<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 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: 33-5539
CMC SECURITIES CORPORATION I
(Exact name of Registrant as specified in its Charter)
NEVADA 75-2449544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2711 NORTH HASKELL, DALLAS, TEXAS 75204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 874-2323
(Former name, former address and former fiscal year, if changed from last
report)
The Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) for Form 10-Q and is therefore filing this Form under the reduced disclosure
format.
Indicate by check mark whether the Registrant (1) has filed all documents and
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
------- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock ($1.00 par value) 1,000 as of November 4, 1996
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CMC SECURITIES CORPORATION I
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PAGE
----
PART I. -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet -- September 30, 1996 and December 31, 1995... 3
Statement of Operations -- Quarter and Nine Months Ended
September 30, 1996 and 1995............................... 4
Statement of Cash Flows -- Nine Months Ended
September 30, 1996 and 1995............................... 5
Notes to Financial Statements............................... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 8
PART II. -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................... 8
SIGNATURES.................................................. 9
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<PAGE>
PART I. -- FINANCIAL INFORMATION
CMC SECURITIES CORPORATION I
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Mortgage securities collateral $665,660 $723,767
Cash and cash equivalents 1 1
-------- --------
$665,661 $723,768
======== ========
LIABILITIES
Collateralized mortgage securities $665,660 $723,767
Accrued expenses 28 20
-------- --------
665,688 723,787
-------- --------
STOCKHOLDER'S EQUITY
Common stock - $1 par value,
10,000 shares authorized,
issued and outstanding 10 10
Paid-in capital 70 60
Accumulated deficit (107) (89)
--------- --------
(27) (19)
--------- --------
$665,661 $723,768
======== ========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
CMC SECURITIES CORPORATION I
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- ----------------------
1996 1995 1996 1995
------- ------ ------- ------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $12,667 $14,104 $39,057 $43,075
Interest expense on collateralized
mortgage securities 12,261 13,653 37,808 41,624
------- ------- ------- -------
Net interest income 406 451 1,249 1,451
------- ------- ------- -------
Other expenses:
Management fees 3 3 8 8
Professional fees and other 1 1 10 13
Pool insurance 406 451 1,249 1,451
------- ------- ------- -------
Total other expenses 410 455 1,267 1,472
------- ------- ------- -------
Net loss $ (4) $ (4) $ (18) $ (21)
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CMC SECURITIES CORPORATION I
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (18) $ (21)
Noncash item - amortization of
discount and premium (26) (97)
Net change in other assets and
accrued expenses 8 13
-------- --------
Net cash provided (used) by
operating activities (36) (105)
-------- --------
INVESTING ACTIVITIES:
Mortgage securities collateral:
Principal collections on collateral 57,690 43,062
Decrease in accrued interest receivable 357 264
Decrease in short-term investments 4 79
-------- --------
Net cash provided by
investing activities 58,051 43,405
-------- --------
FINANCING ACTIVITIES:
Collateralized mortgage securities
Principal payments on securities (57,690) (43,062)
Decrease in accrued interest payab (335) (246)
Capital contributions 10 8
-------- --------
Net cash used by financing activities (58,015) (43,300)
-------- --------
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning
of period 1 9
-------- --------
Cash and cash equivalents at end of
period $ 1 $ 9
======== ========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CMC SECURITIES CORPORATION I
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE A -- 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 Rule 10-01 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 quarter and nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the calendar
year ending December 31, 1996. For further information refer to the financial
statements and footnotes thereto included in the CMC Securities Corporation I
(the "Company") annual report on Form 10-K for the period ended December 31,
1995.
NOTE B -- DISCLOSURES REGARDING FAIR VALUES OF MORTGAGE SECURITIES COLLATERAL
Mortgage securities collateral is classified as held-to-maturity and,
accordingly, is carried at amortized cost in the balance sheet. Estimated fair
values of mortgage securities collateral have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop these estimates. In addition, fair values fluctuate on a daily basis.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The fair value of mortgage securities collateral was estimated using quoted
market prices, including quotes made by Capstead Mortgage Corporation's lenders
in connection with designating collateral for repurchase arrangements.
