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 March 31, 2000 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 1-13991
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Maryland 13-3974868
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
399 Park Avenue, 36th Floor, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 935-8760
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
The number of shares of the Registrant's common stock outstanding on May 10,
2000, was 8,871,642.
<PAGE> -i-
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000
(Unaudited) Dec. 31, 1999
--------------- ---------------
<S> <C> <C>
Assets
Investment in mortgage securities (Note 3) $ 510,790,408 $ 475,719,711
Investment in corporate securities (Note 4) 9,009,383 8,020,026
Investment in preferred stock 7,745,612 3,130,823
Cash and cash equivalents
Unrestricted 9,546,424 19,895,833
Restricted 591,307 3,709,577
Accrued interest receivable 3,472,675 2,855,321
Other investments (Note 5) 3,343,606 3,220,346
Goodwill, net 7,538,022 7,587,948
Other assets 146,962 244,888
--------------- ---------------
$ 552,184,399 $ 524,384,473
=============== ===============
Liabilities
Repurchase agreements (Note 6) $ 484,593,253 $ 452,101,803
Accrued interest payable 892,018 2,778,842
Accounts payable 495,786 595,805
Dividends payable 1,280,838 1,293,410
--------------- ---------------
487,261,895 456,769,860
--------------- ---------------
Stockholders' Equity
Stockholders' Equity
Common stock, $.01 par value; 10,000,000 shares authorized
8,899,242 and 8,978,642 issued and outstanding in 2000 and 1999, respectively 88,992 89,786
Additional paid-in capital 75,440,184 75,831,560
Retained earnings (2,662,322) (2,877,971)
Accumulated other comprehensive income (7,944,350) (5,428,762)
--------------- ---------------
64,922,504 67,614,613
--------------- ---------------
$ 552,184,399 $ 524,384,473
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 1 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
----------------- ---------------
<S> <C> <C>
Mortgage securities income $ 8,177,152 $ 4,564,789
Corporate securities income 240,374 130,899
Dividend income 204,031 -
Interest income on temporary cash investments 152,834 131,385
--------------- ---------------
Total interest and dividend income 8,774,391 4,827,073
Interest expense on borrowed funds 6,966,395 3,143,155
--------------- ---------------
Net interest and dividend income 1,807,996 1,683,918
--------------- ---------------
Income from other investments 148,220 186,697
Loss on sale of investments - (1,534)
--------------- ---------------
148,220 185,163
--------------- ---------------
General and administrative expenses 461,465 616,193
Minority interest - 490
--------------- ---------------
461,465 616,683
--------------- ---------------
Net income $ 1,494,751 $ 1,252,398
=============== ===============
Net income, basic, per share $ .17 $ .14
=============== ===============
Net income, fully diluted, per share $ .17 $ .14
=============== ===============
Weighted average number of shares outstanding 9,003,083 9,055,142
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 2 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Stockholders' Equity
--------------------------------------------------------------------------------------------------
Accumulated
Treasury Other
Common Stock Paid-in Stock Retained Comprehensive
# of Shares Amount Capital At Cost Earnings Income Total
------------ ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 8,978,642 $ 89,786 $ 75,831,560 $ - $(2,877,971) $(5,428,762) $ 67,614,613
Comprehensive income:
Net income - - - - 1,494,751 - 1,494,751
Net unrealized holding gains
arising during the period - - - - - (2,515,588) (2,515,588)
------------ ------------ ------------- ------------ ------------ ------------ -------------
Comprehensive income - - - - 1,494,751 (2,515,588) (1,020,837)
Dividends paid or accrued - - - - (1,279,102) - (1,279,102)
Purchase of shares for treasury - - - 392,170 - - 392,170
Retirement of treasury stock (79,400) (794) (391,376) (392,170) - - (784,340)
------------ ------------ ------------- ------------ ------------ ------------ -------------
Balance at March 31, 2000 8,899,242 $ 88,992 $ 75,440,184 $ - $(2,662,322) $(7,944,350) $ 64,922,504
============ ============ ============= ============ ============ ============ =============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 3 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,494,751 $ 1,252,398
Adjustments to reconcile net income to net cash
from operating activities:
Loss on sale of investments - 1,534
Minority interest - 490
Amortization 402,238 221,617
Increase in interest receivable (617,354) (762,478)
Decrease in other assets 97,926 298,779
Increase (decrease) in accounts payable (100,019) 252,935
Increase (decrease) in accrued interest payable (1,886,824) 43,499
---------------- ---------------
Net cash provided by (used in) operating activities (609,282) 1,308,774
---------------- ---------------
Cash flows from investing activities
Decrease in restricted cash 3,118,270 -
Principal payments on mortgage securities 21,497,100 25,533,537
Purchases of mortgage securities (59,419,766) (124,778,490)
Purchases of corporate securities (978,750) (476,250)
Purchases of preferred stock (4,639,591) (850,333)
(Increase) decrease in other investments (123,260) 46,855
---------------- ---------------
Net cash used in investing activities (40,545,997) (100,524,681)
---------------- ---------------
Cash flows from financing activities
Net borrowings from repurchase agreements 32,491,450 106,822,983
Stock purchased for treasury (392,170) -
Dividends and distributions paid (1,293,410) (2,447,666)
---------------- ---------------
Net cash provided by financing activities 30,805,870 104,375,317
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (10,349,409) 5,159,410
Cash and temporary cash investments at beginning
of period 19,895,833 6,045,956
---------------- ---------------
Cash and temporary cash investments at end of period $ 9,546,424 $ 11,205,366
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 8,853,219 $ 3,099,656
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 4 -
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. Organization
America First Mortgage Investments, Inc. (the Company) was incorporated in
Maryland on July 24, 1997. The Company began operations on April 10, 1998
when it merged with three partnerships: America First Participating/Preferred
Equity Mortgage Fund Limited Partnership (Prep Fund 1), America First Prep
Fund 2 Limited Partnership (Prep Fund 2), America First Prep Fund 2 Pension
Series Limited Partnership (Pension Fund).
