SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: September 30, 1997 Commission file number: 1-12151
CHASE PREFERRED CAPITAL CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3899576
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Park Avenue, New York, New York 10017
- - ----------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 270-6000
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 |_|
Common Stock, $300 Par Value 572,500
----------------------------------------------------------------
Number of shares outstanding of each of the issuer's classes of
common stock on September 30, 1997.
<PAGE>
- - --------------------------------------------------------------------------------
FORM 10-Q INDEX
Part I Page
- - ------ ----
Item 1. Financial Statements -Chase Preferred Capital Corporation:
Balance Sheet at September 30, 1997 and December 31, 1996. 3
Statement of Income for the quarter ended September 30, 4
1997 and nine months ended September 30, 1997.
Statement of Changes in Stockholders' Equity for the nine
months ended September 30, 1997. 5
Statement of Cash Flows for the nine months ended 6
September 30, 1997.
Notes to Financial Statements. 7-8
Item 2. Management's Discussion and Analysis of Financial Condition 9-13
and Results of Operations.
Part II
- - -------
Item 6. Exhibits and Current Reports on Form 8-K. 1 14-17
- - --------------------------------------------------------------------------------
-2-
<PAGE>
Part I
Item 1.
CHASE PREFERRED CAPITAL CORPORATION
BALANCE SHEET
(in thousands)
9/30/97 12/31/96
(Unaudited)
ASSETS:
Residential mortgage loans $ 942,258 $ 958,411
Commercial mortgage loans 97,128 101,570
----------- -----------
1,039,386 1,059,981
Less: allowance for loan losses (3,368) (3,150)
----------- -----------
1,036,018 1,056,831
Cash 46,816 31,091
Due from affiliates 25,565 18,743
Accrued interest receivable 6,746 6,733
----------- -----------
TOTAL ASSETS $ 1,115,145 $ 1,113,398
=========== ===========
LIABILITIES:
Accounts payable $ 367 430
Due to affiliates 2,849 242
----------- -----------
TOTAL LIABILITIES 3,216 672
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $25 per share;
50,000,000 shares authorized, 22,000,000
issued and outstanding 550,000 550,000
Common stock, par value $300 per share;
5,000,000 shares authorized, 572,500
shares issued and outstanding 171,750 171,750
Additonal paid in capital 381,637 381,637
Retained earnings 8,542 9,339
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,111,929 1,112,726
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,115,145 $ 1,113,398
=========== ===========
The Notes to Financial Statements are an integral part of these Statements.
-3-
<PAGE>
Part I
Item 1. (continued)
CHASE PREFERRED CAPITAL CORPORATION
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
Quarter Nine Months
Ended 9/30/97 Ended 9/30/97
INTEREST INCOME:
Residential mortgage loans $ 17,994 $ 54,279
Commercial mortgage loans 2,286 7,057
Interest on overnight investments 624 1,696
--------- --------
20,904 63,032
Less: servicing fees (654) (1,990)
--------- --------
Net interest income 20,250 61,042
========= ========
NON INTEREST EXPENSE:
Advisory fees 63 188
Other administrative expenses 25 213
--------- ------
Total noninterest expense 88 401
--------- ------
NET INCOME $ 20,162 $ 60,641
========= ========
NET INCOME APPLICABLE TO COMMON SHARES $ 9,024 $ 27,228
========= ========
NET INCOME PER COMMON SHARE $ 15.76 $ 47.56
========= ========
The Notes to Financial Statements are an integral part of these Statements.
