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 June 30, 1998 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
<PAGE> -i-
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998
Company Dec. 31, 1997
(Unaudited) Predecessor
--------------- ---------------
<S> <C> <C>
Investment in Mortgage Securities $ 152,880,839 $ 33,506,388
Cash and temporary cash investments, at cost
which approximates market value 13,930,000 10,521,493
Accrued interest receivable 952,166 272,264
Real estate held for sale 26,162,471 -
Real estate - 3,973,776
Other investments 296,183 2,355,923
Investment evaluation fees, net - 564,404
Goodwill 7,405,309 -
Other assets 904,997 3,245,745
--------------- ---------------
$ 202,531,965 $ 54,439,993
=============== ===============
Liabilities
Reverse repurchase agreements $ 99,117,208 $ -
Accrued interest payable 341,641 -
Accounts payable 744,602 876,098
Dividends or distributions payable 2,407,297 511,069
Mortgage notes payable 25,265,597 6,800,000
--------------- ---------------
127,876,345 8,187,167
--------------- ---------------
Minority interest in Pension Fund 271,285 -
Stockholders' Equity
Common stock, $.01 par value; 10,000,000 shares authorized
9,035,084 issued and outstanding 90,351 -
Additional paid in capital 76,018,255 -
Retained earnings (1,165,790) -
Available for sale securities:
Unrealized gain (loss) (558,481) -
General Partner - 100
Unit Holders - 45,682,774
Net unrealized holding gains (losses) - 569,952
Stockholders' equity
--------------- ---------------
$ 74,384,335 $ 46,252,826
--------------- ---------------
$ 202,531,965 $ 54,439,993
=============== ===============
The accompanying notes are an integral part of the consolidated and combined financial statements.
</TABLE>
<PAGE>
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
June 30, 1998 June 30, 1997
Company Predecessor
--------------- ---------------
<S> <C> <C>
Mortgage Securities income $ 1,398,141 $ 674,522
Interest income on temporary cash investments 184,622 147,269
--------------- ---------------
Total interest income 1,582,763 821,791
Interest expense on borrowed funds 437,490 -
--------------- ---------------
Net interest income 1,145,273 821,791
--------------- ---------------
Rental income on real estate held for sale 1,390,631 -
Rental income - 640,650
Income from other investments 61,408 158,322
Gain on sale of investment 414,710 -
--------------- ---------------
1,866,749 798,972
--------------- ---------------
Real estate operating expenses on real estate
held for sale 772,399 -
Real estate operating expenses - 347,399
General and administrative expenses 540,392 294,549
Depreciation - 75,627
Interest expense on mortgage loans 466,201 217,624
--------------- ---------------
1,778,992 935,199
--------------- ---------------
Minority interest (7,977) -
--------------- ---------------
Net income $ 1,241,007 $ 685,564
=============== ===============
Net income allocated to:
General Partner $ 6,705
BUC Holders 678,859
---------------
$ 685,564
===============
Net income, basic and fully diluted, per share $ 0.14 $ N/A
=============== ===============
Net income, basic and fully diluted, per unit $ N/A $ 0.12
=============== ===============
Weighted average number of shares outstanding 9,035,084 N/A
Weighted average number of units outstanding N/A 5,775,797
The accompanying notes are an integral part of the consolidated and combined financial statements.
</TABLE>
<PAGE>
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
For the Six
Predecessor Company Months Ended
Through Apr. 9 From Apr. 10 Total June 30, 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Mortgage Securities income $ 613,793 $ 1,398,141 $ 2,011,934 $ 1,365,842
Interest income on temporary cash investments 148,799 184,622 333,421 266,836
--------------- --------------- --------------- ---------------
Total interest income 762,592 1,582,763 2,345,355 1,632,678
Interest expense on borrowed funds - 437,490 437,490 -
--------------- --------------- --------------- ---------------
Net interest income 762,592 1,145,273 1,907,865 1,632,678
--------------- --------------- --------------- ---------------
Rental income on real estate held for sale 397,519 1,390,631 1,788,150 -
Rental income - - - 1,268,366
Income from other investments 145,167 61,408 206,575 390,555
Gain on sale of investment - 414,710 414,710 -
--------------- --------------- --------------- ---------------
542,686 1,866,749 2,409,435 1,658,921
--------------- --------------- --------------- ---------------
Real estate operating expenses on real estate
held for sale 189,689 772,399 962,088 -
Real estate operating expenses - - - 693,962
General and administrative expenses 421,293 540,392 961,685 535,250
Depreciation 47,259 - 47,259 151,255
Interest expense on mortgage loans 160,571 466,201 626,772 423,149
--------------- --------------- --------------- ---------------
818,812 1,778,992 2,597,804 1,803,616
--------------- --------------- --------------- ---------------
Minority interest - (7,977) (7,977) -
--------------- --------------- --------------- ---------------
818,812 1,771,015 2,589,827 1,803,616
--------------- --------------- --------------- ---------------
Net income $ 486,466 $ 1,241,007 $ 1,727,473 $ 1,487,983
=============== =============== =============== ===============
Net income allocated to:
General Partner $ 3,931 $ 13,487
BUC Holders 482,535 1,474,496
--------------- ---------------
$ 486,466 $ 1,487,983
=============== ===============
Net income, basic and fully diluted, per share $ N/A $ 0.14 $ N/A
=============== =============== ===============
Net income, basic and fully diluted, per unit $ 0.08 $ N/A $ 0.26
=============== =============== ===============
Weighted average number of shares outstanding N/A 9,035,084 N/A
Weighted average number of units outstanding 5,775,797 N/A 5,775,797
The accompanying notes are an integral part of the consolidated and combined financial statements.