The Company has entered into an advisory agreement with America First Mortgage
Advisory Company (the Advisor) which provides advisory services in connection
with the conduct of the Company's business activities.
2. Summary of Significant Accounting Policies
A) Method of Accounting
The accompanying 2000 financial statements include the
accounts of the Company and the accompanying 1999 consolidated financial
statements include the accounts of the Company and its subsidiaries,
Pension Fund and Pension Fund's general partner, America First Capital
Associates Limited Partnership Six (AFCA 6). All significant intercompany
transactions and accounts have been eliminated in consolidation. Pension
Fund and AFCA 6 were liquidated and dissolved under the terms of their
respective partnership agreements during December 1999. In addition, as
more fully discussed in Note 5, the Company has an investment in a
corporation and investments in four real estate limited partnerships, none
of which are controlled by the Company. These investments are accounted
for under the equity method. Neither the corporation nor the real estate
limited partnerships are consolidated for income tax purposes.
The financial statements are prepared on the accrual basis of accounting
in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid
investments with original maturities of three months or less. The
carrying amount of cash equivalents approximates their fair value.
Restricted cash represents amounts held with certain lending
institutions with which the Company has repurchase agreements. Such
amounts may be used to make principal payments on the related
repurchase agreements.
C) Mortgage Securities, Corporate Securities and Preferred Stock
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115), requires
the Company to classify its investments in mortgage securities,
corporate securities and preferred stock (collectively referred to as
investment securities) as either held-to-maturity, available-for-sale or
trading.
Although the Company generally intends to hold most of its mortgage
securities until maturity, it may, from time to time, sell any of its
mortgage securities as part of its overall management of its business.
In order to be prepared to respond to potential future opportunities in the
market, to sell mortgage securities in order to optimize the portfolio's
total return and to retain its ability to respond to economic conditions
that require the Company to sell assets in order to maintain an appropriate
level of liquidity, the Company has classified all its mortgage securities
as available-for-sale. Likewise, the Company has classified all its
preferred stock investments as available-for-sale. Mortgage securities and
<PAGE> - 5 -
preferred stock classified as available-for-sale are reported at fair
value, with unrealized gains and losses excluded from earnings and
reported in other comprehensive income. Corporate securities are
classified as held-to-maturity and are carried at amortized cost.
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 investment security is adjusted. Other-than-temporary
unrealized losses are based on management's assessment of various factors
affecting the expected cash flow from the investment securities, including
an other-than-temporary deterioration of the credit quality of the
underlying mortgages and/or the credit protection available to the related
mortgage pool.
Gains or losses on the sale of investment securities are based on the
specific identification method.
Interest income is accrued based on the outstanding principal amount of
the investment securities and their contractual terms. Premiums and
discounts associated with the purchase of the investment securities are
amortized into interest income over the lives of the securities using the
effective yield method based on, among other things, anticipated estimated
prepayments. Such calculations are periodically adjusted for actual
prepayment activity.
D) Credit Risk
The Company limits its exposure to credit losses on its investment
portfolio by requiring that at least 70% of its investment portfolio
consist of mortgage securities or mortgage loans that are:
(i) insured or guaranteed as to principal and interest by an agency of
the U.S. government, such as the Government National Mortgage Association
(GNMA), the Federal National Mortgage Association (FNMA), or the Federal
Home Loan Mortgage Corporation (FHLMC), (ii) rated in one of the two
highest rating categories by either Standard & Poor's or Moody's, or
(iii) considered to be of equivalent credit quality as determined by the
Advisor and approved by the Company's investment committee. The remainder
of the Company's assets may be: (i) mortgage assets rated at least
investment grade or considered to be of equivalent credit quality by the
Advisor with approval from the Company's investment committee; (ii) direct
investment (mezzanine or equity) in multifamily projects collateralizing
mortgage loans owned by the Company; (iii) investments in limited
partnerships, equities, real estate investment trusts or closed-end funds
owning a portfolio of mortgage and/or real estate assets; or (iv) other
corporate debt or equity securities or government fixed-income instruments
that provide increased call protection relative to the Company's securities.
Corporate debt that is rated below investment grade will be limited to less
than 5% of the Company's total assets. As of March 31, 2000, and December
31, 1999, approximately 82% and 79%, respectively, of the Company's
total assets consisted of mortgage securities insured or guaranteed
by the U.S. government or an agency thereof. At March 31, 2000, management
determined no allowance for credit losses was necessary.
E) Other Investments
Other investments consist of: (i) non-voting preferred stock of a
corporation owning interests in real estate limited partnerships, and
(ii) investments in limited partnerships owning real estate.