-4-
<PAGE>
Part I
Item 1. (continued)
CHASE PREFERRED CAPITAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1997
(in thousands)
(Unaudited)
PREFERRED STOCK:
Balance at beginning of year $ 550,000
-----------
Balance at end of period $ 550,000
===========
COMMON STOCK:
Balance at beginning of year $ 171,750
-----------
Balance at end of periodperiod $ 171,750
===========
ADDITIONAL PAID IN CAPITAL:
Balance at beginning of year $ 381,637
-----------
Balance at end of period $ 381,637
===========
RETAINED EARNINGS:
Balance at beginning of period $ 9,339
Net Income 60,641
Common dividends (28,025)
Preferred dividends (33,413)
-----------
Balance at end of periodperiod $ 8,542
===========
TOTAL STOCKHOLDERS' EQUITY $ 1,111,929
===========
The Notes to Financial Statements are an integral part of these Statements
-5-
<PAGE>
Part I
Item 1. (continued)
CHASE PREFERRED CAPITAL CORPORATION
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1997
(in thousands)
(Unaudited)
OPERATING ACTIVITIES:
Net income $ 60,641
Adjustments to reconcile net income to net cash provided
by operating activities:
Net change in:
Due from affiliates (6,822)
Accrued interest receivable 139
Accounts payable (63)
Due to affiliates 2,607
---------
Net cash provided by operating activities 56,502
---------
INVESTING ACTIVITIES:
Purchase of mortgage loans net of reserve (159,992)
Principal payments received 180,805
Purchase of accrued interest receivable (152)
---------
Net cash provided by investing activities 20,661
---------
FINANCING ACTIVITIES:
Dividends paid (61,438)
---------
Net cash used by financing activities (61,438)
---------
NET INCREASE IN CASH 15,725
CASH AT BEGINNING OF PERIOD 31,091
CASH AT SEPTEMBER 30, 1997 $ 46,816
=========
The Notes to Financial Statements are an integral part of these Statements.
-6-
<PAGE>
Part I
Item 1. (continued)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
- - -----------------------------------------------
Chase Preferred Capital Corporation (the "Company") is a Delaware corporation
incorporated on June 28, 1996 and created for the purpose of acquiring, holding
and managing real estate assets. The Company is a wholly-owned subsidiary of The
Chase Manhattan Bank (the "Bank"), a banking corporation organized under the
laws of the State of New York.
On September 18, 1996, the Company commenced its operations upon consummation of
an initial public offering of 22,000,000 shares of the Company's 8.10%
Cumulative Preferred Stock, Series A, $25 par value per share (the "Series A
Preferred Shares"), and the sale to the Bank of 572,500 shares of the Company's
Common Stock, $300 par value per share (the "Common Stock"). These offerings
raised net capital of $1,103,387,000. All shares of Common Stock are held by the
Bank. The Series A Preferred Shares are traded on the New York Stock Exchange.
The Company used the proceeds raised from the initial public offering of the
Series A Preferred Shares and the sale of the Common Stock to the Bank to pay
expenses incurred during the offering and the formation of the Company and to
purchase from the Bank the Company's initial portfolio of residential and
commercial mortgage loans ( Mortgage Loans ) at their estimated fair values. The
Mortgage Loans were recorded in the accompanying financial statements at the
Bank's historical cost basis which approximated their estimated fair values.
The unaudited financial statements of the Company are prepared in accordance
with generally accepted accounting principles for interim financial information.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and the results of operations for the interim period presented have
been included.
For further discussion of the Company's accounting policies, reference is made
to Note Two of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Annual Report").
NOTE 2 - RELATED PARTY TRANSACTIONS
- - -----------------------------------
The Company has entered into an Advisory Agreement (the "Advisory Agreement")
with the Bank (the "Advisor") requiring an annual payment of $250,000. The
Advisor provides advice to the Board of Directors and manages the operations of
the Company as defined in the Agreement. The Agreement has an initial term of
five years commencing on September 18, 1996 and automatically renews for an
additional five years unless the Company delivers a notice of nonrenewal to the
Advisor as defined in the Advisory Agreement.
