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 September 30, 1995
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 33-28290
ZIEGLER MORTGAGE SECURITIES, INC. II
(Exact name of registrant as specified in its charter)
Wisconsin 39-1539696
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 334-5521
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 outstanding of the registrant's Common Stock, par value
$1.00 per share, at September 30, 1995 was 20,000 shares.
<PAGE>
PART I
ZIEGLER MORTGAGE SECURITIES, INC. II
CONDENSED STATEMENTS OF INCOME
(Unaudited)
[CAPTION]
For the Three Months Ended
September 30, September 30,
1995 1994
<TABLE>
<S> <C> <C>
Revenues:
Interest income $2,633,104 $2,542,213
Gain on liquidation of Mortgage Certificates 23,579 21,975
Total revenues 2,656,683 2,564,188
Expenses:
Interest expense 2,470,617 2,403,515
Amortization of deferred issuance costs 49,727 53,258
General and administrative 136,339 107,415
Total expenses 2,656,683 2,564,188
Income before income taxes - -
Provision for income taxes - -
Net income $ - $ -
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of these statements.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
CONDENSED STATEMENTS OF INCOME
(Unaudited)
[CAPTION]
For the Nine Months Ended
September 30, September 30,
1995 1994
<TABLE>
<S> <C> <C>
Revenues:
Interest income $7,776,212 $7,591,720
Gain on liquidation of Mortgage Certificates 168,566 935,399
Total revenues 7,944,778 8,527,119
Expenses:
Interest expense 7,301,061 7,252,385
Amortization of deferred issuance costs 250,994 1,002,651
General and administrative 392,723 272,083
Total expenses 7,944,778 8,527,119
Income before income taxes - -
Provision for income taxes - -
Net income $ - $ -
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of these statements.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
CONDENSED BALANCE SHEETS
(Unaudited)
[CAPTION]
September 30, December 31,
1995 1994
<TABLE>
<S> <C> <C>
ASSETS
Cash $ 28,133 $ 87,263
Money market investments, at cost which
approximates market 406,889 104,483
Demand note with The Ziegler Companies,
Inc., at cost, which approximates
market - 402,205
Total cash and cash equivalents 435,022 593,951
Assets held by trustee 4,461,884 4,142,583
Accrued interest receivable 871,082 844,075
Mortgage Certificates held by trustee
(net of purchase discount of $3,516,026
and $3,453,038, respectively) 118,736,158 113,401,638
Deferred issuance costs 3,486,633 3,409,878
Total assets $127,990,779 $122,392,125
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest payable $ 3,829,915 $ 3,613,928
Mortgage Certificate-Backed bonds
payable 122,508,000 117,018,000
Payable to B. C. Ziegler and Company 132,864 240,197
Total liabilities 126,470,779 120,872,125
Stockholders' equity
Preferred stock, $.10 par value,
non-voting, $9.00 non-cumulative
dividend, $100 redemption price;
200,000 shares authorized
15,000 shares issued and outstanding 1,500,000 1,500,000
Common stock, $1 par value;
56,000 shares authorized
20,000 shares issued and outstanding 20,000 20,000
Retained earnings - -
Total stockholders' equity 1,520,000 1,520,000
Total liabilities and
stockholders' equity $127,990,779 $122,392,125
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of these balance sheets.
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
For the Nine Months Ended
September 30, September 30,
1995 1994
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ - $ -
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Gain on liquidation of mortgage
certificates (168,566) (935,399)
Discount accretion on Mortgage
Certificates (92,011) (86,739)
Amortization of deferred issuance costs 250,994 1,002,651
Change in assets and liabilities:
Decrease (Increase) in -
Funds held by trustee (319,301) 18,239,590
Accrued interest receivable (27,007) 114,069
Increase (Decrease) in -
Accrued interest payable 215,987 (1,318,468)
Payable to B. C. Ziegler and Company (107,333) (97,822)
Net cash provided by (used in) operating
activities (247,237) 16,917,882
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of Mortgage Certificates 5,530,233 30,372,216
Purchase of Mortgage Certificates (10,604,175) (18,251,625)
Net cash provided by (used in) investing
activities (5,073,942) 12,120,591
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Mortgage Certificate-Backed
Bonds 10,597,250 20,749,706
Principal payments of Mortgage Certificate-
Backed bonds (5,435,000) (49,356,000)
Redemption of preferred stock - (500,000)
Net cash provided by (used in) financing
activities 5,162,250 (29,106,294)
NET DECREASE IN CASH AND CASH EQUIVALENTS (158,929) (67,821)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 593,951 481,853
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 435,022 $ 414,032
</TABLE>
Interest expense paid during the periods was $7,085,074 and $8,570,853 in 1995
and 1994, respectively. No taxes have been paid by the Company.