F) Net income per Share
Net income per share is based on the weighted average number of common
shares and common equivalent shares (e.g., stock options), if dilutive,
outstanding during the period. Basic net income per share is computed by
dividing net income available to shareholders by the weighted average
number of common shares outstanding during the period. Diluted net
income per share is computed by dividing the diluted net income available
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.
<PAGE> - 6 -
As more fully discussed in Note 7, options to purchase 520,000 and
300,000 shares of common stock were granted on April 6, 1998, and August
13, 1999, respectively. During the quarter ended March 31, 2000, the
average price of the Company's stock was slightly greater than the exercise
price of the options granted on August 13, 1999. As such, exercise of such
options under the treasury stock method is slightly dilutive. Accordingly,
these dilutive securities were considered in fully diluted earnings per
share. With regard to the options granted on April 6, 1998, the exercise
price was greater than the average stock price during the quarters ended
March 31, 2000, and March 31, 1999; therefore, exercise of such options
under the treasury stock method would be anti-dilutive. Accordingly,
these potentially dilutive securities were not considered in fully diluted
earnings per share.
The following table sets forth the reconciliation of the weighted average
shares outstanding for the calculation of basic earnings per share to the
weighted average shares outstanding for the calculation of fully diluted
earnings per share for each period presented:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Weighted average shares outstanding for
basic earnings per share 9,003,083 9,005,142
Add effect of assumed shares issued under
treasury stock method for stock options 7,207 -
Weighted average shares outstanding for ----------- -----------
diluted earnings per share 9,010,290 9,005,142
=========== ===========
</TABLE>
G) Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires the Company to display and report
comprehensive income, which includes all changes in Stockholders' Equity
with the exception of additional investments by or dividends to
shareholders. Comprehensive income for the Company includes net income and
the change in net unrealized holding gains (losses) on investments.
Comprehensive income for the three months ended March 31, 2000, and March
31, 1999 was as follows:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
(Unaudited) (Unaudited)
--------------- ---------------
<S> <C> <C>
Net income $ 1,494,751 $ 1,252,398
Change in net unrealized holding gains (losses) (2,515,588) 802,645
--------------- ---------------
Comprehensive income $ (1,020,837) $ 2,055,043
=============== ===============
</TABLE>
H) Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust
(REIT) under the provisions of the Internal Revenue Code and the
corresponding provisions of state law. As such, no provision for income
taxes has been made in the accompanying consolidated financial statements.
I) New Accounting Pronouncement
In June, 1998, the Financial Accounting Standards Board 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, as amended, is required by the Company effective
January 1, 2001. Management intends to adopt the statement as required
in fiscal 2001. Management believes that the impact of such adoption will
not be material to the financial statements. Although the Company has not
historically used such instruments, it is not precluded from doing so.
In the future, management anticipates using such derivative instruments
only as hedges to manage interest rate risk. Management does not anticipate
entering into derivatives for speculative or trading purposes.
<PAGE> - 7 -
3. Mortgage Securities
The following table presents the Company's mortgage securities as of March 31,
2000 and December 31, 1999.
<TABLE>
<CAPTION>
March 31, 2000
(Unaudited) December 31, 1999
----------------- -----------------
<S> <C> <C>
FNMA Certificates $ 391,701,185 $ 359,891,164
GNMA Certificates 48,846,610 43,678,897
FHLMC Certificates 11,638,631 13,220,884
Commercial mortgage-backed securities 16,552,512 16,650,544
Private label CMOs 42,051,470 42,278,222
----------------- -----------------
$ 510,790,408 $ 475,719,711
================= =================
</TABLE>
At March 31, 2000, and December 31, 1999, mortgage securities consisted of
pools of adjustable-rate mortgage securities with carrying values of
$473,609,178 and 444,140,267, respectively, and fixed-rate mortgage
securities with carrying values of $37,181,230 and $31,579,444,
respectively.
The Federal National Mortgage Association (FNMA) Certificates are backed by
first mortgage loans on pools of single-family properties. The FNMA
Certificates are debt securities issued by FNMA and are guaranteed by FNMA as
to the full and timely payment of principal and interest on the underlying
loans.
The Government National Mortgage Association (GNMA) Certificates are backed by
first mortgage loans on multifamily residential properties and pools of
single-family properties. The GNMA Certificates are debt securities issued
by a private mortgage lender and are guaranteed by GNMA as to the full and
timely payment of principal and interest on the underlying loans.
The Federal Home Loan Mortgage Corporation (FHLMC) Certificates are backed by
first mortgage loans on pools of single-family properties. The FHLMC
Certificates are debt securities issued by FHLMC and are guaranteed by FHLMC
as to the full and timely payment of principal and interest on the underlying
loans.
The commercial mortgage securities are rated AA or A by Standard and Poor's.
The private label CMOs (collateralized mortgage obligations) are rated AAA by
Standard and Poor's.
At March 31, 2000, and December 31, 1999, all mortgage securities were
classified as available-for-sale and as such are carried at their fair value.
