UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 2007, and the unaudited pro forma condensed consolidated
statements of income for the year ended December 31, 2006, and the nine months
ended September 30, 2007, are based on the historical financial statements of
American Mortgage Acceptance Company ("AMAC") after giving effect to the
disposition of certain investments and adjustments described in the accompanying
notes as if such dispositions had occurred as of September 30, 2007, for the pro
forma balance sheet purposes and as of January 1, 2006, for pro forma income
statement purposes.
The pro forma financial statements are based upon available information,
preliminary estimates and certain assumptions that we believe are reasonable in
the circumstances, as set for in the notes to the pro forma financial
statements.
The unaudited pro forma statements are presented for informational purposes only
and are not necessarily indicative of the future financial position or results
of operations of AMAC or the financial position or the results of operations
that would have been realized had the disposition transactions been consummated
during the period or as of the dates for which the pro forma statements are
presented.
The unaudited pro forma financial information should be read in conjunction
with, and is qualified by reference to, AMAC's historical consolidated financial
statements and notes thereto.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET OF AMERICAN MORTGAGE ACCEPTANCE COMPANY
As of September 30, 2007
(In Thousands)
HISTORICAL PRO FORMA
AMAC ADJUSTMENTS PRO FORMA
------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 11,528 $ (7,000)(b)(c) $ 4,528
Restricted cash 2,507 - 2,507
Investments
Mortgage loans receivable, net 710,733 (161,160)(a) 549,573
Available-for-sale investments, at fair value
Debt securities 71,528 (71,528)(a) -
CMBS 108,621 (22,113)(a) 86,508
CDO securities 8,672 (8,672)(a) -
Mortgage revenue bonds 4,860 - 4,860
Accounts receivable 11,165 (1,567)(b) 9,598
Deferred charges and other assets, net 7,456 (318)(c) 7,138
------------ ------------ ------------
TOTAL ASSETS $ 937,070 $ (272,358) $ 664,712
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
CDO notes payable $ 362,000 $ - $ 362,000
Repurchase facilities 399,780 (238,176)(a) 161,604
Line of credit - related party 39,300 (13,290)(a) 26,010
Preferred shares of subsidiary (subject to mandatory
repurchase) 25,000 - 25,000
Accounts payable and accrued expenses 27,024 (8,883)(b)(c) 18,141
Due to Advisor and affiliates 1,607 - 1,607
Dividends payable 2,110 - 2,110
------------ ------------ ------------
TOTAL LIABILITIES 856,821 (260,349) 596,472
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 80,249 (12,009)(a)(c) 68,240
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 937,070 $ (272,358) $ 664,712
============ ============ ============
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME OF AMERICAN MORTGAGE ACCEPTANCE COMPANY
For the Nine Months Ended September 30, 2007
(In Thousands, Except Per Share Amounts)
HISTORICAL PRO FORMA
AMAC ADJUSTMENTS PRO FORMA
----------- ----------- -----------
REVENUES:
Interest income $ 43,753 $ (11,338)(d) $ 32,415
Other revenues 1,008 - 1,008
----------- ----------- -----------
Total revenues 44,761 (11,338) 33,423
----------- ----------- -----------
EXPENSES
Interest 30,890 (10,006)(e)(f) 20,884
Interest - distributions to preferred shares of subsidiary 1,677 - 1,677
General and administrative 2,696 - 2,696
Impairment of investments 1,276 (1,140)(d) 136
Fees to Advisor and affiliates 2,929 (23)(g) 2,906
Amortization and other 609 - 609
----------- ----------- -----------
Total expenses 40,077 (11,169) 28,908
----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of ARCap 337 - 337
Change in fair value or termination of derivative instruments (39) 39(h) -
Loss on repayment or sale of investments (59) - (59)
----------- ----------- -----------
Total other income 239 39 278
----------- ----------- -----------
Income from continuing operations 4,923 (130) 4,793
Income from discontinued operations, including gain on sale of
real estate owned 3,531 - 3,531
----------- ----------- -----------
Net income 8,454 (130) 8,324
7.25% Cumulative Preferred dividend requirements (219) - $ (219)
----------- ----------- -----------
Net income available to common shareholders $ 8,235 $ (130) $ 8,105
=========== =========== ===========
Earnings per share:
Basic
Income from continuing operations $ 0.56 $ 0.54
Income from discontinued operations 0.42 0.42
----------- -----------
Net income $ 0.98 $ 0.96
=========== ===========
Diluted
Income from continuing operations $ 0.56 $ 0.55
Income from discontinued operations 0.40 0.40
----------- -----------
Net income $ 0.96 $ 0.95
=========== ===========
Weighted average shares outstanding:
Basic 8,404 8,404
=========== ===========
Diluted 8,794 8,794
=========== ===========
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME OF AMERICAN MORTGAGE ACCEPTANCE COMPANY
For the Year Ended December 31, 2006
(In Thousands, Except Per Share Amounts)
HISTORICAL PRO FORMA
AMAC ADJUSTMENTS PRO FORMA
----------- ----------- -----------
REVENUES:
Interest income $ 38,342 $ (5,339)(d) $ 33,003
Other revenues 286 - 286
----------- ----------- -----------
Total revenues 38,628 (5,339) 33,289
----------- ----------- -----------
EXPENSES
Interest 19,149 (4,841)(e)(f) 14,308
Interest - distributions to preferred shares of subsidiary 2,241 - 2,241
Mortgage interest for real estate owned - held and used 2,376 - 2,376
Property operations of real estate owned - held and used 3,527 - 3,527
General and administrative 2,500 - 2,500
Impairment of investments 17,496 - 17,496
Fees to Advisor 3,483 (16)(g) 3,467
Depreciation 1,345 - 1,345
Amortization and other 160 - 160
----------- ----------- -----------
Total expenses 52,277 (4,857) 47,420
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of ARCap 19,223 - 19,223
Change in fair value or termination of derivative instruments (5,522) 498(h) (5,024)
Equity in earnings of ARCap 3,000 - 3,000
Loss on sale or repayment of investments (934) - (934)
----------- ----------- -----------
Total other income 15,767 498 16,265
----------- ----------- -----------
Income from continuing operations 2,118 16 2,134
Income from discontinued operations 569 - 569
----------- ----------- -----------
Net income $ 2,687 $ 16 $ 2,703
=========== =========== ===========
Per share amounts (basic and diluted):
Income from continuing operations $ 0.25 $ 0.26
Income from discontinued operations 0.07 $ 0.07
----------- -----------
Net income $ 0.32 $ 0.33
=========== ===========
Weighted average shares outstanding:
Basic 8,323 8,323
=========== ===========
Diluted 8,330 8,330
=========== ===========
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF TRANSACTIONS AND BASIS OF PRESENTATION
In November and December of 2007, AMAC completed the sale of its portfolio of
debt securities and two CMBS securities for sales proceeds of $86.8 million.
