<PAGE>
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For Quarter Ended March 31, 2000 Commission File Numbers 33-76642
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
-------------------------------------
Texas 74-2337351
----------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
70 N.E. Loop 410, Suite 545, San Antonio, Texas 78216
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code:(210) 342-1085
N/A
----------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed
since last report)
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 filing requirements
for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 12, 2000
- --------------------------------- -------------------------------
Common Stock, $1.00 par value 10,000 shares
<PAGE>
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
INDEX TO FORM 10-Q
Quarter Ended March 31, 2000
Part I. Financial Information
----------------------
Item 1. Financial Statements
Balance Sheets (Unaudited)
March 31, 2000 and
December 31, 1999 4 of 17
Statements of Income and Comprehensive
Income (Unaudited)
Three months ended
March 31, 2000 and 1999 5 of 17
Statements of Cash Flows (Unaudited)
Three months ended
March 31, 2000 and 1999 6 of 17
Notes to Unaudited Financial Statements 7 of 17
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operation 12 of 17
Part 11. Other Information
Item 6. Exhibits and Reports on Form 8-K 15 of 17
<PAGE>
Item 1. Financial Statements
See next page.
<PAGE>
<TABLE>
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
BALANCE SHEETS
<CAPTION>
March 31, December 31,
2000 1999
-------------- -------------
<S> <C> <C>
ASSETS
Cash $ (3,582) $ 1,202
Accrued interest receivable 354,023 363,904
Underwriting fees and bond issuance
expenses 2,190,962 2,266,477
Requisite funds on deposit 56,290 58,734
Notes Receivable from affiliates 2,832,882 2,790,799
Investment in GNMA securities 65,427,658 67,238,870
Fair value adjustment (1,739,864) (2,108,030)
Less: unamortized discount (2,387,077) (2,469,287)
------------- -------------
61,300,717 62,661,553
Deferred Tax Asset 591,554 716,730
------------- -------------
$67,322,846 $68,859,399
============= =============
LIABILITIES
Accounts payable $ 30,000 $ 30,000
Accrued interest 352,194 362,030
Bonds payable 65,014,000 66,816,000
Deferred tax liability - -
------------- -------------
65,396,194 67,208,030
STOCKHOLDER'S EQUITY (DEFICIT):
Common Stock, $1.00 par value,
10,000 shares authorized,
issued and outstanding 10,000 10,000
Contributed capital 3,043,649 3,032,669
Unrealized gains (losses) on
available-for-sale securities,
net of tax (1,148,310) (1,391,300)
Retained earnings 21,313 0
------------- -------------
1,926,652 1,651,369
------------- -------------
$67,322,846 $68,859,399
============= =============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
<CAPTION>
Three Months Ending
2000 1999
---------------------------
<S> <C> <C>
INCOME
Interest Income $ 1,139,574 $ 1,801,872
Amortization of discount 82,210 286,918
Gain on sales of GNMA securities 0 266,994
---------------------------
1,221,784 2,355,784
EXPENSE
Interest expense 1,077,860 1,649,210
Amortization of underwriting fees
and bond issuance expenses 75,515 405,184
General and administrative 36,116 424,045
---------------------------
1,189,491 2,478,439
---------------------------
Income before taxes 32,293 (122,655)
Income tax expense (benefit):
Current taxes 10,980 (44,267)
Deferred taxes 0 1,923
---------------------------
10,980 (42,344)
---------------------------
Net Income 21,313 (80,311)
---------------------------
Other Comprehensive Income
Unrealized gains (losses) on
available-for-sale securities
(net of income tax) 242,990 (889,624)
Less: reclassification adj
(net of income tax) 0 (170,961)
---------------------------
242,990 (1,060,585)
---------------------------
Comprehensive Income $ 264,303 $(1,140,896)
===========================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
2000 1999
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 21,313 $ (80,311)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Income tax expense (benefit) 10,980 (42,344)
Amortization of discount (82,210) (286,918)
Amortization of underwriting fees and bond
issuance expense 75,515 405,184
(Gain)/Loss on sale of GNMA securities 0 (266,994)
Changes in operating assets and liabilities:
Accrued interest receivable 9,881 61,187
Accounts payable 0 21,000
Accrued interest payable (9,836) (60,854)
--------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 25,643 (250,050)
--------------------------
INVESTING ACTIVITIES
Advances and notes with affiliate (42,083) 20,133
Principal payments received on GNMA securities 1,811,212 6,641,850
Proceeds from sale of GNMA securities 0 3,563,828
--------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,769,129 10,225,811
--------------------------
FINANCING ACTIVITIES
Decrease (increase) in requisite funds on deposit 2,444 14,017
Increase in underwriting fees and bond issurance exp - -
Proceeds from sale of bonds - -
Redemption of bonds payable (1,802,000) (9,990,000)
--------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,799,556) (9,975,983)
--------------------------
INCREASE (DECREASE) IN CASH (4,784) (222)
Cash at beginnning of year 1,202 20,679
--------------------------
Cash at March 31, $ (3,582) $ 20,457
==========================
See notes to financial statements
</TABLE>
<PAGE>
Ray Ellison Mortgage Acceptance Corp.