The following table presents the amortized cost, gross unrealized gains, gross
unrealized losses and fair value of mortgage securities March 31, 2000, and
December 31, 1999, respectively:
<TABLE>
<CAPTION>
March 31, 2000
(Unaudited) Dec. 31, 1999
------------------ ------------------
<S> <C> <C>
Amortized cost $ 518,737,981 $ 481,176,498
Gross unrealized gains 250,841 461,675
Gross unrealized losses (8,198,414) (5,918,462)
------------------ ------------------
Fair value $ 510,790,408 $ 475,719,711
================== ==================
</TABLE>
4. Corporate Securities
Corporate securities are classified as held-to-maturity. The following table
presents the amortized cost, gross unrealized gains, gross unrealized losses
<PAGE> - 8 -
and fair value of the corporate securities as of March 31, 2000, and December
31, 1999:
<TABLE>
<CAPTION>
As of As of
March 31, 2000 December 31, 1999
------------------ ------------------
<S> <C> <C>
Amortized cost $ 9,009,383 $ 8,020,026
Gross unrealized gains 112,749 92,211
Gross unrealized losses (538,387) (174,487)
------------------ ------------------
Fair value $ 8,583,745 $ 7,937,750
================== ==================
</TABLE>
5. Other Investments
Other investments consisted of the following as of March 31, 2000 and December
31, 1999:
<TABLE>
<CAPTION>
March 31, 2000
(Unaudited) Dec. 31, 1999
-------------- -------------
<S> <C> <C>
Investment in Retirement Centers Corporation $ 2,513,240 $ 2,389,980
Investment in and advances to real estate limited partnerships 830,366 830,366
------------- -------------
Total $ 3,343,606 3,220,346
============= =============
</TABLE>
The Company's investment in Retirement Centers Corporation (RCC) represents a
95% ownership interest in such corporation. The Company owns 100% of the
non-voting preferred stock of RCC and a third party owns 100% of the common
stock. The Company accounts for its investment in RCC on the equity method.
As of March 31, 2000, RCC owned (i) a limited partnership interest in a real
estate limited partnership which operates an assisted living center located in
Salt Lake City, Utah, and (ii) a 127-unit apartment property located in Omaha,
Nebraska, which was acquired on January 12, 2000. As of December 31, 1999,
RCC's investments consisted of (i) its interest in the real estate limited
partnership referenced above and (ii) cash which was utilized to acquire the
apartment property on January 12, 2000.
Investments in and advances to real estate limited partnerships consist of
investments in or advances made to four limited partnerships which own the
properties underlying certain mortgage securities owned by the Company. These
investments are not insured or guaranteed but rather are collateralized by the
value of the real estate underlying the real estate owned by such limited
partnerships. They are accounted for under the equity method of accounting.
Certain of the investments have a zero carrying value and, as such, earnings
are recorded only to the extent distributions are received. Such investments
have not been reduced below zero through recognition of allocated investment
losses since the Company has no legal obligation to provide additional cash
support to the underlying property partnerships as it is not the general
partner, nor has it indicated any commitment to provide this support.
6. Repurchase Agreements
As of March 31, 2000, the Company had outstanding balances of $484,593,253
under 45 repurchase agreements with a weighted average borrowing rate of 5.85%
and a weighted average remaining maturity of 1.4 months. As of March 31,
2000, all of the Company's borrowings were fixed-rate term repurchase
agreements with original maturities that range from one to twelve months. As
of December 31, 1999, the Company had outstanding balances of $452,101,803
under 38 repurchase agreements with a weighted average borrowing rate of
5.72%.
<PAGE> - 9 -
At March 31, 2000, the repurchase agreements had the following remaining
maturities:
<TABLE>
<CAPTION>
<S> <C>
Within 30 days $165,600,060
30 to 90 days 310,933,193
90 days to one year 8,060,000
-------------
$484,593,253
=============
</TABLE>
The repurchase agreements are collateralized by the Company's mortgage
securities and corporate securities with an aggregate current face value of
approximately $504.9 million and preferred stock with a current market value
of approximately $7.7 million. The repurchase agreements bear interest at
rates that are LIBOR based.
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
Company's common stock, but not more than 10% of the total outstanding 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 eligible to
receive grants of NQSOs with DERs pursuant to the provisions of the Plan. The
exercise price for any options granted to eligible persons under the Plan
shall not be less than the fair market value of the common stock on the day of
the grant. The options expire if not exercised ten years after the date
granted.
On April 6, 1998, 500,000 ISOs were granted to buy common shares at an
exercise price of $9.375 per share (the 1998 Grant). In addition, 20,000
NQSOs were issued at an exercise price of $9.375 per share. On August 13,
1999, 300,000 ISOs were granted to buy common shares at an exercise price of
$4.875 per share (the 1999 Grant). Prior to the 1998 Grant, no other options
were outstanding. As of March 31, 2000 and December 31, 1999, respectively,
325,000 and 125,000 ISOs were vested and exercisable. As of March 31, 2000
and December 31, 1999, respectively, 10,000 and 5,000 NQSOs were vested and
exercisable. As of March 31, 2000, no options had been exercised.
In addition to the options granted on April 6, 1998, 500,000 and 20,000 DERs
were also granted on the ISOs and NQSOs, respectively, based on the provisions
of the Plan. No DERs were granted on the ISOs granted on August 13, 1999.