The accompanying notes to condensed financial statements are an integral part
of these statements.
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1995
Note A -- Basis of Presentation
The condensed financial statements included herein have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Management believes, however, that
these condensed financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
periods presented. All such adjustments are of a normal recurring nature. It
is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the company's
latest annual report on Form 10-K.
Note B -- Mortgage Certificate-Backed Bonds
Bonds outstanding at September 30, 1995 consist of the following:
[CAPTION]
Original Outstanding Principal
Date of Stated Principal Amount
Series Rate Bonds Maturity Amounts at 9/30/95
<TABLE>
<C> <C> <C> <C> <C> <C>
10 8.90% 10/1/86 10/1/21 $ 8,200,000 $ 2,489,000
15 7.75% 4/1/87 4/1/22 3,522,000 1,581,000
16 9.00% 5/1/87 1/1/22 4,500,000 2,293,000
18 9.15% 6/1/87 5/1/22 7,372,000 5,812,000
19 9.15% 6/1/87 5/1/22 5,750,000 3,816,000
20 9.00% 7/1/87 6/1/22 5,418,000 3,506,000
21 9.00% 7/1/87 6/1/22 5,266,000 4,888,000
22 9.10% 8/1/87 12/1/21 5,650,000 2,457,000
24 9.20% 10/1/87 2/1/22 5,237,000 4,996,000
33 9.10% 4/1/88 10/15/21 7,054,000 3,663,000
34 9.35% 6/1/88 5/15/23 4,163,000 3,330,000
39 9.40% 8/1/88 8/15/23 5,780,000 3,817,000
40 9.50% 9/1/88 9/15/23 6,800,000 3,930,000
41 9.30% 10/1/88 10/15/23 4,655,000 4,222,000
42 9.20% 10/1/88 10/15/23 4,000,000 3,628,000
45 9.45% 2/1/89 1/15/24 3,950,000 3,833,000
47 9.75% 5/1/89 2/15/24 3,744,000 1,703,000
49 8.45% 7/1/89 7/15/22 2,740,000 2,618,000
52 9.35% 5/1/90 5/15/20 3,000,000 713,000
55 9.00% 9/1/90 10/1/20 3,244,000 697,000
60 8.30% 6/1/91 6/15/24 3,326,000 3,235,000
61 8.00% 9/1/91 11/15/19 3,390,000 1,635,000
62 7.25% 2/1/92 4/15/22 2,925,000 1,551,000
63 7.60% 5/1/92 5/15/22 3,400,000 1,940,000
64 7.40% 6/1/92 6/15/22 3,300,000 1,789,000
65 7.00% 1/1/93 1/15/28 3,029,000 2,979,000
66 7.00% 1/1/93 1/15/28 3,000,000 2,958,000
67 6.40% 3/1/93 12/15/13 3,585,000 3,383,000
68 6.25% 4/1/93 5/1/23 3,000,000 2,660,000
69 6.00% 5/1/93 5/1/23 3,022,000 2,613,000
70 6.00% 3/1/94 11/15/28 3,390,000 3,360,000
71 7.00% 4/1/94 9/20/23 3,015,000 2,824,000
72 7.00% 4/1/94 10/15/23 2,897,000 2,864,000
73 7.00% 4/1/94 4/15/24 3,130,000 3,076,000
74 7.10% 5/1/94 2/15/24 3,145,000 3,111,000
75 7.10% 6/1/94 2/15/24 3,290,000 3,247,000
76 7.35% 9/1/94 9/15/29 2,535,000 2,515,000
77 8.00% 2/1/95 10/15/29 3,066,000 3,066,000
78 7.50% 4/1/95 9/15/29 2,597,000 2,597,000
79 6.75% 6/1/95 6/15/22 2,622,000 2,622,000
80 7.00% 9/1/95 7/15/23 2,640,000 2,640,000
164,349,000 120,657,000
</TABLE>
American Mortgage Securities, Inc.
Mortgage Certificate-Backed Bonds*
<TABLE>
<C> <C> <C> <C> <C> <C>
5 7.35% 3/1/92 3/1/22 3,000,000 1,851,000
$167,349,000 $122,508,000
</TABLE>
*Assumed by the company as a result of the merger of American Mortgage
Securities, Inc. into the company as of December 30, 1994.
The stated maturities are the dates on which Bonds will be fully paid
assuming no prepayments are received on the Mortgage Certificates which serve
as collateral for the Bonds. The actual maturities of the Bonds will be
shortened by prepayments on the Mortgage Certificates and by any Bond calls.
The Bonds can be redeemed each month without premium under the
following circumstances:
The company must call Bonds, to the extent funds are available,
commencing in the twelfth month following the original issuance
of each series or commencing at such time as the aggregate
balance in the Redemption Fund for each series reaches $100,000;
whichever first occurs.
