted living center located in Salt Lake
City, Utah, and (ii) a 127-unit apartment property
located in Omaha, Nebraska,Utah. On January 2, 2001, the limited partnership which owned the
assisted living center was acquired on January 12, 2000. As of
December 31, 1999, RCC's investments consisted of (i) itsliquidated with RCC receiving an undivided interest
in the real
estate limited partnership referenced above and (ii) cash which wasnet assets of such partnership. RCC then sold its undivided interest
in the net assets of the assisted living center. Such sale contributed
approximately $2,100,000 ($2,600,000 less an incentive fee of approximately
$511,000) (see Note 9) to the Company's net income for the quarter ended March
31, 2001. The proceeds of such sale were utilized to acquire the 192-unit
apartment property on January 12, 2000.18, 2001 as discussed above.
Investments in and advances to unconsolidated real estate limited partnerships
consist of investments in or advances made to limited partnerships which own
properties. These investments are not insured or guaranteed but rather are
collateralized by any government
agency or third party. The value of these investments is a function of the
underlying value of the real estate owned by such limited partnerships. They
are accounted for under the equity method of accounting. Certain of the
investments have a zero carrying value and, as such, earnings are recorded
only to the extent distributions are received. Such investments have not been
reduced below zero through recognition of allocated investment losses since
the Company has no legal obligation to provide additional cash support to the
underlying property partnerships as it is not the general partner, nor has it
indicated any commitment to provide this support. AtAs of March 31, 2001, and
December 31, 1999,2000, the Company had investments in four such limited
partnerships. However, on September 26, 2000,On January 18, 2001, the Company soldand one of its real estate
limited partnerships acquired the remaining 11.7% undivided interest in one of the
limited partnerships. Such sale contributed
approximately $2,100,000 ($2,600,000 less an incentive fee of approximately
$519,000 (see Note 9)), to the Company's net income for the quarter and nine
months ended September 30, 2000.192-unit apartment property discussed above.
7. Repurchase Agreements
As of September 30, 2000,March 31, 2001, the Company had outstanding balances of $473,390,262$482,148,607
under 5462 repurchase agreements with a weighted average borrowing rate of 6.58%
- 10 -5.38%
and a weighted average remaining maturity of 2.6 months. As of September 30,
2000, approximately 98.5%March 31,
2001, all of the Company's borrowings were fixed-rate term repurchase
agreements with original maturities that range from one to twelve months. As
of December 31, 1999,2000, the Company had outstanding balances of $452,101,803$448,583,432
under 3855 repurchase agreements with a weighted average borrowing rate of
5.72%.6.60% and a weighted average maturity of approximately one month.
- 10 -
At September 30, 2000,March 31, 2001, the repurchase agreements had the following remaining
maturities:
Within 30 days $155,153,892$ 311,618,478
30 to 90 days 170,046,44664,540,969
90 days to one year 148,189,924105,989,160
-------------
$473,390,262$ 482,148,607
=============
The repurchase agreements are collateralized by the Company's mortgage
securities and corporate debt securities with an aggregate current face value
of approximately $495$509.1 million and corporate equity securities with a current
market value of approximately $9.3$9.9 million. The repurchase agreements bear
interest at rates that are LIBOR based.
8. Stockholders' Equity
1997 Stock Option Plan
- ---------------------
The Company has a 1997 Stock Option Plan (the Plan) which authorizes the
granting of options to purchase an aggregate of up to 1,000,000 shares of the
Company's common stock, but not more than 10% of the total outstanding shares
of the Company's common stock. The Company has adopted an amendment to the
Plan that would increase the total number of options for shares available for
issuance to 1,400,000, subject to shareholder approval at its 2001 annual
meeting. The Plan authorizes the Boardboard of Directors,directors, or a committee of the
Boardboard of Directors,directors, to grant Incentive Stock Options (ISOs) as defined under
section 422 of the Internal Revenue Code, Non-Qualified Stock Options (NQSOs)
and Dividend Equivalent Rights (DERs) to eligible persons, other than
non-employee directors. Non-employee directors are eligible to receive grants
of NQSOs with DERs pursuant to the provisions of the Plan. The exercise price
for any options granted to eligible persons under the Plan shall not be less
than the fair market value of the common stock on the day of the grant. The
options expire if not exercised ten years after the date granted.