DERs vest on the same basis as the options and payments are made on vested
DERs only. Vested DERs are paid only to the extent of ordinary income and not
on returns of capital. Dividends paid on ISOs are charged to stockholders'
equity when declared and dividends paid on NQSOs are charged to earnings when
declared. For the three months ended March 31, 2000, and March 31, 1999, the
Company recorded charges of $35,000 and $16,250, respectively, to stockholders'
equity (included in dividends paid or accrued) associated with the DERs on
ISOs and charges of $1,400 and $650, respectively, to earnings 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 as variable grants and a
periodic charge will be recognized based on the vesting schedule. The charge
for options which vested immediately with the 1998 Grant was included as
capitalized transaction costs in connection with the Merger. Until fixed and
determinable, management estimates the value of the ISOs granted as of each
balance sheet date using a Black-Scholes valuation model, as adjusted for the
discounted value of dividends not to be received under the unvested DERs. In
the absence of comparable historical market information for the Company,
management originally utilized assumptions consistent with activity of a
comparable peer group of companies including an estimated option life, a
volatility rate, a risk-free rate and a current dividend yield (or 0% if the
<PAGE> - 10 -
related DERs are issued). For the three months ended March 31, 2000, and
March 31, 1999, as part of operations, the Company reflected earnings charges
of $96,854 and $58,899, respectively, representing the value of ISOs/DERs
granted over their vesting period. NQSOs granted were accounted for using the
intrinsic method and, accordingly, no earnings charge was reflected since the
exercise price was equal to the fair market value of the common stock at the
date of the grant.
Dividends/Distributions
- -----------------------
On March 17, 2000, the Company's board of directors declared a dividend of
$.14 per share for the quarter ended March 31, 2000, payable on May 17, 2000,
to shareholders of record as of April 14, 2000.
8. Related Party Transactions
The Advisor manages the operations and investments of the Company and performs
administrative services for the Company. In turn, the Advisor receives a
management fee payable monthly in arrears in an amount equal to 1.10% per
annum of the first $300 million of Stockholders' Equity of the Company, plus
.80% per annum of the portion of Stockholders' Equity of the Company above
$300 million. The Company also pays the Advisor, 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%. For the three months ended March 31, 2000, and March
31, 1999, the Advisor earned a base management fee of $182,925 and $189,822,
respectively, and incentive compensation of $71,260 and $45,000, respectively.
America First Properties Management Company L.L.C., (the Manager), provides
property management services for certain of the multifamily properties in
which the Company has an interest. The Manager receives a management fee
equal to a stated percentage of the gross revenues generated by the properties
under management, ranging from 3.5% to 5% of gross revenues. Such fees paid
by the Company for the three months ended March 31, 2000 and March 31, 1999,
amounted to $94,549 and $73,108, respectively.
<PAGE> - 11 -
Item 2.
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The Company was incorporated in Maryland on July 24, 1997. The Company began
operations on April 10, 1998 when it merged with three partnerships: America
First Participating/Preferred Equity Mortgage Fund Limited Partnership ("Prep
Fund 1"), America First Prep Fund 2 Limited Partnership ("Prep Fund 2"),
America First Prep Fund 2 Pension Series Limited Partnership ("Pension Fund").
America First Mortgage Advisory Corporation (the "Advisor") provides advisory
services to the Company in connection with the conduct of the Company's
business activities. The Company's principal investment strategy includes
leveraged investing in adjustable rate mortgage securities and mortgage
loans. Since commencing operations and through March 31, 2000, the Company
purchased mortgage securities with a face value at the time of purchase of
approximately $623 million (mortgage securities with a face value of
approximately $51.8 million were purchased during the three months ended March
31, 2000).
The Company has elected to become subject to tax as a real estate investment
trust ("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. On March 17, 2000, the
Company's board of directors declared a dividend of $.14 per share for the
quarter ended March 31, 2000, payable on May 17, 2000, to shareholders of
record as of April 14, 2000.
The Company's operations for any period may be affected by a number of factors
including the investment assets held, general economic conditions affecting
underlying borrowers and, most significantly, factors which affect the
interest rate market. Interest rates are highly sensitive to many factors,
including governmental monetary and tax policies, domestic and international
economic and political considerations, and other factors beyond the control of
the Company.
Due to the on-going implementation of the Company's investment strategy, the
currently reported financial information is not necessarily indicative of the
Company's future operating results or financial condition.
Liquidity and Capital Resources
The Company's principal sources of capital consist of borrowings under
repurchase agreements, principal payments received on its portfolio of
mortgage securities and cash provided by operations. Principal uses of cash
include the acquisition of investment securities, the payment of operating
expenses and the payment of dividends to shareholders.
During the three months ended March 31, 2000, the Company acquired $65 million
of mortgage securities, corporate securities and preferred stock. Financing
for these acquisitions was provided primarily through the utilization of
repurchase agreements, supplemented by cash flow from operations of $4.9
million. Net borrowings under such repurchase agreements totaled $32.5
million during the three months ended March 31, 2000. The Company also
received principal payments of $21.5 million on its mortgage securities during
the three months ended March 31, 2000. Other uses of funds during the three
months ended March 31, 2000, consisted of a $1.3 million dividend payment and
$0.4 million for the acquisition of 79,400 shares of its own common stock
pursuant to a stock repurchase program implemented in the fourth quarter of
1999.
The Company's borrowings under repurchase agreements totaled $484.6 million at
March 31, 2000, and had a weighted average borrowing rate of 5.85% as of such
date. At March 31, 2000, the repurchase agreements had balances of between
$295,000 and $64 million. These arrangements have original terms to maturity
ranging from one month to twelve months and annual interest rates based on
LIBOR. To date, the Company has not had any significant margin calls on its
repurchase agreements that were related to a decrease in the value of its
collateral.
<PAGE> - 12 -
The Company believes it has adequate financial resources to meet its
obligations as they come due and fund committed dividends as well as to
actively pursue its investment policy.