</TABLE>
<PAGE>
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Partners' Capital
-----------------------------------------------------------------------------------
Exchangeable Net Unrealized
General Unit Holders Holding
Partner # of Units Amount Gains Total
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 100 5,775,797 $ 45,682,774 $ 569,952 $ 46,252,826
Net income 3,931 - 482,535 - 486,466
Cash distributions paid or accrued (3,931) - (1,530,009) - (1,533,940)
Change in net unrealized holding gains - - (21,235) (21,235)
Issuance of stock of the Company in exchange
for Units of the Predecessor (100) (5,775,797) (44,635,300) (548,717) (45,184,117)
--------------- --------------- --------------- --------------- ---------------
Balance at April 10, 1998 (unaudited) $ - - $ - $ - $ -
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Stockholders' Equity
---------------------------------------------------------------------------------
Net
Unrealized
Common Stock Paid-in Retained Holding
# of Shares Amount Capital Earnings Gains (Losses) Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 90,621 $ 906 $ 94 $ - $ - $ 1,000
Effects of Merger:
Issuance of stock of the Company in exchange
for Units of the Predecessor 5,775,797 57,758 45,126,359 - - 45,184,117
Issuance of stock of the Company in exchange
for Units of Prep Fund 2 and Pension Fund 3,168,666 31,687 29,949,412 - - 29,981,099
Change in classification of Mortgage
Securities from held-to maturity to
available-for-sale (704,828) (704,828)
Issuance of stock options - - 942,390 - - 942,390
Net income - - - 1,241,007 - 1,241,007
Change in net unrealized holding gains
since the Merger - - - - 146,347 146,347
Dividends paid or accrued - - - (2,406,797) - (2,406,797)
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1998 (unaudited) 9,035,084 $ 90,351 $76,018,255 $(1,165,790) $ (558,481) $74,384,335
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED AND COMBINED STATEMENTS CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998 For the Six
Months Ended
Predecessor Company June 30, 1997
Through Apr. 9 From Apr. 10 Total Predecessor
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 486,466 $ 1,241,007 $ 1,727,473 $ 1,487,983
Adjustments to reconcile net income to
net cash from operating activities:
Gain on sale of investment - (414,710) (414,710) -
Equity in earnings of operating partnerships (138,561) - (138,561) (230,156)
Amortization and Depreciation 45,300 101,987 147,287 145,996
Decrease (increase) in interest receivable 8,302 (545,660) (537,358) 17,950
Increase in other assets (786,123) (110,515) (896,638) (197,797)
Increase (decrease) in accounts payable 569,508 (1,684,858) (1,115,350) (72,653)
Increase in accrued interest payable - 341,641 341,641 -
--------------- --------------- --------------- ---------------
Net cash provided by operating activities 184,892 (1,071,108) (886,216) 1,151,323
--------------- --------------- --------------- ---------------
Cash flows from investing activities
Net cash from Merger - 5,070,552 5,070,552 -
Purchases of mortgage securities - (102,631,993) (102,631,993) -
Principal payments on mortgage securities 867,630 2,650,449 3,518,079 1,911,331
Proceeds from sale of other investments - 1,290,000 1,290,000 2,100,000
Distributions received from PEPs 181,430 - 181,430 277,894
Investment in real estate - - - (7,656)
--------------- --------------- --------------- --------------
Net cash provided by investing activities 1,049,060 (93,620,992) (92,571,932) 4,281,569
--------------- --------------- --------------- --------------
Cash flows from financing activities
Net borrowings from reverse repurchase agreements - 99,117,208 99,117,208 -
Principal payments on mortgage loans - 60,000 60,000 -
Dividends and distributions paid (1,535,007) (775,546) (2,310,553) (3,073,924)
--------------- --------------- --------------- --------------
Net cash used in financing activities (1,535,007) 98,401,662 96,866,655 (3,073,924)
--------------- --------------- --------------- --------------
Net increase (decrease) in cash and cash equivalents (301,055) 3,709,562 3,408,507 2,358,968
Cash and temporary cash investments at beginning
of period 10,521,493 10,220,438 10,521,493 9,001,666
--------------- --------------- --------------- --------------
Cash and temporary cash investments at end of period $ 10,220,438 $ 13,930,000 $ 13,930,000 $ 11,360,634
=============== =============== =============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 160,571 $ 562,050 $ 722,621 $ 423,149
=============== =============== =============== ==============
The accompanying notes are an integral part of the consolidated and combined financial statements.