On April 6, 1998, 500,000 ISOs were granted to buy common shares at an
exercise price of $9.375 per share (the 1998 Grant). In addition, 20,000
NQSOs were issued at an exercise price of $9.375 per share. On August 13,
1999, 300,000 ISOs were granted to buy common shares at an exercise price of
$4.875 per share (the 1999 Grant). Prior to the 1998 Grant, no other options
were outstanding. As of September 30, 2000March 31, 2001 and December 31, 1999,
respectively,2000, 525,000 and 325,000 ISOs
were vested and exercisable. As of September 30, 2000March 31, 2001 and December 31, 1999,2000,
20,000 NQSOs were vested and exercisable. As of September 30, 2000,March 31, 2001, no options
had been exercised.
In addition to the options granted on April 6, 1998, 500,000 and 5,000 DERs
were also granted on the ISOs and NQSOs, respectively, based on the provisions
of the Plan. No DERs were granted on the ISOs granted on August 13, 1999.
DERs on the ISOs vest on the same basis as the options. DERs on NQSOs became
fully vested in April, 1999. Payments are made on vested DERs only. Vested
DERs are paid only to the extent of ordinary income and not on returns of
capital. Dividends paid on ISOs are charged to stockholders' equity when
declared and dividends paid on NQSOs are charged to earnings when declared.
For the three and nine months ended September 30,March 31, 2001, and March 31, 2000, the Company
recorded charges of $58,125$82,500 and $163,125,$35,000, respectively, to stockholders' equity
(included in dividends paid or accrued) associated with the DERs on ISOs and
charges of $775$825 and $2,875,$1,400, respectively, to earnings associated with DERs on
NQSOs. For the three and nine months ended September 30, 1999, the Company
recorded charges of $35,000 and $82,500, respectively, to stockholders'
equity (included in dividends paid or accrued) associated with DERs on ISOs
and charges of $1,400 and $3,300, respectively, to earnings associated with
DERs on NQSOs.
- 11 -
The options and related DERs issued were accounted for under the provisions of
SFAS 123, "Accounting for Stock Based Compensation". Because the ISOs were
not issued to officers who are direct employees of the Company, ISOs granted
were accounted for under the option value method as variable plan grants and a
periodic charge will beis recognized based on the vesting schedule. The charge
for options which vested immediately with the 1998 Grant was included as
capitalized transaction costs in connection with the Merger. Until fixed and
determinable, management estimates the value of the ISOs granted as of each
balance sheet date using a Black-Scholes valuation model, as adjusted for the
- 11 -
discounted value of dividends not to be received under the unvested DERs. In
the absence of comparable historical market information for the Company,
management originally utilized assumptions consistent with activity of a
comparable peer group of companies including an estimated option life, a
volatility rate, a risk-free rate and a current dividend yield (or 0% if the
related DERs are issued). For the three and nine months ended September 30,March 31, 2001, and
March 31, 2000, as part of operations, the Company reflected earnings charges
of $14,344$125,643 and $167,019,$96,854, respectively, representing the value of ISOs/DERs granted over
their vesting period. For the nine months ended September 30, 1999, as part
of operations, the Company reflected an earnings charge of $117,798,
representing the value of the ISOs/DERs
granted over their vesting period. NQSOs granted were accounted for using the
intrinsic method and, accordingly, no earnings charge was reflected since the
exercise price was equal to the fair market value of the common stock at the
date of the grant.
Dividends/Distributions
- -----------------------
The CompanyOn February 12, 2001, the Company's board of directors declared a dividend of
$.165 per share for the following dividends and distributions during 2000 and
1999:
Amount per
Declaration Date Record Date Payment Date Share
- ---------------- ------------ ------------ -----------
During 2000:
March 17, 2000 April 14, 2000 May 17, 2000 $ .140
June 14, 2000 June 30, 2000 August 17, 2000 $ .140
September 18, 2000 October 16, 2000 November 17, 2000 $ .155
During 1999:
March 24, 1999 April 5, 1999 May 17, 1999 $ .265 (1)
June 14, 1999 June 30, 1999 August 17, 1999 $ .125
September 21, 1999 September 30, 1999 November 17, 1999 $ .140
(1) As part of the Merger transaction, the Company made quarterly distributions of
$.265 per common share ($1.06 per common share per year) in the first year
following the Merger (i.e. through the first quarter of 1999.)
quarter ended March 31, 2001, payable on April 30,
2001, to shareholders of record as of April 16, 2001.