Results of Operations
Three Month Period Ended March 31, 2000 Compared to 1999
During the three months ended March 31, 2000, total interest and dividend
income for the Company increased $3.9 million (82%) as compared to total
interest and dividend income for the three months ended March 31, 1999. This
increase is primarily the result of a 69% increase in the Company's interest
earning assets from March 31, 1999, to March 31, 2000. Also contributing to
the increase was an increase in the annualized yield on the Company's interest
earning assets to 6.70% for the three months ended March 31, 2000, up from
6.29% for the comparable period in 1999.
The Company's interest expense increased $3.8 million (122%) for the three
months ended March 31, 2000 compared to the comparable period in 1999. Such
increase is primarily due to the increase in funds borrowed from $291.7
million at March 31, 1999, to $484.6 million at March 31, 2000. In addition,
the Company's interest cost on such borrowed funds increased to an average of
5.95% for the three months ended March 31, 2000 from 5.16% for the three
months ended March 31, 1999.
Income from other investments decreased $38,000 due to a reduction in the
Company's investments in real estate limited partnerships.
General and administrative expenses for the Company for the three months ended
March 31, 2000 decreased $155,000 as compared to the three months ended March
31, 1999. Approximately $45,000 of such decrease is due to expenses incurred
in 1999 by a consolidated subsidiary which was liquidated in December 1999.
The remaining decrease of $110,000 is primarily attributable to decreases in
various servicing, filing fees and printing costs.
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 March 31,
2000, the Company determined that it is in and has maintained compliance with
this requirement.
Forward Looking Statements
When used in this Form 10-Q, in future SEC filings or in press releases or
other written or oral communications, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. The Company cautions that such forward looking statements
speak only as of the date made and that various factors including regional
and national economic conditions, changes in levels of market interest
rates, credit and other risks of lending and investment activities, and
competitive and regulatory factors could affect the Company's financial
performance and could cause actual results for future periods to differ
materially from those anticipated or projected.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect events or circumstances after
the date of such statements.
<PAGE> - 13 -
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the Company's market risk since
December 31, 1999.
<PAGE> - 14 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger by and among the Registrant,
America First Participating/Preferred Equity Mortgage Fund
Limited Partnership, America First Prep Fund 2 Limited
Partnership, America First Prep Fund 2 Pension Series
Limited Partnership and certain other parties, dated as of
July 29, 1997 (incorporated herein by reference to Exhibit
2.1 of the Registration Statement on Form S-4 dated
February 12, 1998, filed by the Registrant pursuant to the
Securities Act of 1933 (Commission File No. 333-46179)).
3.1 Amended and Restated Articles of Incorporation of the
Registrant (incorporated herein by reference 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)).
4.1 Specimen of Common Stock Certificate of the Company.
(incorporated herein by reference to Exhibit 4.1 of the
Registration Statement on Form S-4 dated February 12, 1998,
filed by the Registrant pursuant to the Securities Act of
1933 (Commission File No. 333-46179)).
10.1 Advisory Agreement, dated April 9, 1998, by and between
the Company and the Advisor (incorporated herein by
reference from Form 8-K dated April 10, 1998 filed by
the Company pursuant to the Securities Exchange Act of
1934 (Commission File No. 1-13991)).
10.2 Employment Agreement of Stewart Zimmerman (incorporated
herein by reference to Exhibit 10.2 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.3 Employment Agreement of William S. Gorin (incorporated
herein by reference to Exhibit 10.3 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.4 Employment Agreement of Ronald A. Freydberg (incorporated
herein by reference to Exhibit 10.4 of the Registration
Statement on Form S-4 dated February 12, 1998, filed by
the Company pursuant to the Securities Act of 1933
(Commission File No. 333-46179)).
10.5 Addendum to Employment Agreement of Stewart Zimmerman
10.6 Addendum to Employment Agreement of William S. Gorin
10.7 Addendum to Employment Agreement of Ronald A. Freydberg
10.8 Amended and Restated 1997 Stock Option Plan of the Company
(incorporated herein by reference to Form 10-K dated
December 31, 1999, filed with the Securities and Exchange
Commission (Commission File No. 1-13991)).
10.9 Form of Dividend Reinvestment Plan (incorporated herein by
reference to Appendix C of the Registration Statement on
Form S-4 dated February 12, 1998, filed by the Registrant
pursuant to the Securities Act of 1933 (Commission File No.
333-46179)).
27. Financial Data Schedule
<PAGE> - 15 -
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during
the quarter for which this report is filed.
<PAGE> - 16 -
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: May 11, 2000 AMERICA FIRST MORTGAGE INVESTMENTS, INC.
By /s/ Stewart Zimmerman
Stewart Zimmerman
President and Chief Executive Officer
By /s/ Gary Thompson
Gary Thompson
Authorized Officer and Chief Financial Officer
<PAGE> - 17 -
EXHIBIT 10-5
ADDENDUM TO
EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYEMENT AGREEMENT (this "Addendum") is entered as of this
1st day of July, 2000 by and between AMERICA FIRST MORTGAGE ADVISORY
CORPORATION, a Maryland corporation with its office at 399 Park Avenue, 36th
Floor, New York, New York 10022 (the "Company") and STEWART ZIMMERMAN, an
individual residing at 3063 Wynsum Avenue, Merrick, New York 11566 (the
"Employee").