</TABLE>
<PAGE>
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. Organization
America First Mortgage Investments, Inc. (the Company) was incorporated in
Maryland on July 24, 1997, but had no operations prior to April 10, 1998.
On April 10, 1998, (the Merger Date) the Company and three partnerships;
America First Participating/Preferred Equity Mortgage Fund Limited Partnership
(Prep Fund 1), America First Prep Fund 2 Limited Partnership (Prep Fund 2),
America First Prep Fund 2 Pension Series Limited Partnership (Pension Fund),
consummated a merger transaction whereby their preexisting net assets and
operations or majority interest in the preexisting partnership were
contributed to the Company in exchange for 9,035,084 shares of the Company's
common stock. For financial accounting purposes, Prep Fund 1, the largest of
the three Partnerships, was considered the Predecessor entity (the
Predecessor) and its historical operating results are presented in the
financial statements contained herein. The Merger was accounted for using the
purchase method of accounting in accordance with GAAP. Prep Fund 1 was deemed
to be the acquirer of the other Partnerships under the purchase method.
Accordingly, the Merger resulted, for financial accounting purposes, in the
effective purchase by Prep Fund 1 of all the BUCs of Prep Fund 2 and
approximately 98% of the BUCs of Pension Fund. As the surviving entity for
financial accounting purposes, the assets and liabilities of Prep Fund 1 were
recorded by the Company at their historical cost and the assets and
liabilities of Prep Fund 2 and Pension Fund were adjusted to fair value. The
excess of the fair value of stock issued over the fair value of net assets
acquired has been recorded as goodwill in the accompanying balance sheet.
2. Summary of Significant Accounting Policies
A) Method of Accounting
The accompanying 1998 consolidated financial statements include the
consolidated accounts of the Company from April 10, 1998 through June 30,
1998, and the combined accounts of Prep Fund 1 and America First
Participating/Preferred Equity Mortgage Fund Limited Partnership (the
managing general partner of Prep Fund 1) (together referred to as the
Predecessor) for periods prior to the Merger. The financial statements
are prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles. In the opinion of management,
all adjustments necessary to present fairly the financial position at June
30, 1998, and results of operations for all periods presented have been
made. The financial statements should be read in conjunction with the
combined financial statements and notes thereto included in the
Predecessor's Annual Report on Form 10-K for the year ended December 31,
1997.
The consolidated financial statements include the accounts of the Company
and its subsidiary, Pension Fund. In addition, as more fully discussed in
Note 5, the Company had an investment in a corporation which it does not
control and which it accounts for under the equity method. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
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.
C) Mortgage 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 as either held-to-maturity,
available-for-sale or trading. 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.
Although the Company generally intends to hold most of its Mortgage
Securities until maturity, it may, from time to time, sell any of it
Mortgage Securities as part of its overall management of it balance
sheet. Accordingly, to maintain flexibility, the Company currently
classifies all of its Mortgage Securities as available-for sale.
Certain Mortgage Securities classified as available-for-sale on the June
30, 1998, balance sheet of the Company were classified as held-to-maturity
on the December 31, 1997 balance sheet of the Predecessor. (See Note 3).
Mortgage Securities which were classified as held-to-maturity were carried
at amortized cost. Mortgage Securities classified as available-for-sale
are reported at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of stockholders' equity or
partners' capital.
Unrealized losses on Mortgage 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 Mortgage Security is adjusted. Other-than-temporary
unrealized losses are based on management's assessment of various factors
affecting the expected cash flow from the Mortgage 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 Mortgage Securities are based on the
specific identification method.
Interest income is accrued based on the outstanding principal amount of
the Mortgage Securities and their contractual terms. Premiums and
discounts associated with the purchase of the Mortgage 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. Such calculations are periodically adjusted for actual
prepayment activity.
D) Credit Risk
The Company limits its exposure to credit losses on its portfolio of
Mortgage Securities and mortgage loans by requiring that at least 70% of
the Company's Mortgage Investment portfolio consist of Mortgage Securities
or mortgage loans that are either (i) insured or guaranteed by an agency of
the U.S. government, such as Ginnie Mae, Fannie Mae, or Freddie Mac, (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. As of June 30, 1998, the Company's Mortgage Investments
consisted only of Mortgage Securities insured or guaranteed by the U.S.
government.
The Company monitors the delinquencies and losses on the underlying
mortgages of its Mortgage Securities. An allowance for credit losses will
be made for possible credit losses at a level deemed appropriate by
management. The allowance will be evaluated and adjusted periodically by
management based on the actual and projected timing and amount of
potential credit losses, as well as industry loss experience. At June 30,
1998, management determined no allowance for credit losses was necessary.
E) Other Investments
Other investments consist of (i) direct investments in multifamily
projects collateralizing mortgage loans owned by the Company, (ii)
investments in limited partnerships owning real estate (PEPs) and (iii) a
corporation owning interests in real estate limited partnerships.