Stock Repurchase Plan
- ---------------------
In connection with the Company's 400,000600,000 share repurchase program, the Company
purchased and retired 120,100293,621 shares during the nine monthsyear ended September
30,December 31, 2000,
at an aggregate cost of $599,637 (7,600 shares$1,511,613. During the year ended December 31, 1999,
the Company purchased and retired 84,600 share at an aggregate cost of
$41,185 for the three months ended September 30, 2000).$412,208. Since implementing the stock repurchase program during the fourth
quarter of 1999, through September 30, 2000,March 31, 2001, the Company has purchased and
retired 204,700378,221 shares at an aggregate cost of $1,011,845.$1,923,821 (none during the
quarter ended March 31, 2001).
9. Related Party Transactions
The Advisor manages the operations and investments of the Company and performs
administrative services for the Company. In turn, the Advisor receives a
management fee payable monthly in arrears in an amount equal to 1.10% per
annum of the first $300 million of Stockholders' Equity of the Company, plus
.80% per annum of the portion of Stockholders' Equity of the Company above
$300 million. The Company also pays the Advisor, ason a quarterly basis, an
incentive compensation - 12 -
for each fiscal quarter, an amount equal tofee of 20% of the dollar amount by which the annualizedits Return on Equity
for such fiscaleach quarter exceeds the amount
necessary to provide an annualized Returna return based on Equity equal to the Ten-Year U.S. Treasury Rate
plus 1%. For the three and nine months ended September 30,March 31, 2001, and March 31, 2000, the
Advisor earned a base management fee of $183,572$209,004 and $545,919,$182,925, respectively,
and incentive compensation of $544,985$752,789 and $670,214,$71,260, respectively.
Approximately $519,000$511,000 of the incentive fee earned for the
quarter and nine months ended September 30, 2000,in 2001 was attributable to
the sale of the Company's limited partnership interest as described in Note 6. For the
three and nine months ended September 30, 1999, the Advisor earned a base
management fee of $190,760 and $573,546, respectively, and incentive
compensation of $498,543 and $633,150, respectively. Approximately $435,000
of the incentive fee for the quarter and nine months ended September 30, 1999
was attributable to the sale of undivided interests in the net assets of four
real estate limited partnerships.
America First Properties Management Company L.L.C., (the Manager), provides
property management services for certain of the multifamily properties in which the Company
has an interest. The Manager receives a management fee equal to a stated
percentage of the gross revenues generated by the properties under management,
ranging from 3.5% to 5%4% of gross revenues. Such fees paid by the entities
which own the multifamily properties in which the Company has an interest for
the three and nine months ended September 30,March 31, 2001 and March 31, 2000, amounted to $96,774$108,435
and $288,340,$94,549, respectively.
Such fees paid by10. Subsequent Events
On April 30, 2001, the Company forfiled a Registration Statement on Form S-2 with
the threeSecurities and nine months ended September 30, 1999, amountedExchange Commission offering 7,500,000 shares of its
common stock. The Registration Statement also covers an additional 1,125,000
shares that may be issued to $85,014cover the underwriter's over allotment option.
Net proceeds from the proposed offering of common stock will be utilized to
acquire additional mortgage-backed securities, interests in multifamily
apartment properties and $252,459, respectively.
other investments consistent with the Company's
investment criteria.
- 1312 -
Item 2.
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with all of the
financial statements and notes included in Item 1 of this report as well as
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.2000.
General
The Company was incorporated in Maryland on July 24, 1997. The Company began
operations on April 10, 1998 when it merged with three partnerships: America
First Participating/Preferred Equity Mortgage Fund Limited Partnership ("Prep
Fund 1"), America First Prep Fund 2 Limited Partnership ("Prep Fund 2"), and
America First Prep Fund 2 Pension Series Limited Partnership ("Pension Fund").