W I T N E S S E T H :
WHEREAS the Employee entered into an employment agreement, dated October 23,
1997, with America First Companies L.L.C., which agreement has been assigned
to and assumed by the Company (the "Agreement"), under which the Employee has
agreed to serve as the President and Chief Executive Officer of the Company
for a term ending on June 30, 2000 subject to all the provisions thereof; and
WHEREAS, the Company and the Employee desire to extend the period of
employment beyond June 30, 2000 on the same terms and conditions as are set
forth in the Agreement, except as specifically amended by this Addendum;
NOW THEREFORE, the parties hereby covenant and agree as follows:
1. Term of Employment. (a) The Company and the Employee hereby agree to
extend the term of employment provided for in Section 3(v) of the Agreement to
June 30, 2003. All other provisions of Section 3 of the Agreement shall
remain in force as written other than subsection (iv) thereof (relating to
termination due to failure to form America First Mortgage Investments, Inc.)
which the parties agree to eliminate.
(b) The reference to June 30, 2000 in Section 13(c) of the Agreement
(relating to the effect of termination of employment) is changed to June
30, 2003.
2. Base Compensation. Section 4 of the Agreement is hereby amended to
provide for an annual base salary of Two Hundred Seventy Five Thousand Seven
Hundred Dollars ($275,700) to be paid by the Company to the Employee for
services rendered by the Employee as President of the Company during the term
of this Addendum.
3. Bonus. Section 5 of the Agreement is hereby amended to provide that for
each calendar year during the term of this Addendum, the Employee shall be
eligible to receive a bonus in such amount as the Chairman of the Company may
determine in his discretion, based on the (i) the preservation of
shareholders' equity of America First Mortgage Investments, Inc. ("MFA"), (ii)
the growth in total assets and shareholders' equity of MFA and (iii) the
return to MFA shareholders. Such bonus, if any, shall be paid by the Company
to the Employee in a lump sum within sixty (60) days of the end of the
calendar year to which it relates.
4. Conforming Changes. (a) The parties agree that the Agreement shall be
deemed to be amended as is necessary to reflect the assignment of the
Agreement to, and assumption of the Agreement by, the Company.
(b) The parties agree that the reference to the "Board" in Section 14 of
the Agreement shall mean the respective boards of directors of the Company and
America First Mortgage Investments, Inc.
(c) The parties agree that Section 22 of the Agreement is no longer
applicable and is hereby eliminated from the Agreement.
<PAGE> - 18 -
5. Remaining Terms Unchanged. The parties agree that all terms and
conditions of the Agreement not specifically amended by the Addendum shall
remain in full force and effect.
IN WITNESS THEREOF, the Company and the Employee have executed this Addendum
as of the date first above written:
AMERICA FIRST MORTGAGE ADVISORY CORPORATION
By /s/ Michael Yanney
Michael Yanney
Chairman
/s/ Stewart Zimmerman
Stewart Zimmerman
<PAGE> - 19 -
EXHIBIT 10-6
ADDENDUM TO
EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYEMENT AGREEMENT (this "Addendum") is entered as of this
1st day of January, 2000 by and between AMERICA FIRST MORTGAGE ADVISORY
CORPORATION, a Maryland corporation with its office at 399 Park Avenue, 36th
Floor, New York, New York 10022 (the "Company") and WILLIAM S. GORIN, an
individual residing at 1365 York Avenue, Apartment 15K, New York, New York
10021 (the "Employee").
W I T N E S S E T H :
WHEREAS the Employee entered into an employment agreement, dated July 1, 1997,
with America First Companies L.L.C., which agreement has been assigned to and
assumed by the Company (the "Agreement"), under which the Employee has agreed
to serve as the Executive Vice President of the Company for a term ending on
June 30, 2000 subject to all the provisions thereof; and
WHEREAS, the Company and the Employee desire to extend the period of
employment beyond June 30, 2000 on the same terms and conditions as are set
forth in the Agreement, except as specifically amended by this Addendum;
NOW THEREFORE, the parties hereby covenant and agree as follows:
1. Term of Employment. (a) The Company and the Employee hereby agree to
extend the term of employment provided for in Section 3(v) of the Agreement to
June 30, 2003. All other provisions of Section 3 of the Agreement shall
remain in force as written other than subsection (iv) thereof (relating to
termination due to failure to form America First Mortgage Investments, Inc.)
which the parties agree to eliminate.
(b) The reference to June 30, 2000 in Section 13(c) of the Agreement
(relating to the effect of termination of employment) is changed to June
30, 2003.
2. Part Time Employment. Section 2 of the Agreement is hereby amended to
reflect the agreement of the Company and the Employee that the Employee will
devote approximately 25% of his business time and effort to the performance of
his duties as Executive Vice President of the Company.
3. Base Compensation. Section 4 of the Agreement is hereby amended to
provide for an annual base salary to be paid by the Company to the Employee
for services rendered by the Employee as Executive Vice President of the
Company of Forty Five Thousand Dollars ($45,000) beginning on January 1,
2000. The Company acknowledges that Employee expects to devote substantially
all of his remaining business time and effort to the performance of duties on
behalf of America First Companies L.L.C., an affiliate of the Company
("America First"), which will pay Employee a separate annual salary of
$135,000 beginning on January 1, 2000 and continuing during the term hereof
pursuant to a separate agreement attached hereto as Annex A. The Company
agrees that if it and America First decide that during any twelve month period
of this Agreement the Employee will spend more or less time on the business
and affairs of the Company than the amount contemplated by Section 2 hereof
(on other than a temporary basis), then the Company and America First may
agree to redistribute the payment of the Employee's compensation between
themselves, in which case the amount of the annual salary payable by the
Company under this Section 3 will be adjusted accordingly and Employee hereby
agrees and consents to such adjustment.