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
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 7, options to purchase 520,000 shares of
common stock were issued during the quarter ended June 30, 1998. Because
the average stock price during the quarter was less than the exercise
price, exercise of such securities under the treasury stock method would
be anti-dilutive. Accordingly, these potentially dilutive securities were
not considered in fully diluted earnings per share and, as a result, basic
and fully diluted net income per share are the same for such period. With
regard to the Predecessor, basic and diluted net income per Unit of the
Predecessor were the same for all periods presented as no dilutive
equivalent units existed.
G) Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income requires the Company and the Predecessor to display
and report comprehensive income, which includes all changes in
Stockholders' Equity or Partners Capital with the exception of additional
investments by or dividends to shareholders of the Company or additional
investments by or distributions to partners of the Predecessor.
Comprehensive income for the Company includes net income and the change in
net unrealized holding gains on investments charged or credited to
Stockholders' Equity. Comprehensive income for the Predecessor includes
net income and the change in net unrealized holding gains on investments
charged or credited to Partner's Capital. Comprehensive income for the
quarters and six months ended June 30, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
For the Quarter Ended June 30,
1998 1997
Company Predecessor
(Unaudited) (Unaudited)
--------------- ---------------
<S> <C> <C>
Net income $ 1,241,007 $ 685,564
Change in net unrealized holding gains (losses) 146,347 (337,972)
--------------- ---------------
Comprehensive income $ 1,387,354 $ 347,592
=============== ===============
For the Six Months Ended June 30,
1998
Predecessor Company 1997
Through April 9 From April 10 Total Predecessor
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 486,466 $ 1,241,007 $ 1,727,473 $ 1,487,983
Change in net unrealized holding gains (losses) (21,335) 146,347 125,012 (8,306)
--------------- --------------- --------------- ---------------
Comprehensive income $ 465,131 $ 1,387,354 $ 1,852,485 $ 1,479,677
=============== =============== =============== ===============
</TABLE>
I) 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. Accordingly, the Company will not
be subject to federal or state income tax to the extent of its
distributions to stockholders. In order to maintain its status as a REIT,
the Company is required, among other requirements, to distribute at least
95% of its taxable income. As such, no provision for income taxes has
been made in the accompanying consolidated financial statements.
Since the Predecessor was a partnership, it has not made a provision for
income taxes since its Beneficial Unit Certificate (BUC) Holders are
required to report their share of the Predecessor's income for federal and
state income tax purposes.
J) Reclassifications
Certain prior period amounts have been reclassified to conform with the
current period classification.
K) New Accounting Pronouncement
In June, 1998, the Financial Accounting Standards Board has issued
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities " (FAS 133). This statement provides
new accounting and reporting standards for the use of derivative
instruments. Adoption of this statement is required by the Company
effective January 1, 2000. Management intends to adopt the statement as
required in fiscal 2000. Although the Company and its Predecessor have
not historically used such instruments, it is not precluded from doing
so. Management anticipates using such instruments to manage interest rate
risk. Management believes that the impact of such adoption will not be
material to the financial statements.
3. Mortgage Securities
The following tables present the Company's Mortgage Securities as of June 30,
1998 and the Predecessor's Mortgage Securities as of December 31, 1997. The
Mortgage Securities classified as available-for sale are carried at their fair
value and the Mortgage Securities classified as held-to-maturity are carried
at their amortized cost:
<TABLE>
<CAPTION>
As of June 30, 1998 - Company (unaudited)
Available-for-Sale
------------------
<S> <C>
Amortized cost $ 153,439,320
Net unrealized losses (558,481)
------------------
Fair value $ 152,880,839
==================
</TABLE>
<TABLE>
December 31, 1997 - Predecessor
Available-for-Sale Held-to-Maturity Total
------------------ ---------------- ---------------
<S> <C> <C> <C>
Amortized cost $ 18,884,194 $ 14,052,242 $ 32,936,436
Gross unrealized gains 606,486 658,816 1,265,302
Gross unrealized losses 36,534 - 36,534
------------------ ---------------- ---------------
Fair value $ 19,454,146 $ 14,711,058 $ 34,165,204
================== ================ ===============
</TABLE>
Certain securities classified as available-for-sale on the June 30, 1998,
balance sheet of the Company were classified as held-to-maturity on the
December 31, 1997 balance sheet of the Predecessor. Based on the differing
investment objectives of the Company, it was determined that it would be more
appropriate to classify such securities as available-for-sale rather than
held-to-maturity. Accordingly, on the Merger Date, such securities were
transferred from the held-to-maturity classification to the available-for-sale
classification. The total amortized cost, net unrealized holding losses and
the aggregate fair value of the securities transferred were $14,027,386,
$704,828 and $13,322,558, respectively.