The Company also entered into two servicing agreements with the Bank for the
servicing of the commercial and residential mortgage loans. (The Bank in its
role as servicer under the terms of the servicing agreements is herein referred
to as the "Servicer"). Pursuant to each servicing agreement, the Servicer
performs the actual servicing of the Mortgage Loans held by the Company, in
accordance with normal industry practice. The Servicing Agreements can be
terminated without cause with at least thirty days notice to the Servicer. The
servicing fee is 0.25% of the outstanding principal balance for the residential
mortgage loans and ranges from 0.08% - 0.30% of the outstanding principal
balances for the commercial mortgage loans depending upon the outstanding
principal amount.
The Bank has entered into sub-servicing agreements ("Sub-Agreements") with Chase
Manhattan Mortgage Corporation ("CMMC"), a wholly-owned subsidiary of Chase
Manhattan Bank USA, National Association, an indirect wholly-owned subsidiary of
The Chase Manhattan Corporation.
Advisory fees and servicing fees totaled approximately $717,000 for the quarter
ended September 30, 1997 and approximately $2,178,000 for the nine months ended
September 30, 1997.
The $25,565,000 due from affiliates at September 30, 1997 consists primarily of
mortgage loan payments received by CMMC, in addition, in its capacity as
Sub-Servicer, $13,507,00on behalf of the Company. Pursuant to the terms of the
servicing and subservicing agreements, the Company receives mortgage loan
payments collected by the Servicer (and sub-servicer) in the month immediately
following its collection.
-7-
<PAGE>
Part I
Item 1. (Continued)
The Company maintains its cash in an overnight deposit account with the Bank and
earns a market rate of interest. Interest income on these deposits for the
quarter ended and nine months ended September 30, 1997 amounted to approximately
$624,000 and $1,696,000, respectively.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- - -------------------------------------------
For further discussion on the methodology for determining the fair value of the
Mortgage Loans, reference is made to Note Six of the Company's 1996 Annual
Report.
Loans:
The book value and fair value of Mortgage Loans at September 30, 1997 are as
follows (in thousands):
Book Value Fair Value
---------- ----------
Residential Mortgage Loans $ 942,258 $ 952,631
Commercial Mortgage Loans 97,128 104,657
Assets and liabilities in which fair value approximates carrying value:
The fair values of certain financial assets and liabilities carried at cost,
including cash, due from affiliates, accrued interest receivable, accounts
payable and due to affiliates, are considered to approximate their respective
carrying value due to their short-term nature and negligible credit losses.
-8-
<PAGE>
Part 1
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - --------------------------------------------------------------------------------
CHASE PREFERRED CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
(in thousands, except per share, unit and ratio data)
(Unaudited)
1997 Nine Months Ended
----------------------- -----------------
Third Second September 30,
Quarter Quarter 1997
-------- -------- ----
INCOME STATEMENT:
Interest income $ 20,904 $ 21,387 63,032
Net interest income 20,250 20,716 61,042
Net income 20,162 20,555 60,641
Average number of common shares
outstanding 572,500 572,500 572,500
Net income applicable to common
shares 9,024 9,417 27,228
Income per common share $ 15.76 $ 16.45 $ 47.56
BALANCE SHEET:
Mortgage loans $1,039,386 $1,071,919 $1,039,386
Total assets 1,115,145 1,115,684 1,115,145
Preferred stock outstanding 550,000 550,000 550,000
Total stockholders' equity $1,111,929 $1,112,455 $1,111,929
OTHER DATA:
Dividends paid on preferred shares $ 11,138 $ 11,138 $ 33,413
Dividends paid on common shares 9,550 18,475 28,025
Number of preferred shares 22,000,000 22,000,000 22,000,000
outstanding
Number of common shares outstanding 572,500 572,500 572,500
Average yield on mortgage loans 7.9% 7.9% 7.8%
-9-
<PAGE>
Part I
Item 2. (continued)
- - --------------------------------------------------------------------------------
OVERVIEW
- - --------------------------------------------------------------------------------
The principal business of the Company is to acquire, hold and manage residential
and commercial mortgage loans ("Mortgage Loans") that will generate net income
for distribution to stockholders. The Company currently intends to continue to
acquire all its Mortgage Loans from The Chase Manhattan Bank (the "Bank"), a
banking corporation organized under the laws of the State of New York, or from
affiliates of the Bank as whole loans secured by first mortgages or deeds of
trust on single-family (one- to four-unit) residential real estate properties or
on commercial real estate properties. The Company may also from time to time
acquire securities that qualify as real estate assets under Section 856(c)(6)(B)
of the Internal Revenue Code of 1986 (the "Code") that are rated by at least one
nationally independent rating organization and that represent interests in or
obligations backed by pools of mortgage loans ("Mortgage-Backed Securities").