Notes to Unaudited Financial Statements
March 31, 2000 and 1999
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1999.
2. Bonds Payable
The long-term bonds payable of the Company are issued in series as follows:
<TABLE>
<CAPTION>
Face Bonds Outstanding
of Bonds Interest Maturity March 31, December 31,
Series Issued at Issue Rate Date 2000 2000
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993B 12/22/93 21,000,000 6.000 12/31/2024 $ 15,152,000 $ 15,326,000
1994A 01/27/94 15,000,000 6.000 01/31/2025 9,397,000 9,786,000
1994B 02/24/94 13,000,000 6.000 02/28/2025 8,513,000 8,770,000
1996A 04/25/96 12,500,000 7.000 04/30/2027 7,762,000 8,041,000
1996B 05/30/96 15,500,000 7.000 05/31/2027 9,853,000 10,387,000
1996C 09/26/96 9,000,000 7.100 09/30/2027 5,970,000 6,056,000
1997A 04/24/97 12,500,000 7.000 04/30/2027 8,367,000 8,450,000
---------------------- --------------------------------------
$ 98,500,000 $ 65,014,000 $ 66,816,000
====================== ======================================
</TABLE>
The remaining bonds may be redeemed at the option of the Company, in whole or in
part, at any time after the fourth anniversary of their issuance. To ensure
sufficient funds to meet debt service requirements, the Indenture provides for
redemption if the payments to be made on the GNMA securities will be less than
the debt service requirements. The amounts of bonds to be redeemed are dependent
on a number of factors such as: 1) prepayments on the GNMA securities, 2)
interest earned on requisite funds, 3) deposit or substitution of collateral in
lieu of bond redemption, and 4) requests for redemption by bondholders. In all
redemptions described above, the redemption price will be 100% of the principal
amount of the bonds to be redeemed plus interest accrued to the date of
redemption.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Quarter ended March 31, 2000
As of March 31, 2000 the Company has completed the issuance of ninety-two
Series of its GNMA-Collateralized Bonds (Bonds). Each Series of Bonds has been
assigned a bond rating of AAA by Standard & Poors Ratings Groups. Proceeds from
the sale of each Series of Bonds have been used by the Company to purchase GNMA
(Government National Mortgage Association) securities from affiliated companies.
The GNMA securities purchased are pledged as collateral for one or more Series
of the Company's Bonds.
From time to time, the Company has substituted or deposited additional GNMA
securities to below-market Bond Series in accordance with the Indentures under
which the Bonds are issued. Management anticipates that such substitution or
deposit of additional GNMA securities in these Bond Series will defer
redemptions in the Bond series affected. Additionally, from time to time the
Company has substituted or withdrawn GNMA securities securing above-market Bond
Series to the extent permitted by the Indentures. Management anticipates that
such substitutions or withdrawals of GNMA securities will accelerate redemptions
in the Bond Series affected.
As of March 31, 2000, the Company has exercised its option to redeem all
Series issued previous to 1993 as well as Series 1993A, 1994C through 1994M,
1995A, 1995B and 1995C. These calls produced significant gains for the Company.
The Company has exercised its option to redeem GMNA-Collateralized Bond Series
whenever the Series were callable and the interest rate on the series was above
the current market interest rate. Management anticipates calling any
above-market interest rate Bond Series at the earliest date permitted under the
respective prospectus supplement for such Bond Series.
The Company anticipates that receipts from the GNMA securities securing
each outstanding series of Bonds together with reinvestment income thereon and
funds available in any expense funds which may be established for such series,
will be adequate to meet the Company's cash flow requirements to pay
administrative expenses and the principal of and interest on each series of
Bonds as they become due. The Company does not have, nor does management expect
that the Company will have, any significant source of cash flow other than
capital contributions from its parent and/or advances from its affiliates and
receipts on collateral securing Bonds which have been or may be issued by the
Company.