At June 30, 1998, Mortgage Securities consisted of pools of adjustable-rate
Mortgage Securities with a carrying value of $101,749,315 which were acquired
since the Merger Date and fixed-rate Mortgage Securities with a carrying value
of $51,131,524. At June 30, 1998, Mortgage Securities consisted of Government
National Mortgage Association (GNMA) Certificates, Federal National Mortgage
Association (FNMA) Certificates, and Federal Home Loan Mortgage Corporation
(FHLMC) Certificates. The GNMA Certificates are backed by first mortgage
loans on multifamily residential properties and pools of single-family
properties. The FNMA Certificates and FHLMC Certificates are backed by 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 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 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. At December 31, 1997, Mortgage Securities
consisted of GNMA Certificates and FNMA Certificates.
As of June 30, 1998, the Company had approximately $46.8 million of
commitments to purchase Mortgage Securities.
4. Real Estate Held for Sale
Certain real estate assets acquired in connection with the Merger were not
considered consistent with the investment objectives of the Company. As a
consequence, the Company has classified such assets as held for sale upon
consummation of the Merger and is investigating opportunities to sell such
assets. Two of the three rental properties were transferred from the
Predecessor at carryover basis and the remaining property was acquired at fair
value. Based on estimates of net realizable value, as adjusted for costs to
sell, management does not anticipate that such a sale would necessitate an
impairment reserve under SFAS 121 "Accounting for Impairment of Long Lived
Assets". During the period assets are held for sale, no depreciation will be
reflected in the Company's financial statements.
5. Other Investments
Other investments consisted of the following:
<TABLE>
<CAPTION>
As of As of
June 30, 1998 Dec. 31, 1997
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Investment in Retirement Centers Corporation $ 296,183 $ -
Investment in and advances to PEPS - 1,495,923
Investment in participating loans - 860,000
------------- -------------
Total $ 296,183 $ 2,355,923
============= =============
</TABLE>
6. Reverse Repurchase Agreements
The Company has entered into several reverse repurchase agreements to finance
Mortgage Securities purchased since the Merger Date. The reverse repurchase
agreements are collateralized by the Company's Mortgage Securities with a
principal balance of approximately $104 million and bear interest at rates that
are LIBOR based.
As of June 30, 1998, the Company had outstanding $99,117,208 of reverse
repurchase agreements with a weighted average borrowing rate of 5.62% and a
weighted average remaining maturity of 3.55 months. As of June 30, 1998, all
of the Company's borrowings were fixed-rate term reverse repurchase agreements
with original maturities that range from 3 to 6 months.
At June 30, 1998, the reverse repurchase agreements had the following
remaining maturities:
Within 30 days $ -
30 to 90 days 56,259,330
90 days to one year 42,857,878
-------------
$ 99,117,208
=============
7. 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
outstanding shares, but not more than 10% of the shares of the Company's
common stock. The Plan authorizes the Board of Directors, or a committee of
the Board of 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 automatically provided
periodic grants of NQSOs with DERs pursuant to the provisions of the Plan.
The exercise price for any options granted to eligible persons, other than
non-employee directors, under the Plan shall not be less than the fair market
value of the common stock on the day of the grant. The exercise price for any
options granted to non-employee directors under the Plan shall be the fair
market value of the common stock on the day of the grant. Twenty-five percent
of the options become exercisable at the time the option is granted.
Thereafter each year, for the next three years, 25% of the total amount of the
options shall cumulatively become exercisable upon the anniversary of the date
of grant. The options expire if not exercised ten years after the date
granted.
During the quarter ended and as of June 30, 1998, there were 500,000 ISOs
granted to buy common shares at an exercise price of $9.375 per share, of
which 125,000 were vested and exercisable. In addition, there were 20,000
NQSOs issued at an exercise price of $9.375 per share, of which 5,000 were
vested and exercisable. No options were exercised during the quarter ended
and as of June 30, 1998.
In addition to options, 125,000 and 5,000 DERs were granted on the ISOs and
NQSOs, respectively, during the quarter ended June 30,1998, based on the
provisions of the Plan. In connection with the options discussed above the
recipients were also granted DERs which vest on the same basis as the options
and payments are made on vested DERs only. Dividends paid on ISOs are charged
to stockholders' equity when declared and dividends paid on NQSOs are charged
to earnings when declared. For the quarter ended June 30, 1998, the Company
recorded a $500 charge to earnings associated with the DERs on ISOs and a
$12,500 charge to stockholders' equity of associated with DERs on NQSOs.
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 and a periodic change will be
recognized based on the vesting schedule. The change of options which vested
at date of grant were included as capitalized transaction costs in connection
with the Merger. Management estimated the value of the ISOs at the date of
grant to be approximately $1.88 per share using a Black-Scholes valuation
model, as adjusted for the discounted value of dividends not to be received
under the unvested DERs. In the absence of comparable historical market
information for the Company, management utilized assumptions consistent with
activity of a comparable peer group of companies including an estimated option
life of five years, a 25% volatility rate and a risk-free rate of 5.5% and a
dividend yield of 0% (because of the DERs). 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
- ---------
On June 18, 1998, the Company declared a distribution of $.265 per share for
the quarter ending June 30, 1998, which is to be paid on August 14, 1998, to
shareholders of record as of June 30, 1998. The distribution consists in part
of a dividend paid from earnings and in part of a cash merger payment,
representing a return of capital.