The Bonds of any series may be redeemed in whole by the company
after the third anniversary of the original issuance and,
commencing with Series 16 Bonds, at any time as the outstanding
principal amount of such series is less than 10% of the aggregate
principal amount of such series originally issued.
Bondholders can present their Bonds for redemption each month
commencing with the second calendar month following the month in
which each series is originally issued. The company will redeem
such Bonds to the extent funds are available.
The market values in the secondary bond market of the Bonds outstanding
as of September 30, 1995 and December 31, 1994, approximated $116,406,000 and
$111,150,000, respectively.
Note C -- GNMA Certificates
The market values of the GNMA Certificates as of September 30, 1995 and
December 31, 1994, were approximately $125,556,000 and $112,825,000,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Third Quarter 1995 vs. Third Quarter 1994
During the third quarter of 1995, the company issued one additional
series of Mortgage Certificate-Backed Bonds totaling $2,640,000. This
compares to the issuance of one series totaling $2,535,000 during the third
quarter of 1994. Total revenues, consisting mostly of interest income, for
the quarters totaled approximately $2,657,000 in 1995 and $2,564,000 in 1994.
Bond redemptions totaled $620,000 during the third quarter of 1995. They were
$801,000 during the same quarter of 1994.
In accordance with a written agreement with B. C. Ziegler and Company,
which acts as underwriter and manager of the company, management fees of the
company were limited to the amount which prevented the company from incurring
a loss.
First Nine Months 1995 vs. First Nine Months 1994
During the first nine months of 1995, the company issued four additional
series of Mortgage Certificate-Backed Bonds totaling $10,925,000. This
compares to the issuance of seven series totaling $21,402,000 during the first
nine months of 1994. Total revenues, consisting mostly of interest income,
for the periods totaled approximately $7,945,000 in 1995 and $8,527,000 in
1994. Bond redemptions totaled $5,435,000 during the first nine months of
1995. They were $49,356,000 during the same period of 1994. Lower interest
rates existing during part of 1994 caused a higher level of prepayments of the
loans underlying the Mortgage Certificates in 1994. This in turn, caused an
increase in Mortgage Certificate liquidations and the subsequent increase in
Bond calls in 1994.
In accordance with a written agreement with B. C. Ziegler and Company,
which acts as underwriter and manager of the company, management fees of the
company were limited to the amount which prevented the company from incurring
a loss.
Liquidity and Capital Resources
The company has no fixed assets nor any commitments outstanding to
purchase or lease any fixed assets.
Each series of bonds is structured in a manner such that funds received
from the related Mortgage Certificates are sufficient to fund all interest and
principal payments on the bonds, and all other expenses of the company. This
can be seen in the Condensed Statement of Cash Flows. For the nine month
period ended September 30, 1995, there was a net decrease in cash and cash
equivalents totaling approximately $159,000 which is primarily caused by
company payments to B. C. Ziegler and Company for previously accumulated
management fees. Net income was zero because of the management fee paid to B.
C. Ziegler and Company. The primary net cash disbursement from operations
totaled $5,074,000 from an excess of amounts invested in the purchase of new
Mortgage Certificates which serve as collateral for the four Bond series
issued during 1995 over the amounts received from Mortgage Certificate
liquidations in that same period. This net disbursement was funded by the
primary net cash receipt, which totaled $5,162,000, which arose from an excess
of cash received from the issuance of the four Bond series during the period
over cash disbursed to redeem outstanding Bonds from the previous series.
PART II
Items 1 through 5.
None of the Items are applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
Form 8-K Dated September 1, 1995, reporting
theissuance of Series 80 Bonds and execution of the
Eightieth Supplemental Indenture with the Trustee and
the Terms Agreement with B. C. Ziegler and Company,
filed with the Securities and Exchange Commission on
September 8, 1995.
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.
ZIEGLER MORTGAGE SECURITIES, INC. II
Dated: October 31, 1995 By /s/ Eugene H. Rudnicki
Eugene H. Rudnicki
President
Dated: October 31, 1995 By /s/ Lynn R. Van Horn
Lynn R. Van Horn
Treasurer & Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Ziegler
Mortgage Securities, Inc. II financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 435,022
<SECURITIES> 118,736,158<F3>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 127,990,779
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 122,508,000
<COMMON> 20,000
0
1,500,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 127,990,779
<SALES> 0
<TOTAL-REVENUES> 7,944,778<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 643,717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,301,061
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F3>GNMA mortgage certificates net of purchase discounts and held by a trustee.
<F1>Registrant has an unclassified balance sheet.
<F2>Revenues consist primarily of interest income.
</FN>
</TABLE>