America First Mortgage Advisory Corporation (the "Advisor") provides advisory
services to the Company in connection with the conduct of the Company's
business activities. The Company's principal investment strategy includes
leveraged investing in adjustable rate mortgage securities. The Company's
investment strategy also provides for the acquisition of multifamily housing
properties, REIT securities and mortgage
loans.high-yield corporate securities. Since
commencing operations and through September 30, 2000,March 31, 2001, the Company purchased
adjustable-rate mortgage securities with a face value at the time of purchase
of approximately $658.1$735.3 million (mortgage securities with a face value of
approximately $87$66.1 million were purchased during the ninethree months ended September
30, 2000)March
31, 2001).
The Company has elected to be treatedbecome subject to tax as a real estate investment
trust ("REIT") for federal income tax purposesunder the Code beginning with its 1998 taxable year and, as
such, anticipates distributing annually at least 95%90% (95% prior to January 1, 2001)
of its taxable income, subject to certain adjustments. Generally, cash for
such distributions is expected to be largely generated from the Company's
operations, although the Company may borrow funds to make distributions. The
CompanyOn
February 12, 2001, the Company's board of directors declared a dividend of
$0.165 per share for the following dividends during 2000:
Amount per
Declaration Date Record Date Payment Date Share
- ---------------- ------------ ------------ -----------
March 17, 2000 April 14, 2000 May 17, 2000 $ .140
June 14, 2000 June 30, 2000 August 17, 2000 $ .140
September 18, 2000 October 16, 2000 November 17, 2000 $ .155
quarter ended March 31, 2001, payable on April 30,
2001, to shareholders of record as of April 16, 2001. On April 9, 2001, the
Company's board of directors declared a dividend of $0.175 per share for the
quarter ended June 30, 2001, payable on July 16, 2001, to shareholders of
record as of June 30, 2001.
The Company's operations for any period may be affected by a number of factors
including the investment assets held, general economic conditions affecting
underlying borrowers and, most significantly, factors which affect the
interest rate market. Interest rates are highly sensitive to many factors,
including governmental monetary and tax policies, domestic and international
economic and political considerations, and other factors beyond the control of
the Company.
Due to the on-going implementation of the Company's investment strategy, the
currently reported financial information is not necessarily indicative of the
Company's future operating results or financial condition.
Liquidity and Capital Resources
The Company's principal sources of capital consist of borrowings under
repurchase agreements, principal payments received on its portfolio of
mortgage securities and cash provided by operations. Principal uses of cash
include the acquisition of investment securities, the payment of operating
expenses and the payment of dividends to shareholders.
During the ninethree months ended September 30, 2000,March 31, 2001, the Company acquired $108.6$67.1
million of mortgage securities, corporate debt securities and corporate equity securities. Financing for these acquisitions was provided
primarily through the utilization of repurchase agreements, supplemented by
cash flow from operations of $8.4$2.6 million. Net borrowings under such
repurchase agreements totaled $21.3$33.6 million during the ninethree months ended
September 30, 2000.March 31, 2001. The Company also received principal payments of $72.8$34.9 million
on its mortgage - 14 -
securities during the nine months ended September 30, 2000. Other sources of
funds during the nine months ended September 30, 2000, consisted of $5and $5.5 million $1.1 million and $0.4 million in proceeds received from the sale of mortgage
securities corporate equity securities and corporate debt
securities, respectively. The Company also received $2.6 million in proceeds
fromduring the sale of its limited partnership interest in a real estate limited
partnership.three months ended March 31, 2001. Other uses of funds
during the ninethree months ended September 30,
2000, consisted of $3.9March 31, 2001, included $3.4 million for dividend payments and $0.6 millionprimarily
for the acquisition of 120,100 shares of its own common stock pursuant toan interest in a stock
repurchase program implemented in the fourth quarter of 1999.multifamily housing property and a
$1.4 million dividend payment.
The Company's borrowings under repurchase agreements totaled $473.4$482.1 million at
September 30, 2000,March 31, 2001, and had a weighted average borrowing rate of 6.58%5.38% as of such
date. At September 30, 2000,March 31, 2001, the repurchase agreements had balances of between
$0.6$0.3 million and $58.6$51.7 million. Approximately 98.5% theseThese arrangements have original terms to
- 13 -
maturity ranging from one month to twelve months and annual interest rates
based on LIBOR. To date, the Company has not had any
significant margin calls on its
repurchase agreements that were relatedit was not able to satisfy with either cash or
additional pledged collateral.