Mortgage loans underlying the Mortgage-Backed Securities will be secured by
single-family residential, multifamily or commercial real estate properties
located in the United States.
On September 18, 1996, the Company commenced its operations upon the initial
public offering of 22,000,000 shares of the Company's 8.10% Cumulative Preferred
Stock, Series A, $25 par value per share (the "Series A Preferred Shares"), and
the sale to the Bank of 572,500 shares of the Company's Common Stock, $300 par
value per share (the Common Stock ). These offerings raised net capital of
$1,103,387,000. All shares of Common Stock are held by the Bank. The Series A
Preferred Shares are traded on the New York Stock Exchange.
The Bank and its affiliates are involved in virtually every aspect of the
Company's existence. The Bank administers the day-to-day activities of the
Company in its role as Advisor under the Advisory Agreement. CMMC sub-services
the Company's Mortgage Loans on behalf of the Servicer under each of the
Servicing Agreements.
The Bank and its affiliates may have interests which are not identical to those
of the Company. Consequently, conflicts of interest may arise with respect to
transactions, including without limitation, future acquisitions of Mortgage
Loans from the Bank or its affiliates; servicing of Mortgage Loans, particularly
with respect to Mortgage Loans that become classified or placed in nonaccrual
status or which have been, more than once during the preceding twelve months,
more than 30 days past due in the payment of principal and interest; future
dispositions of Mortgage Loans to The Chase Manhattan Corporation ("CMC") or any
of its nonbank subsidiaries; and the modification of the Advisory Agreement or
the Servicing Agreements.
It is the intention of the Company, CMC and the Bank that any agreements and
transactions between the Company, on the one hand, and CMC, the Bank or their
affiliates, on the other hand, are fair to all parties and consistent with
market terms, including the price paid and received for Mortgage Loans,
including those in the initial portfolio, on their acquisition or disposition by
the Company or in connection with the servicing of such Mortgage Loans. The
requirement in the Certificate of Designation establishing the Series A
Preferred Shares that certain actions of the Company be approved by a majority
of the Independent Directors (as defined in the Certificate of Designation) is
also intended to ensure fair dealing between the Company and CMC, the Bank and
their respective affiliates. However, there can be no assurance that such
agreements or transactions will be on terms as favorable to the Company as those
that could have been obtained from unaffiliated third parties.
RESULTS OF OPERATIONS
The Company reported net interest income for the quarter ended September 30,
1997 of approximately $20,250,000. Interest income from residential and
commercial mortgage loans was $17,994,000 and $2,286,000, respectively,
representing a total average yield of 7.9%. After deduction of approximately
$63,000 and $25,000 in advisory fees and other administrative expenses,
respectively, the Company reported net income of approximately $20,162,000 for
the quarter ended September 30, 1997.
The Company reported net interest income for the nine months ended September 30,
1997 of approximately $61,042,000. Interest income from residential and
commercial mortgage loans was $54,279,000 and $7,057,000, respectively,
representing a total average yield of 7.8%. After deduction of approximately
$188,000 and $213,000 in advisory fees and other administrative expenses,
respectively, the Company reported net income of approximately $60,641,000 for
the nine months ended September 30, 1997. The Company reported net income per
common share of $15.76 and $47.56 for the quarter ended and nine months ended
September 30, 1997, respectively.