4. Bonus. Section 5 of the Agreement is hereby amended to provide that for
each calendar year during the term of this Addendum, the Employee shall be
eligible to receive a bonus in such amount as the Chairman of the Company may
determine in his discretion, based on the (i) the preservation of
shareholders' equity of America First Mortgage Investments, Inc. ("MFA"), (ii)
the growth in total assets and shareholders' equity of MFA and (iii) the
return to MFA shareholders. Such bonus, if any, shall be paid by the Company
to the Employee in a lump sum within sixty (60) days of the end of the
calendar year to which it relates.
5. Conforming Changes. (a) The parties agree that the Agreement shall be
deemed to be amended as is necessary to reflect the assignment of the
Agreement to, and assumption of the Agreement by, the Company.
<PAGE> - 20 -
(b) The parties agree that the reference to the "Board" in Section 14 of
the Agreement shall mean the respective boards of directors of the Company and
America First Mortgage Investments, Inc.
(c) The parties agree that Section 22 of the Agreement is no longer
applicable and is hereby eliminated from the Agreement.
6. Remaining Terms Unchanged. The parties agree that all terms and
conditions of the Agreement not specifically amended by the Addendum shall
remain in full force and effect.
IN WITNESS THEREOF, the Company and the Employee have executed this Addendum
as of the date first above written:
AMERICA FIRST MORTGAGE ADVISORY CORPORATION
By /s/ Stewart Zimmerman
Stewart Zimmerman
President and Chief Executive Officer
/s/ William S. Gorin
<PAGE> - 21 -
EXHIBIT 10-7
ADDENDUM TO
EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYEMENT AGREEMENT (this "Addendum") is entered as of this
1st day of January, 2000 by and between AMERICA FIRST MORTGAGE ADVISORY
CORPORATION, a Maryland corporation with its office at 399 Park Avenue, 36th
Floor, New York, New York 10022 (the "Company") and RONALD FREYDBERG, an
individual residing at 59 Greenway Circle, Rye Brook, New York 10573 (the
"Employee").
W I T N E S S E T H :
WHEREAS the Employee entered into an employment agreement, dated July 16,
1997, with America First Companies L.L.C., which agreement has been assigned
to and assumed by the Company (the "Agreement"), under which the Employee has
agreed to serve as the Senior Vice President of the Company for a term ending
on June 30, 2000 subject to all the provisions thereof; and
WHEREAS, the Company and the Employee desire to extend the period of
employment beyond June 30, 2000 on the same terms and conditions as are set
forth in the Agreement, except as specifically amended by this Addendum;
NOW THEREFORE, the parties hereby covenant and agree as follows:
1. Term of Employment. (a) The Company and the Employee hereby agree to
extend the term of employment provided for in Section 3(v) of the Agreement to
June 30, 2003. All other provisions of Section 3 of the Agreement shall
remain in force as written other than subsection (iv) thereof (relating to
termination due to failure to form America First Mortgage Investments, Inc.)
which the parties agree to eliminate.
(b) The reference to June 30, 2000 in Section 13(c) of the Agreement
(relating to the effect of termination of employment) is changed to June 30,
2003.
2. Base Compensation. Section 4 of the Agreement is hereby amended to
provide for an annual base salary to be paid by the Company to the Employee
for services rendered by the Employee as Senior Vice President of the Company
as follows:
Period Salary
January 1, 2000 to December 31, 2001 $150,000
January 1, 2001 to December 31, 2002 $155,000
January 1, 2002 to June 30, 2003 $160,000
3. Bonus. Section 5 of the Agreement is hereby amended to provide that for
each calendar year during the term of this Addendum, the Employee shall be
eligible to receive a bonus in such amount as the Chairman of the Company may
determine in his discretion, based on the (i) the preservation of
shareholders' equity of America First Mortgage Investments, Inc. ("MFA"), (ii)
the growth in total assets and shareholders' equity of MFA and (iii) the
return to MFA shareholders. Such bonus, if any, shall be paid by the Company
to the Employee in a lump sum within sixty (60) days of the end of the
calendar year to which it relates.
4. Conforming Changes. (a) The parties agree that the Agreement shall be
deemed to be amended as is necessary to reflect the assignment of the
Agreement to, and assumption of the Agreement by, the Company.
(b) The parties agree that the reference to the "Board" in Section 14 of
the Agreement shall mean the respective boards of directors of the Company and
America First Mortgage Investments, Inc.
(c) The parties agree that Section 22 of the Agreement is no longer
applicable and is hereby eliminated from the Agreement.
5. Remaining Terms Unchanged. The parties agree that all terms and
conditions of the Agreement not specifically amended by the Addendum shall
remain in full force and effect.
<PAGE> - 22 -
IN WITNESS THEREOF, the Company and the Employee have executed this Addendum
as of the date first above written:
AMERICA FIRST MORTGAGE ADVISORY CORPORATION
By /s/ Stewart Zimmerman
Stewart Zimmerman
President and Chief Executive Officer
/s/ Ronald Freydberg
Ronald Freydberg
<PAGE> - 23 -
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