On April 30, 2001, the Company filed a decrease inRegistration Statement on Form S-2 with
the valueSecurities and Exchange Commission offering 7,500,000 shares of its
collateral.
In connectioncommon stock. The Registration Statement also covers an additional 1,125,000
shares that may be issued to cover the underwriter's over allotment option.
Net proceeds from the proposed offering of common stock will be utilized to
acquire additional mortgage-backed securities, interests in multifamily
apartment properties and other investments consistent with the Company's
400,000 share repurchase program, the Company
purchased and retired 120,100 shares during the nine months ended September
30, 2000, at an aggregate cost of $599,637. Since implementing the stock
repurchase program during the fourth quarter of 1999, through September 30,
2000, the Company has purchased and retired 204,700 shares at an aggregate
cost of $1,011,845.investment criteria.
The Company believes it has adequate financial resources to meet its
obligations as they come due and fund committed dividends as well as to
actively pursue its investment policy.
Results of Operations
Three Month Period Ended September 30, 2000March 31, 2001 Compared to 19992000
During the three months ended September 30, 2000,March 31, 2001, total interest and dividend
income for the Company increased $2.3$0.1 million (33%(1.4%) as compared to total
interest and dividend income for the three months ended September 30, 1999.March 31, 2000. This
increase is primarily the result of a 20% increase in the Company's
average interest earning assets from $442 million to $529 million for the
respective periods in 1999 and 2000. Also contributing to the increase was an increase in the annualized yield on the
Company's average interest earning assets to 6.92%6.81% for the three months ended September 30, 2000,March
31, 2001, up from 6.22%6.70% for the comparable period in 1999.2000. The Company's
average interest-earning assets for the three months ended March 31, 2001
approximated those of the same period in 2000.
The Company's interest expense increased $2.8decreased $0.4 million (57%(6.2%) for the three
months ended September 30, 2000March 31, 2001, compared to the comparable period in 1999.2000. Such
increasedecrease is due primarily due to a 24% increasedecrease in average amount of funds
borrowed from $383 million to $473 million for the respective periods in 1999
and 2000. In addition, the Company's average interest cost
on such borrowed funds
increasedfrom 5.95% to an average of 6.62%5.62% for the three months ended September 30,March 31, 2000 up from 5.21%and 2001,
respectively. The Company's average outstanding borrowings for the three
months ended September 30, 1999.March 31, 2001 approximated those of the same period in 2000.
The Company's interest rate margin (calculated by dividing annualized net
interest and divided income by the average interest earning assets) was 1.81%
for the three months ended March 31, 2001, compared to 1.38% for the same
period in 2000. As a result of the narrowingwidening of the Company's interest ratesuch margin, net interest and
dividend income decreased by 29%increased $0.6 million (31%) from $1,880,105$1.8 million to $2.4 million
for the quarterthree months ended September 30, 1999 to $1,328,300 for the quarter ended September 30,
2000.March 31, 2000 and 2001, respectively.
Income from other investments excludingincreased $2.8 million for the three months
ended March 31, 2001, compared to the same period in 2000. Included in such
income for the three months ended March 31, 2001, is a gain of approximately
$2.3$2.6 million (excluding the related incentive fee) realized during the quarter ended
September 30, 1999 in conjunction withwhich resulted from the sale by a non-consolidated subsidiary of
RCC'sits undivided interestsinterest in the net assets of four limited partnerships,an assisted living center.
Excluding such gain, income from other investments increased approximately
$232,000 for the three months ended September 30, 2000 compared$0.2 million due
to the
comparable period in 1999. This increase resulted from higher income realized
ongenerated by the Company's real estate investments.
During the quarter ended September 30, 2000, the Company realized a net gain
of $2,648,125 on the sale of investments. Approximately $2.6 million of such
gain resulted from the Company's September 26, 2000, sale of its limited
partnership interestinvestments in one of itsunconsolidated real
estate limited partnerships.