-10-
<PAGE>
Part I
Item 2. (continued)
The Company paid $11,137,500 and $33,412,500 for the quarter ended and nine
months ended September 30, 1997, respectively, in Preferred Stock dividends. As
of this date, all dividend payments on Series A Preferred Shares are current. In
addition, the Company paid Common Stock dividends of approximately $9,550,000
and $28,025,000 in the quarter ended and nine months ended September 30, 1997,
respectively. Dividends on the Common Stock are paid to the Bank when, as and if
declared by the Board of Directors of the Company out of funds legally available
therefor. The Company expects to pay Common Stock dividends at least annually in
amounts necessary to continue to preserve its status as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
MORTGAGE LOANS
Mortgage loans consist of both residential and commercial mortgage loans.
Residential mortgage loans consist of Six-Month Prime Rate Adjustable Rate
Mortgages ("ARMs"); One-Year ARMs; Three-Year, Five-Year, and Seven-Year Fixed
Rate Loans with an automatic conversion to One-Year ARMs; Three-Year Fixed Rate
Loans with an automatic conversion to Three-Year ARMs; and Fixed Rate Loans. The
commercial mortgage loans consist of Fixed and Variable Rate loans, a majority
of which have balloon payments. Reinvestments in Mortgage Loans have been and
will continue to be consistent in maintaining an approximate 90% and 10% ratio
between residential and commercial mortgage loans, respectively. All Mortgage
Loans were purchased from the Bank or its affiliates. Each of the Mortgage Loans
are secured by a mortgage, deed of trust or other security instrument which
created a first lien on the residential dwellings and/or commercial property
located in their respective jurisdictions.
For the quarter ended September 30, 1997, the Company purchased Mortgage Loans
having an outstanding principal balance of approximately $50,488,000 from the
Bank. In addition, the Company received approximately $83,021,000 of principal
payments on its portfolio from the Servicer (and sub-servicer).
For the nine month ended September 30, 1997, the Company purchased Mortgage
Loans having an outstanding principal balance of $160,210,000 from the Bank. In
addition, the Company received approximately $180,805,000 of principal payments
on its portfolio from the Servicer (and sub-servicer).
The following table reflects the composition of interest-earning assets as a
percentage of total interest-earning assets:
Interest-Earning Asset Mix At September 30, 1997 At December 31, 1996
(in thousands) Amount Percent Amount Percent
- - --------------------------------------------------------------------------------
Residential mortgage loans $ 942,258 90.7% $ 958,411 90.4%
Commercial mortgage loans 97,128 9.3% 101,570 9.6%
---------------------------------------------
Total interest-earning assets $1,039,386 100% $,059,981 100%
=============================================
For further discussion on the Company's acquisition and disposition policies for
Mortgage Loans, reference is made to page 7 of the Company's 1996 Annual Report.
There were approximately $3,037,000 of nonaccruingal residential mortgage loans
at September 30, 1997, compared with $236,012 of nonaccruing residential
mortgage loans at December 31, 1996. There were no nonaccruing commercial loans
for either period. At September 30, 1997 and December 31,1996, nonaccruing loans
represented .29% and .02%, respectively, of the total loan portfolio. There were
$460,457 of nonaccruing residential loans sold to a wholly-owned subsidiary of
The Chase Manhattan Corporation during the quarter ended September 30, 1997.
ALLOWANCE FOR CREDITLOAN LOSSES
The allowance for loan losses is available to absorb potential credit losses
from the entire Mortgage Loan portfolio. The Company deems its allowance for
loan losses as of September 30, 1997 to be adequate. Although the Company
considers that it has sufficient reserves to absorb losses that currently may
exist in the portfolio, but are not yet identifiable, the precise loss content
is subject to continuing review based on quality indicators, industry and
geographic concentrations, changes in business conditions, and other external
factors such as competition, legal and regulatory requirements. The Company will
continue to reassess the adequacy of the allowance for loan losses.