Disclosures regarding fair values of mortgage securities collateral are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- ------------------
<S> <C> <C>
Carrying amount $665,660 $723,767
Unrealized gains - 7,569
Unrealized losses (19,738) (8,089)
-------- --------
Fair value $645,922 $723,247
======== ========
</TABLE>
All mortgage securities collateral is held-to-maturity. The maturity of
mortgage securities collateral is directly affected by the rate of principal
prepayments by mortgagors. In addition, upon the Company's redemption of
remaining bonds outstanding pursuant to clean-up calls, released collateral may
be sold. Such sales are deemed maturities under the provisions of Statement of
Financial Accounting Standards No. 115. No such redemptions occurred during the
quarter or nine months ended September 30, 1996 or during 1995.
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NOTE C -- NET INTEREST INCOME ANALYSIS
The following tables summarize the amount of interest income and interest
expense and the average effective interest rate for mortgage securities
collateral and collateralized mortgage securities for the periods shown (dollars
in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
------------------------------------
1996 1995
----------------- -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $12,667 7.59% $14,104 7.58%
Interest expense on
collateralized mortgage
securities 12,261 7.35 13,653 7.34
------- -------
Net interest income $ 406 $ 451
======= =======
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-----------------------------------
1996 1995
---------------- ----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ---- ------- -------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $39,057 7.59% $43,075 7.57%
Interest expense on
collateralized mortgage
securities 37,808 7.35 41,624 7.32
------- -------
Net interest income $ 1,249 $ 1,451
======= =======
</TABLE>
The following tables summarize the amount of change in interest income on
mortgage securities collateral and interest expense on collateralized mortgage
securities due to changes in effective interest rates, versus changes in volume
for the quarter and nine months ended September 30, 1996, compared to the same
periods in 1995 (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1996
-----------------------------------
RATE* VOLUME* TOTAL
--------- ----------- -----------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $ 24 $(1,461) $(1,437)
Interest expense on
collateralized mortgage
securities 24 (1,416) (1,392)
---- ------- -------
$ - $ (45) $ (45)
==== ======= =======
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------
RATE* VOLUME* TOTAL
---- ------- -------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $ 68 $(4,086) $(4,018)
Interest expense on
collateralized mortgage
securities 142 (3,958) (3,816)
---- ------- -------
$(74) $ (128) $ (202)
==== ======= =======
</TABLE>
* The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
CMC Securities Corporation I (the "Company"), was incorporated in Nevada on May
7, 1986 as a special-purpose finance corporation and is a wholly-owned
subsidiary of Capstead Mortgage Corporation ("CMC").
Since inception the Company has issued approximately $1.7 billion of
collateralized mortgage obligations ("CMOs"). The Company has not retained any
investment in the CMOs issued; therefore, no related economic benefit will be
received and no related net income or loss will be recognized. However, in
instances where an affiliate retained investments in these CMOs, the issuances
were accounted for as financings, and accordingly, the collateral and bonds are
reflected on the Company's balance sheet. The Company did not issue any CMOs in
1996.
Net operating losses are due to operational costs not directly related to CMO
issuances.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
All ongoing CMO-related expenses of the Company are paid out of the excess cash
flows on the CMOs issued before the residual holders receive their residual
interest. The Company believes that the excess cash flows will be sufficient to
pay ongoing CMO-related expenses. Cash flow requirements due to ongoing
operational costs are funded by CMC.
PART II. -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: None.
Exhibit 27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CMC SECURITIES CORPORATION I
Date: November 4, 1996 By /s/ RONN K. LYTLE
------------------------------------
Ronn K. Lytle
Chairman and Chief Executive Officer
Date: November 4, 1996 By /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Senior Vice President - Control
and Treasurer
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from CMC
Securities Corporation I's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 665,661
<CURRENT-LIABILITIES> 28
<BONDS> 665,660
0
0
<COMMON> 10
<OTHER-SE> (37)
<TOTAL-LIABILITY-AND-EQUITY> 665,661
<SALES> 0
<TOTAL-REVENUES> 39,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,808
<INCOME-PRETAX> (18)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