Because each series of outstanding Bonds is secured by GNMA securities
paying interest and principal at specified rates backed by existing pools of
mortgage loans, and because payment on outstanding Bonds issued by the Company
are at fixed interest rates, management does not expect that changes in economic
factors will significantly affect the Company's ability to meet its obligations
as they come due.
All GNMA securities are classified as available-for-sale as of January 1,
1994. Accordingly, GNMA securities are reflected on the accompanying balance
sheet at fair value, with the unrealized gains and losses, net of tax reported
in a separate category of shareholders' equity. The Company wishes to emphasize
that due to the nature of its business, the GNMA securities carried as
available-for-sale collateralize GNMA-collateralized bonds, and the securities
are not salable before the bonds are callable, at some future date. In addition,
the market value of GNMA securities fluctuates significantly as interest rates
change; therefore, the market values of the GNMA securities as of the future
redemption dates may vary significantly from the current date, and the
realization of any unrealized gains is not assured. When market is such that the
value of GNMA securities is less than amortized cost, the Company has the
expectation that they would be held to maturity as collateral for the related
GNMA-collateralized Bonds, or until the market value rose, whichever is sooner,
and the Company would not realize any unrealized losses.
The Company may from time to time make forward-looking statements (within
the meaning of the Private Securities Litigation Reform Act of 1995) with
respect to Company objectives and other financial and business matters. The
Company cautions the reader that these forward- looking statements are subject
to numerous assumptions, risks and uncertainties, including economic conditions;
regulatory actions and reforms; competition; as well as other reasons, all of
which change over time. Actual results may differ materially from
forward-looking statements.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
NONE
Item 2. Change in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8K
NONE
<PAGE>
Signatures:
Pursuant to the requirements of the Securities and Exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAY ELLISON MORTGAGE ACCEPTANCE CORP.
(Registrant)
/s/ Locksley Simmons
------------------------------------
Locksley Simmons
Vice President and Chief Financial Officer
DATE: May 12, 2000
<PAGE>
Exhibit Index
EX-3.1 Articles of Incorporation of the Registrant as originally filed. (1)
EX-3.2 Bylaws of the Registrant as currently in effect. (5)
EX-4.1 Form of Indenture between the Registrant and Trustee (containing
Form of Bond). (4)
EX-4.2 Form of Series Supplement(2)
EX-4.3 Form of Guaranty Agreement for GNMA I Program ("Summary of Guaranty
Agreement". (3) EX-4.4 Form of Guaranty Agreement for GNMA II Program
("Schedule of Subscribers and GNMA II Contractual Agreement"). (4)
*EX-27 Financial Data Schedule
(1) Previously filed with the Commission as an exhibit to the Registrant's
Form S-11 Registration Statement (File No. 2-93624)on October 4, 1984,
and incorporated by reference herein.
(2) Previously filed with the Commission as an exhibit to the
Post-Effective Amendment No. 1 to the Registrant's Form S-11
Registration Statement (File No. 2-93624) on February 14, 1985, and
incorporated by reference herein.
(3) Previously filed with the Commission as an exhibit to Amendment
No. 1 to the Registrant's Form S-11 Registration Statement (File
No. 2-93624) on January 11, 1985, and incorporated by reference
herein.
(4) Previously filed with the Commission as an exhibit to the Registrant's
Form S-11 Registration Statement (File No. 33-48368)on June 4, 1992,
and incorporated by reference herein.
(5) Previously filed with the Commission as an exhibit to the Registrant's
Form 10-Q for the quarter ended June 30, 1995, and incorporated by
reference herein.
*Filed Herein
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Ray Ellison Mortgage Acceptance Corp. at March 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 754591
<NAME> Ray Ellison Mortgage Acceptance Corp.
<MULTIPLIER> 1
<CURRENCY> Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> (3,582)
<SECURITIES> 61,300,717
<RECEIVABLES> 354,023
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 350,441
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,322,846
<CURRENT-LIABILITIES> 382,194
<BONDS> 65,014,000
0
0
<COMMON> 10,000
<OTHER-SE> 1,916,652
<TOTAL-LIABILITY-AND-EQUITY> 67,322,846
<SALES> 0
<TOTAL-REVENUES> 1,221,784
<CGS> 0
<TOTAL-COSTS> 1,189,491
<OTHER-EXPENSES> 36,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,077,860
<INCOME-PRETAX> 32,293
<INCOME-TAX> 10,980
<INCOME-CONTINUING> 21,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,313
<EPS-BASIC> 2.13
<EPS-DILUTED> 2.13
</TABLE>