-11-
<PAGE>
Part I
Item 2. (continued)
The accompanying table reflects the activity in the Company's allowance for loan
losses:
For the Period from For the
At September 30, 1996
Allowance for Loan Losses January 1, 1997 (September 18, 1996) through
(in thousands) through September 30, 1997 December 31, 1996
- - --------------------------------------------------------------------------------
Total allowance at
beginning of period $ 3,150 $ 0
Acquired allowance 329 3,150
Provision for losses 0 0
Charge-offs 0 0
Recoveries 0 0
Sale of loans (111) 0
---------- --------
Total allowance at end of
period $ 3,368 $ 3,150
========== =========
================================================================================
At September 30, 1997 and December 31, 1996, the Company's allowance for loan
losses as a percentage of total loans was .32% and .30%, respectively.
INTEREST RATE RISK
The Company's income consists primarily of interest payments on Mortgage Loans.
Currently, the Company does not use any derivative products to manage its
interest rate risk. If there is a decline in interest rates (as measured by the
indices upon which the interest rates of the Mortgage Loans are based), then the
Company will experience a decrease in income available to be distributed to its
shareholders. There can be no assurance that an interest rate environment in
which there is a significant decline in interest rates over an extended period
of time would not adversely affect the Company's ability to pay dividends on the
Series A Preferred Shares.
SIGNIFICANT CONCENTRATION OF CREDIT RISK
Concentration of credit risk arises when a number of customers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry.
The Company's balance sheet exposure to geographic concentrations directly
affects the credit risk of the Mortgage Loans within the portfolio. The
following table shows the Mortgage Loan portfolio by geographical area as of
September 30, 1997:
Geographical Breakout
(in thousands) Amount Percent
- - --------------------------------------------------------------------------------
Residential Mortgage Loans:
California $ 487,201 46.9%
New York 69,406 6.7%
Florida 53,406 5.1%
Other States (no State has more than 4%) 332,245 32.0%
---------- -----
Total Residential Mortgage Loans $ 942,258 90.7%
---------- -----
Commercial Mortgage Loans:
New York Metropolitan Tri-State Area 92,946 8.9%
Other States (no State has more than 3%) 4,182 0.4%
---------- -----
Total Commercial Mortgage Loans 97,128 9.3%
---------- -----
Total $ 1,039,386 100%
=========== =====
-12-
<PAGE>
Part I
Item 2. (continued)
Approximately 46.9% of the Company's total Mortgage Loan portfolio are loans
secured by residential real estate properties located in California.
Consequently, these residential mortgage loans may be subject to a greater risk
of default than other comparable residential mortgage loans in the event of
adverse economic, political or business developments and natural hazards
(earthquakes, for example) in California that may affect the ability of
residential property owners in California to make payments of principal and
interest on the underlying mortgages.
In addition, the majority of the commercial mortgage properties underlying the
Company's commercial mortgage loans are located in the New York metropolitan
tri-state area. Substantially all of these mortgaged properties were, at the
time of their origination, at least 70% occupied by the borrowers or their
affiliates. Consequently, these commercial mortgage loans may be subject to
greater risk of default than other comparable commercial mortgage loans in the
event of adverse economic, political or business developments in the New York
metropolitan tri-state areas that may affect the ability of businesses in that
area to make payments of principal and interest on the underlying mortgages.
LIQUIDITY RISK MANAGEMENT
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments and to
capitalize on opportunities for the Company's business expansion. In managing
liquidity, the Company takes into account various legal limitations placed on a
REIT as discussed below in Other Matters.
The Company's principal liquidity needs are to maintain the current portfolio
size through the acquisition of additional Mortgage Loans as Mortgage Loans
currently in the portfolio mature, prepay or are sold ,and to pay dividends on
the Series A Preferred Shares. The acquisition of additional Mortgage Loans is
intended to be funded with the proceeds obtained from the sale or repayment of
principal balances by individual borrowersM. The Company does not have and does
not anticipate having any material capital expenditures.
For further discussion on liquidity risk management, reference is made to page 9
of the Company's 1996 Annual Report.