During December 2007, AMAC completed additional sales of first mortgage loans
and CDO securities for net sales proceeds of $164.6 million.
All of the assets sold had been pledged as collateral under repurchase
facilities. Sale of the securities therefore necessitated repayment of the
associated debt, which totaled $227.9 million.
The first mortgage loans, CDO securities and CMBS securities were not owned on
January 1, 2006, the assumed date of disposition. Therefore, the pro forma
adjustments with respect to the condensed statements of income are calculated on
these assets from their actual acquisition dates forward.
The pro forma adjustments do not include a loss on sale of $2.3 million on debt
securities assumed to have been sold January 1, 2006 and the receipt of $0.8
million related to the termination of related interest rate derivatives at
January 1, 2006.
2. PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma consolidated financial statements have been
prepared as if the dispositions had occurred as of September 30, 2007, for
balance sheet purposes and as of January 1, 2006, for income statement purposes
and reflect the following pro forma adjustments ($ in thousands):
(a) To record the assumed sale of the assets as follows:
DEBT SECURITIES
- ---------------
Proceeds from the sale of debt securities $ 71,212
Repayment of repurchase facilities (66,817)
-----------
Net cash proceeds $ 4,395
===========
Total sales proceeds $ 71,212
Less: basis
Fair value of debt securities $ 71,528
Add back unrealized losses 2,466
----------
Total basis 73,994
-----------
Net loss $ (2,782)
===========
CMBS SECURITIES
- ---------------
Proceeds from the sale of CMBS securities $ 15,562
Repayment of repurchase facilities (23,065)
-----------
Net cash expenditure $ (7,503)
===========
Total sales proceeds $ 15,562
Less: basis
Fair value of CMBS securities $ 22,113
Add back unrealized losses 3,798
----------
Total basis 25,911
-----------
Net loss $ (10,349)
===========
CDO SECURITIES
- --------------
Proceeds from the sale of CDO securities $ 7,939
Repayment of repurchase facilities (3,586)
-----------
Net cash proceeds $ 4,353
===========
Total sales proceeds $ 7,939
Less: basis
Fair value of CDO securities $ 8,672
Add back unrealized losses 1,391
----------
Total basis 10,063
-----------
Net loss $ (2,124)
===========
FIRST MORTGAGES
- ---------------
Proceeds from the sale of first mortgages $ 157,406
Less: selling expenses (654)
-----------
Net sales proceeds 156,752
Repayment of repurchase facilities (144,708)
-----------
Net cash proceeds $ 12,044
===========
Net sales proceeds $ 156,752
Less: basis
Fair value of first mortgages $ 161,160
Add back impairment losses 1,140
----------
Total basis 162,300
-----------
Net loss $ (5,548)
===========
(b) To reflect assumed collection of $1.5 million of interest receivables and
payment of $6.5 million of interest liabilities upon assumed sale of the
assets.
(c) To record a net cash payment of $2.0 million resulting from termination of
interest rate swaps on assets sold or interest rate swaps on cash flows of
debt repaid, of which, $2.3 million were in a liability position and $0.3
million were in an asset position.
(d) Elimination of historic interest income on assets sold, net of premium and
discount amortization, and impairment charges.
(e) Elimination of historic interest expense on the debt assumed repaid or
interest on debt incurred on assets not owned at January 1, 2006. A
weighted average interest rate of 8.13% and 8.37% in 2006 and 2007,
respectively, was assumed in calculating interest expense amounts.
(f) Reduction of interest expense assuming net sale proceeds from debt
securities were used to repay the related party line of credit and cash was
never borrowed from this line for the origination of first mortgages
throughout 2006.
(g) To record reduction in asset management fees related to 2006 activity.
(h) To reverse changes in fair value of free-standing derivatives on first
mortgages sold.