8. Related Party Transactions
America First Mortgage Advisory Corporation (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, as incentive compensation for each fiscal
quarter, an amount equal to 20% of the dollar amount by which the annualized
Return on Equity for such fiscal quarter exceeds the amount necessary to
provide an annualized Return on Equity equal to the Ten-Year U.S. Treasury
Rate plus 1%. During the quarter ended June 30, 1998, the Advisor earned a
base management fee of $181,376. The Advisor was eligible to receive
incentive compensation of approximately $8,400 for the quarter ended June 30,
1998.
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 also provided property
management services to certain properties previously associated with the
Predecessor which were acquired in the Merger. The Manager receives a
management fee equal to a stated percentage of the gross revenues generated by
the properties under management, ranging from 4.5% to 5% of gross revenues.
Such fees paid by the Company for periods after the Merger Date amounted to
$70,583 and such fees paid by the Predecessor for periods prior to the Merger
Date amounted to $71,125.
Prior to the Merger Date, AFCA 3 was entitled to an administrative fee of .35%
per annum of the outstanding amount of investments of Prep Fund 1 to be paid
by Prep Fund 1 to the extent such amount is not paid by property owners. In
1998, AFCA 3 earned administrative fees of $53,617. Of this amount, $38,069
was paid by Prep Fund 1 and the remainder was paid by property owners.
9. Pro Forma Financial Statements (Unaudited)
The following summary pro forma information includes the effects of the
Merger. The pro forma operating data for the six months ended June 30, 1998
and June 30, 1997 are presented as if the Merger had been completed on January
1, 1998 and 1997, respectively.
Pro Forma
Statement of Operations
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
--------------- ---------------
<S> <C> <C>
Mortgage Securities income $ 2,513,828 $ 2,166,004
Interest income on temporary cash investments 432,155 396,159
--------------- ---------------
Total interest income 2,945,983 2,562,163
Interest expense on borrowed funds 437,490 -
--------------- ---------------
Net interest income 2,508,493 2,562,163
--------------- ---------------
Rental income on real estate held for sale 1,788,150 -
Rental income - 1,268,366
Income from other investments 263,070 542,624
Gain on sale of investment 414,710 -
--------------- ---------------
2,465,930 1,810,990
--------------- ---------------
Real estate operating expenses on real estate
held for sale 962,088 -
Real estate operating expenses - 693,962
General and administrative expenses 1,637,787 914,350
Depreciation 47,259 151,255
Interest expense 626,772 423,149
--------------- ---------------
3,273,906 2,182,716
--------------- ---------------
Minority interest (7,978) -
--------------- ---------------
Net income $ 1,708,495 $ 2,190,437
=============== ===============
Net income, basic and fully diluted, per share $ 0.19 $ 0.24
=============== ===============
Weighted average number of shares outstanding 9,035,184 9,035,184
</TABLE>
The pro forma financial information is not necessarily indicative of what the
consolidated results of operations of the Company would have been as of and
for the periods indicated, nor does it purport to represent the results of
operations for future periods.
10. Subsequent Events
On July 2, 1998, the Company acquired a FNMA whole-pool mortgaged backed
certificate with an aggregate original principal balance of $56,000,649 (the
FNMA Certificate). The FNMA Certificate bears interest at 7.498% per annum.
The total purchase price paid for the FNMA Certificate was approximately $23.1
million, including accrued interest. The acquisition was financed through a
LIBOR-based reverse repurchase agreement.
On July 29, 1998, the Company acquired a FNMA whole-pool mortgaged backed
certificate with an aggregate original principal balance of $33,154,488 (the
FNMA Certificate). The FNMA Certificate bears interest at 5.77% per annum.
The total purchase price paid for the FNMA Certificate was approximately $33.7
million, including accrued interest. The acquisition was financed through a
LIBOR-based reverse repurchase agreement.
On August 6, 1998 and August 10, 1998, the Company purchased with cash two
corporate bonds with a face value of $1 million each for $980,000 and
$990,000, respectively.
<PAGE>
Item 2.
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Prior to the Merger (described in Note 1 to the Company's consolidated
financial statements), the Company was a newly formed real estate investment
trust (REIT) which had no operations of its own.
On April 10, 1998, the Company and three partnerships; America First
Participating/Preferred Equity Mortgage Fund Limited Partnership (Prep Fund
1), America First Prep Fund 2 Limited Partnership (Prep Fund 2), America First
Prep Fund 2 Pension Series Limited Partnership (Pension Fund), consummated a
merger transaction whereby their preexisting net assets and operations or
majority interest in the preexisting partnership were contributed to the
Company in exchange for 9,035,084 shares of the Company's common stock. For
financial accounting purposes, Prep Fund 1, the largest of the three
Partnerships, was considered the Predecessor entity (the Predecessor) and its
historical operating results are presented in the financial statements
contained herein. The Merger was accounted for using the purchase method of
accounting in accordance with GAAP. Prep Fund 1 was deemed to be the
acquirer of the other Partnerships under the purchase method. Accordingly,
the Merger resulted, for financial accounting purposes, in the effective
purchase by Prep Fund 1 of all the BUCs of Prep Fund 2 and approximately 98%
of the BUCs of Pension Fund. As the surviving entity for financial accounting
purposes, the assets and liabilities of Prep Fund 1 were recorded by the
Company at their historical cost and the assets and liabilities of Prep Fund 2
and Pension Fund were adjusted to fair value. The excess of the fair value of
stock issued over the fair value of net assets acquired has been recorded as
goodwill in the accompanying balance sheet.
