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, 1996
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 March 31, 1996 was 20,000 shares.
<PAGE>
PART I
ZIEGLER MORTGAGE SECURITIES, INC. II
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Revenues:
Interest income $2,526,353 $2,566,594
Other 194,277 127,828
Total revenues 2,720,630 2,694,422
Expenses:
Interest expense 2,406,375 2,419,843
Amortization of deferred issuance costs 208,946 153,898
General and administrative 105,309 120,681
Total expenses 2,720,630 2,694,422
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)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ 95,883 $ 83,353
Money market investments, at cost
which approximates market 346,177 341,861
Total cash and cash equivalents 442,060 425,214
Assets held by trustee 7,737,639 4,207,178
Accrued interest receivable 813,875 855,783
Mortgage Certificates held by
trustee (net of purchase discount
of $3,205,080 and $3,425,237,
respectively) 110,321,650 116,345,952
Deferred issuance costs 3,169,168 3,378,116
Total assets $122,484,392 $125,212,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest payable $ 3,766,421 $ 3,716,958
Mortgage Certificate-Backed bonds
payable 117,134,000 119,908,000
Payable to B. C. Ziegler and Company 63,971 67,285
Total liabilities 120,964,392 123,692,243
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 $122,484,392 $125,212,243
</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)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ - $ -
Adjustments to reconcile net income to
net cash used in operating activities:
Gain on liquidation of Mortgage
Certificates (194,277) (127,828)
Discount accretion on Mortgage
Certificates (30,063) (30,225)
Amortization of deferred issuance cost 208,948 153,898
Change in assets and liabilities:
Decrease (Increase) in -
Assets held by trustee (3,530,461) (1,837,482)
Accrued interest receivable 41,908 11,645
Increase (Decrease) in -
Accrued interest payable 49,463 121,687
Payable to B. C. Ziegler and Company (3,314) (111,003)
Net cash used in operating activities (3,457,796) (1,819,308)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of Mortgage Certificates 6,248,642 4,167,255
Purchase of Mortgage Certificates - (2,964,201)
Net cash provided by investing activities 6,248,642 1,203,054
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Mortgage Certificate-Backed
Bonds - 2,974,020
Principal payments of Mortgage
Certificate-Backed bonds (2,774,000) (2,515,000)
Net cash provided by (used in) financing
activities (2,774,000) 459,020
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 16,846 (157,234)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 425,214 593,951
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 442,060 $ 436,717
</TABLE>
Interest expense paid during the periods was $2,356,912 and $2,298,156 in
1996 and 1995, 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
March 31, 1996 and 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 March 31, 1996 consist of the following:
<TABLE>
<CAPTION>
Outstanding
Original Original Principal
Date of Stated Principal Amounts
Series Rate Bonds Maturity Amounts at 3/31/96
<C> <C> <C> <C> <C> <C>
10 8.90% 10/1/86 10/1/21 $ 8,200,000 $2,444,000
16 9.00% 5/1/87 1/1/22 4,500,000 2,279,000
18 9.15% 6/1/87 5/1/22 7,372,000 5,791,000
19 9.15% 6/1/87 5/1/22 5,750,000 3,797,000
20 9.00% 7/1/87 6/1/22 5,418,000 3,490,000
21 9.00% 7/1/87 6/1/22 5,266,000 4,867,000
22 9.10% 8/1/87 12/1/21 5,650,000 2,446,000
24 9.20% 10/1/87 2/1/22 5,237,000 4,973,000
33 9.10% 4/1/88 10/15/21 7,054,000 3,646,000
34 9.35% 6/1/88 5/15/23 4,163,000 3,318,000
39 9.40% 8/1/88 8/15/23 5,780,000 3,800,000
40 9.50% 9/1/88 9/15/23 6,800,000 3,910,000
41 9.30% 10/1/88 10/15/23 4,655,000 4,178,000
42 9.20% 10/1/88 10/15/23 4,000,000 3,591,000
45 9.45% 2/1/89 1/15/24 3,950,000 1,885,000
47 9.75% 5/1/89 2/15/24 3,744,000 1,698,000