OTHER MATTERS
As of September 30, 1997 the Company believed that it was in full compliance
with the REIT tax rules and that it will continue to qualify as a REIT under the
provisions of the Code. The Company calculates that:
o its Qualified REIT Assets, as defined in the Code, to be 100% of its
total assets, as compared to the federal tax requirements that at
least 75% of its total assets must be Qualified REIT assets.
o 97% of its revenues qualifyies for the 75% source of income test and
100% of its revenues qualifyies for the 95% source of income test
under the REIT rules.
o none of its revenues were subject to the 30% income limitation under
the REIT rules.
The Company also met all REIT requirements regarding the ownership of its common
and preferred stocks and anticipates meeting the 1997 annual distribution and
administrative requirements.
-13-
<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Current Reports on Form 8-K
(A) Exhibits:
11 - Computation of net income per share.
12(a) - Computation of ratio of earnings to fixed charges.
12(b) - Computation of ratio of earnings to fixed charges and preferred
stock dividend requirements.
27 - Financial Data Schedule.
(B) Reports on Form 8-K: None
-14-
<PAGE>
SIGNATURE
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.
CHASE PREFERRED CAPITAL CORPORATION
-----------------------------------
(Registrant)
Date: November 14, 1997 By: /s/ Don B. Taggart
-----------------------------
Don B. Taggart
Treasurer and Director
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibits
- - ----------- --------
11 Computation of net income per share
12(a) Computation of ratio of earnings to fixed charges
12(b) Computation of ratio of earnings to fixed charges and
preferred stock dividend requirements
27 Financial Data Schedules
Part II
Item 6. (continued)
EXHIBIT 11
CHASE PREFERRED CAPITAL CORPORATION
Computation of net income per share
(Unaudited)
Net income for primary earnings per share are computed by subtracting from the
applicable earnings the dividend requirements on preferred stock to arrive at
earnings applicable to common stock and dividing this amount by the weighted
average number of shares of common stock outstanding during the period.
Quarter Ended Nine Months Ended September
30, 1997 September 30, 1997 (in thousands,
except per share amounts):
-----------------------------------------
Net income $ 20,162 $ 60,641
Less: preferred stock dividend 11,138 33,413
requirements ---------- ----------
Net income applicable to common $ 9,024 $ 27,228
stock ---------- ----------
Shares:
Weighted average number of
common shares outstanding 572,500 572,500
Net income per share: $ 15.76 $ 47.56
========== ==========
-15-
Part II
Item 6. (continued)
EXHIBIT 12(a)
CHASE PREFERRED CAPITAL CORPORATION
Computation of ratio of earnings to fixed charges
-------------------------------------------------
(Unaudited)
For the Nine Months Ended September 30,1997
(in thousands, except ratio):
-----------------------------
Net income $ 60,641
--------
Fixed charges:
Advisory fees 188
--------
Total fixed charges 188
--------
Earnings before fixed charges $60,829
=======
Fixed charges, as above $ 188
=======
Ratio of earnings to fixed charges 323.56
=======
================================================================================
-16-
Part II
Item 6. (continued)
EXHIBIT 12(b)
CHASE PREFERRED CAPITAL CORPORATION
Computation of ratio of earnings to fixed charges
and preferred stock dividend requirements
-----------------------------------------
(Unaudited)
For the Nine Months Ended September 30, 1997
(in thousands, except ratio):
- - --------------------------------------------------------------------------------
Net income $60,641
-------
Fixed charges:
Advisory fees 188
-------
Total fixed charges 188
-------
Earnings before fixed charges $60,829
=======
Fixed charges, as above $ 188
Preferred stock dividend
requirements 33,413
-------
Fixed charges including preferred
stock dividends $33,601
=======
Ratio of earnings to fixed charges and
preferred stock dividend requirements 1.81
=======
-17-
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<NAME> CHASE PREFERRED CAPITAL CORPORATION
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<S> <C>
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0
550,000
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