The remainingCompany recognized a net loss of $80,172 on its investments during the
three months ended March 31, 2001, resulting from a permanent impairment loss
recognized on one of its investments in corporate equity securities. (See Note
5). Such loss was partially offset by a gain of approximately $53,000 is primarily attributable toon the sale of corporate equitycommercial
mortgage-backed securities. The Company recognized no such gains or losses
during the comparable period in 2000.
General and administrative expenses for the Company for the three months ended
- 15 -
September 30, 2000 decreased $58,000March 31, 2001, increased $0.7 million as compared to the three months ended
September 30, 1999.March 31, 2000. Such decrease consisted of: (i)increase is attributable to a decrease of $30,000 due
to expenses incurred in 1999 by a consolidated subsidiary which was liquidated
in December 1999; (ii) a $74,000 decrease attributable primarily to decreases
in various servicing, filing fees and printing costs; partially offset by
(iii) a $46,000 increase inhigher incentive
compensation payable tofee earned by the Advisor byof which $0.5 million resulted from the
Company.
Nine Month Period Ended September 30, 2000 Compared to 1999
During the nine months ended September 30, 2000, total interestsale described in Note 6 and dividend
income for the Company increased $9$0.2 million (50%) as compared to total
interest and dividend income for the nine months ended September 30, 1999.
This increase is primarily the result of a 47% increase in the Company's
average interest earning assetsresulted from $354 million to $522 million for the
respective periods in 1999 and 2000. Also contributing to the increase was an increase in income
generated by the annualized yield on the Company's average interest earning
assets to 6.91% for the nine months ended September 30, 2000, up from 6.79%
for the comparable period in 1999.
The Company's interest expense increased $10 million (80%) for the nine months
ended September 30, 2000 compared to the comparable period in 1999. Such
increase is primarily due to a 58% increase in average amount of funds
borrowed from $293 million to $463 million for the respective periods in 1999
and 2000. In addition, the Company's interest cost on such borrowed funds
increased to an average of 6.46% for the nine months ended September 30, 2000
up from 5.67% for the nine months ended September 30, 1999.
As a result of the narrowing of the Company's interest rate margin, net
interest and dividend income decreased by 18% from $5,591,960 for the nine
months ended September 30, 1999 to $4,595,518 for the nine months ended
September 30, 2000.
Income from other investments, excluding a gain of approximately $2.3 million
(excluding the related incentive fee) realized during the third quarter of
1999 in conjunction with the sale of RCC's undivided interests in the net
assets of four limited partnerships, increased approximately $486,000 for the
nine months ended September 30, 2000 compared to the comparable period in
1999. This increase resulted from higher income realized on the Company's
real estate investments.
During the nine months ended September 30, 2000, the Company realized a net
gain of $2,767,744 on the sale of investments. Approximately $2.6 million of
such gain resulted from the Company's September 26, 2000, sale of its limited
partnership interest in one of its real estate limited partnerships. During
the nine months ended September 30, 2000, the Company also sold corporate debt
securities and corporate equity securities for a gain of approximately
$365,000 which was partially offset by a loss of approximately $192,000 on the
sale of numerous small pools of fixed-rate mortgage securities. This compares
to a gain of approximately $55,000 realized on the sale of corporate equity
securities and a number of small pools of fixed-rate mortgage securities
during the nine months ended September 30, 1999.
General and administrative expenses for the Company for the nine months ended
September 30, 2000 decreased $329,000 (14%) as compared to the nine months
ended September 30, 1999. Approximately $112,000 of such decrease is due to
expenses incurred in 1999 by a consolidated subsidiary which was liquidated in
December 1999. The remaining decrease of $217,000 is primarily attributable
to decreases in various servicing, filing fees and printing costs.Company.
Other Matters
The Company at all times intends to conduct its business so as to not become
regulated as an investment company under the Investment Company Act of 1940.
If the Company were to become regulated as an investment company, then, among
other things, the Company's ability to use leverage would be substantially
- 14 -
reduced. The Investment Company Act exempts entities that are "primarily
engaged in the business of purchasing or otherwise acquiring mortgages and
other liens on and interests in real estate" (i.e. "Qualifying Interests").