49 8.45% 7/1/89 7/15/22 2,740,000 2,605,000
52 9.35% 5/1/90 5/15/20 3,000,000 596,000
55 9.00% 9/1/90 10/1/20 3,244,000 631,000
60 8.30% 6/1/91 6/15/24 3,326,000 3,222,000
61 8.00% 9/1/91 11/15/19 3,390,000 1,431,000
62 7.25% 2/1/92 4/15/22 2,925,000 1,485,000
63 7.60% 5/1/92 5/15/22 3,400,000 1,654,000
64 7.40% 6/1/92 6/15/22 3,300,000 1,607,000
65 7.00% 1/1/93 1/15/28 3,029,000 2,970,000
66 7.00% 1/1/93 1/15/28 3,000,000 2,943,000
67 6.40% 3/1/93 12/15/13 3,585,000 3,337,000
68 6.25% 4/1/93 5/1/23 3,000,000 2,546,000
69 6.00% 5/1/93 5/1/23 3,022,000 2,600,000
70 6.00% 3/1/94 11/15/28 3,390,000 3,346,000
71 7.00% 4/1/94 9/20/23 3,015,000 2,711,000
72 7.00% 4/1/94 10/15/23 2,897,000 2,855,000
73 7.00% 4/1/94 4/15/24 3,130,000 3,052,000
74 7.10% 5/1/94 2/15/24 3,145,000 3,093,000
75 7.10% 6/1/94 2/15/24 3,290,000 3,227,000
76 7.35% 9/1/94 9/15/29 2,535,000 2,507,000
77 8.00% 2/1/95 10/15/29 3,066,000 3,040,000
78 7.50% 4/1/95 9/15/29 2,597,000 2,585,000
79 6.75% 6/1/95 6/15/22 2,622,000 2,602,000
80 7.00% 9/1/95 7/15/23 2,640,000 2,640,000
160,827,000 115,398,000
</TABLE>
<TABLE>
<CAPTION>
American Mortgage Securities, Inc.
Mortgage Certificate-Backed Bonds*
<C> <C> <C> <C> <C> <C>
5 7.35% 3/1/92 3/1/22 3,000,000 1,736,000
$163,827,000 $117,134,000
</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 March 31, 1996 and December 31, 1995, approximated
$117,467,000 and $120,264,000, respectively.
Note C -- GNMA Certificates
The market values of the GNMA Certificates as of March 31, 1996 and
December 31, 1995, were approximately $116,404,000 and $124,478,000,
respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
First Quarter 1996 vs. First Quarter 1995
During the first quarter of 1996, the company did not issue any
additional series of Mortgage Certificate-Backed Bonds. This compares to
the issuance of one series totaling $3,066,000 during the first quarter of
1995. Unfavorable spreads between the interest yields on the Mortgage
Certificates and the Certificate-Backed Bonds have kept the company from
issuing additional series. Total revenues for the quarters totaled
approximately $2,721,000 in 1996 and $2,694,000 in 1995. Bond redemptions
were relatively low in this lower interest rate environment, totaling
$2,774,000 during the first quarter of 1996 and $2,515,000 during the same
quarter of 1995.
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. It is anticipated that on a continuing basis the
company will operate at close to a breakeven level.
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 quarter ended March 31, 1996, there was a net increase in cash and cash
equivalents totaling approximately $17,000. The primary net cash receipt
totaled $6,249,000 from the redemption of Mortgage Certificates during the
quarter. The primary cash disbursement totaled $2,774,000 and arose from
cash disbursed to redeem outstanding Bonds from previous series during the
quarter. The cash generated by the redemption of the Mortgage Certificates
which has not yet been used to redeem Bonds ($3,475,000) is being held by
the trustee and comprises the majority of the $3,530,000 increase in assets
held by trustee on the cashflow statement.
<PAGE>
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: None
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: May 9, 1996 By /s/ Eugene H. Rudnicki
Eugene H. Rudnicki
President
Dated: May 9, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 442,060
<SECURITIES> 110,321,650<F3>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 122,484,392
<CURRENT-LIABILITIES> 0
<BONDS> 117,134,000
0
1,500,000
<COMMON> 20,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,520,000
<SALES> 0
<TOTAL-REVENUES> 2,720,630<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 314,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,406,375
<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>