Concurrently with the Merger, the Company entered into an Advisory Agreement
with America First Mortgage Advisory Corporation (the "Advisor") and adopted
an investment policy which significantly differed from that pursued by the
predecessor partnerships. This strategy includes leveraged investing in
adjustable rate mortgage securities and mortgage loans. The Company began
implementing this investment strategy in the second quarter of 1998. During
the period from the consummation of the Merger through June 30, 1998, the
Company purchased six positions in mortgage backed securities for an aggregate
purchase cost of approximately $103 million. Subsequent to June 30, 1998
through August 14, 1998, the Company acquired three additional positions for
an aggregate purchase cost of approximately $58.8 million.
The Company intends to elect to qualify as a REIT under the Code beginning
with its 1998 taxable year and, as such, anticipates distributing annually at
least 95% 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. Further, as part of the Merger transaction, Company has
committed to make distributions in the first year following the Merger of at
least $1.06 per common share, to be paid in four equal quarterly installments,
which is expected to significantly exceed taxable income. Accordingly, a
portion of distributions received by shareholders in 1998 and 1999 will
consist in part of a dividend paid from earnings and in part of a cash merger
payment, representing non-taxable return of capital. There is no commitment
by the Company to distribute amounts in excess of taxable income beyond the
first year of operations.
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.
The Merger, other related transactions and on-going implementation of the
change in investment strategy will materially impact the Company's future
operations as compared to those of the Predecessor, or the Company's current
level of operations. Accordingly, 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 requires capital to fund its investment strategy and pay its
operating expenses. The Company's capital sources upon consummation of the
Merger include cash flow from operations, borrowings under reverse repurchase
agreements and mortgage loans on the Company's remaining direct real estate
investments, which are currently held for sale.
Since the Merger , the Company has primarily financed its mortgage investments
through reverse repurchase agreements with aggregate balances of between $8.6
million and $28.2 million, respectively. These arrangements have original
terms to maturity ranging from one month to six months and annual interest
rates based on LIBOR.
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 new investment policy.
Results of Operations
Three Month Period Ended June 30, 1998 Compared to 1997
During the three months ended June 30, 1998, total interest income increased
$760,972 as compared to total interest income of the Predecessor for the
three months ended June 30, 1997. This increase is a result of the interest
generated by mortgage investments acquired from Prep Fund 2 and Pension Fund
in the Merger as well as the acquisition of additional mortgage investments
during 1998.
Rental income increased $749,981 as compared to that of the Predecessor as a
result of (i) a reclassification of certain assets to investments in real
estate as of the Merger Date and (ii) additional rental income realized from
real estate acquired from Prep Fund 2 and Pension Fund in the Merger.
The Company realized a gain of $385,000 from the sale of a mortgage loan on
May 1, 1998 and a gain of $29,710 on the sale of other investments. The
reduction of $96,914 in income from other investments was primarily due to
this sale.
The increase in the Company's interest expense on borrowed funds during the
three months ended June 30, 1998 compared to that of the Predecessor for the
three months ended June 30, 1997, relates to interest expense on reverse
repurchase arrangements used to fund additional investments.
Real estate operating expenses and interest expense on mortgage loans
increased $673,577 as compared to that of the Predecessor as a result of (i) a
reclassification of certain assets to investments in real estate as of the
Merger Date and (ii) additional real estate operating expenses realized from
real estate acquired from Prep Fund 2 and Pension Fund in the Merger.
No depreciation was recorded for the three months ended June 30, 1998 because
all real estate assets were classified as held for sale.
General and administrative expenses increased $245,843 as compared to that of
the Predecessor as a result of (i) the management fee payable to the Advisor
and (ii) the increased scope of operations resulting from the Merger.
Six month period ended June 30, 1998 compared to 1997
During the six months ended June 30, 1998, total interest income increased
$712,677 as compared to total interest income of the Predecessor for the six
months ended June 30, 1997. This increase is a result of the interest
generated by mortgage investments acquired from Prep Fund 2 and Pension Fund
in the Merger as well as the acquisition of additional mortgage investments
during 1998.
Rental income increased $519,784 as compared to that of the Predecessor as a
result of (i) a reclassification of certain assets to investments in real
estate as of the Merger Date and (ii) additional rental income realized from
real estate acquired from Prep Fund 2 and Pension Fund in the Merger.