Under the current interpretation of the staff of the SEC, in order to qualify
for this exemption, the Company must maintain at least 55% of its assets
directly in Qualifying Interests. In addition, unless certain mortgage
securities represent an undivided interest in the entire pool backing such
mortgage securities (i.e. "whole pool" mortgage securities), such mortgage
securities may be treated as securities separate from the underlying mortgage
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loan, thus, may not be considered Qualifying Interests for purposes of the 55%
exemption requirement. Accordingly, the Company monitors its compliance with
this requirement in order to maintain its exempt status. As of September 30,March 31,
2000, the Company determined that it is in and has maintained compliance with
this requirement.
Forward Looking Statements
When used in this Form 10-Q, in future SEC filings or in press releases or
other written or oral communications, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. The Company cautions that such forward looking statements
speak only as of the date made and that various factors including regional
and national economic conditions, changes in levels of market interest
rates, credit and other risks of lending and investment activities, and
competitive and regulatory factors could affect the Company's financial
performance and could cause actual results for future periods to differ
materially from those anticipated or projected.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect events or circumstances after
the date of such statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the Company's market risk since
December 31, 1999.
2000.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger by and among the Registrant,
America First Participating/Preferred Equity Mortgage Fund
Limited Partnership, America First Prep Fund 2 Limited
Partnership, America First Prep Fund 2 Pension Series
Limited Partnership and certain other parties, dated as of
July 29, 1997 (incorporated herein by reference to Exhibit
2.1 of the Registration Statement on Form S-4 dated
February 12, 1998, filed by the Registrant pursuant to the
Securities Act of 1933 (Commission File No. 333-46179)).
3.1 Amended and Restated Articles of Incorporation of the
Registrant (incorporated herein by reference tofrom Form 8-K
dated April 10, 1998, filed by the Registrant pursuant to
the Securities Exchange Act of 1934 (Commission File No.
1-13991)).
3.2 Amended and Restated Bylaws of the Registrant (incorporated
herein by reference tofrom Form 8-K dated April 10, 1998,
filed by the Registrant pursuant to the Securities Exchange
Act of 1934 (Commission File No. 1-13991)).
4.1 Specimen of Common Stock Certificate of the Company.
(incorporated herein by reference to Exhibit 4.1 of the
Registration Statement on Form S-4 dated February 12, 1998,
filed by the Registrant pursuant to the Securities Act of
1933 (Commission File No. 333-46179)).
10.1 Advisory Agreement, dated April 9, 1998, by and between
the Company and the Advisor (incorporated herein by
reference tofrom Form 8-K dated April 10, 1998 filed by
the Company pursuant to the Securities Exchange Act of
1934 (Commission File No. 1-13991)).
10.2 Employment Agreement of Stewart Zimmerman (incorporated
herein by reference to Exhibit 10.2 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.3 Employment Agreement of William S. Gorin (incorporated
herein by reference to Exhibit 10.3 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.4 Employment Agreement of Ronald A. Freydberg (incorporated
herein by reference to Exhibit 10.4 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.5 Addendum to Employment Agreement of Stewart Zimmerman
(incorporated herein by reference to Form 10-Q dated
March 31, 2000, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934
(Commission File No. 1-13991)).
10.6 Addendum to Employment Agreement of William S. Gorin
(incorporated herein by reference to Form 10-Q dated
March 31, 2000, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934
(Commission File No. 1-13991)).
10.7 Addendum to Employment Agreement of Ronald A. Freydberg
(incorporated herein by reference to Form 10-Q dated
March 31, 2000, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934
(Commission File No. 1-13991)).
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10.8 Amended and Restated 1997 Stock Option Plan of the Company
(incorporated herein by reference to Form 10-K dated
December 31, 1999, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (Commission File No. 1-13991)).
10.9 Form of Dividend Reinvestment Plan (incorporated herein by
reference to Appendix C of the Registration Statement on
Form S-4 dated February 12, 1998, filed by the Registrant
pursuant to the Securities Act of 1933 (Commission File No.
333-46179)).
27. Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during
the quarter for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 11, 2000May 10, 2001 AMERICA FIRST MORTGAGE INVESTMENTS, INC.
By /s/ Stewart Zimmerman
Stewart Zimmerman
President and Chief Executive Officer
By /s/ Gary Thompson
Gary Thompson
Authorized Officer and Chief Financial Officer
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