The Company realized a gain of $385,000 from the sale of a mortgage loan on
May 1, 1998 and a gain of $29,710 on the sale of other investments. The
reduction of $96,914 in income from other investments was primarily due to
this sale.
The increase in the Company's interest expense on borrowed funds during the
six months ended June 30, 1998 compared to that of the Predecessor for the six
months ended June 30, 1997, relates to interest expense on reverse repurchase
arrangements used to fund additional investments.
Real estate operating expenses and interest expense on mortgage loans
increased $471,749 as compared to that of the Predecessor as a result of (i) a
reclassification of certain assets to investments in real estate as of the
Merger Date and (ii) additional real estate operating expenses realized from
real estate acquired from Prep Fund 2 and Pension Fund in the Merger.
Depreciation decreased $103,996 as compared to that of the Predecessor because
all real estate assets were classified as held for sale as of the Merger Date.
General and administrative expenses increased $426,435 as compared to that of
the Predecessor as a result of (i) the management fee payable to the Advisor
and (ii) the increased scope of operations resulting from the Merger.
Interest Rate Risks
The Company's operating results will depend in part on the difference between
the interest income earned on its interest-earned assets and the interest
expense incurred in connection with its interest-bearing liabilities.
Competition from other providers of investment capital may lead to a lowering
of the interest rate earned on the Company's interest bearing assets which the
Company may not be able to offset by obtaining lower interest costs on its
borrowings. Changes in the general level of interest rates prevailing in the
economy can affect the spread between the Company's interest-earning assets
and interest-bearing liabilities. Any significant compression of the spreads
between interest-earning assets and interest-bearing liabilities could have
material adverse effect on the Company. In addition, an increase in interest
rates could, among other things, reduce the value of the Company's
interest-bearing assets and its ability to realize gains from the sale of such
assets, and a decrease in the interest rates could reduce the average life of
the Company's interest earning assets.
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. The
Company may employ various hedging strategies to limit the effects of changes
in interest rates on its operations, including asset liability matching, which
represents the current strategy, or engaging in active hedging using
derivative instruments including interest rate swaps, caps, floors and other
interest rate exchange contracts. There can be no assurance that the
profitability of the Company or the value of the Company's investment assets
will not be adversely affected during any period as a result of changing
interest rates. In addition, hedging transactions involve certain additional
risks such as counter-party credit risk, legal enforceability of hedging
contracts and the risk that unanticipated and significant changes in interest
will cause a significant loss of basis in the contract. With regard to loss
of basis in a hedging contract, indices upon which contracts are priced may be
more or less variable than the indices upon which the hedged loans are priced,
thereby making the hedge less effective. There can be no assurance that the
Company will be able to adequately protect against the foregoing risks and
that the Company will ultimately realize an economic benefit from any hedging
contract it enters into.
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
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
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 June 30, 1998,
the Company calculates 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. The
requirements of Item 3 of Form 10-Q are not applicable to the Company prior to
its Annual Report on Form 10-K for the year ended December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
The proxy for the 1999 annual meeting of shareholders will confer
discretionary authority on the Board of Directors to vote on any matter
proposed by any shareholder for consideration at the meeting if the Company
does not receive written notice of the matter from the proponent on or before
February 6, 1999. Such notice must be submitted in writing and mailed by
certified mail to Stewart Zimmerman, America First Mortgage Investments, Inc.,
399 Park Avenue, New York, New York, 10022.
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 from 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 from Form 8-K dated April 10, 1998,
filed by the Registrant pursuant to the Securities Exchange
Act of 1934 (Commission File No. 1-13991)).
3.3 Agreement of Limited Partnership, dated May 25, 1988, of
America First Prep Fund 2 Pension Series Limited
Partnership (incorporated herein by reference to Form
10-K, dated December 31, 1988, filed with the
Securities and Exchange Commission (File No. 33-13407)).
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 Form of Advisory Agreement by and between the Company and
America First Mortgage Advisory Corporation (incorporated
herein by reference to Exhibit 10.1 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)).
10.2 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 Registrant 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 Registrant 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 Registrant pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.5 Form of 1997 Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 10.5 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)).
10.6 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)).
(b) Reports on Form 8-K
The Registrant filed the following reports on Form 8-K during
the quarter for which this report is filed.
Item Reported Financial Statements Filed Date of Report
2. Acquisition Yes April 10, 1998
or Disposition
of Assets
2. Acquisition No May 26, 1998
or Disposition
of Assets
<PAGE>
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: August 14, 1998 AMERICA FIRST MORTGAGE INVESTMENTS, INC.
By /s/ Gary Thompson
Gary Thompson
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,930,000
<SECURITIES> 152,880,839
<RECEIVABLES> 952,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 202,531,965
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 90,351
0
0
<OTHER-SE> 74,293,984
<TOTAL-LIABILITY-AND-EQUITY> 202,531,965
<SALES> 0
<TOTAL-REVENUES> 3,012,022
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,312,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 466,201
<INCOME-PRETAX> 1,241,007
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,241,007
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.14
</TABLE>
