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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, 1997
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) 10,000 as of November 13, 1997
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CMC SECURITIES CORPORATION I
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
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<CAPTION>
PAGE
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<S> <C>
PART I. -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet -- September 30, 1997 (Unaudited)
and December 31, 1996................................................ 1
Statement of Operations -- Quarter and Nine Months Ended
September 30, 1997 and 1996 (Unaudited).............................. 2
Statement of Cash Flows -- Nine Months Ended
September 30, 1997 and 1996 (Unaudited).............................. 3
Notes to Financial Statements (Unaudited)............................. 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 6
PART II. -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K............................. 6
SIGNATURES............................................................. 7
</TABLE>
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PART I. -- FINANCIAL INFORMATION
CMC SECURITIES CORPORATION I
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Mortgage securities collateral $585,602 $647,407
Cash and cash equivalents 1 1
-------- --------
$585,603 $647,408
======== ========
LIABILITIES
Collateralized mortgage securities $585,602 $647,407
Accrued expenses 38 30
-------- --------
585,640 647,437
-------- --------
STOCKHOLDER'S EQUITY
Common stock - $1 par value,
10,000 shares authorized,
issued and outstanding 10 10
Paid-in capital 83 72
Accumulated deficit (130) (111)
-------- --------
(37) (29)
-------- --------
$585,603 $647,408
======== ========
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION I
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------- ------------------
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $11,241 $12,667 $34,691 $39,057
Interest expense on collateralized
mortgage securities 10,879 12,261 33,579 37,808
------- ------- ------- -------
Net interest income 362 406 1,112 1,249
------- ------- ------- -------
Other expenses:
Management fees 3 3 8 8
Professional fees and other 2 1 11 10
Pool insurance 362 406 1,112 1,249
------- ------- ------- -------
Total other expenses 367 410 1,131 1,267
------- ------- ------- -------
Net loss $ (5) $ (4) $ (19) $ (18)
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION I
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (19) $ (18)
Noncash item - amortization of
discount and premium (28) (26)
Net change in other assets and
accrued expenses 8 8
-------- --------
Net cash used by
operating activities (39) (36)
-------- --------
INVESTING ACTIVITIES:
Mortgage securities collateral:
Principal collections on collateral 61,314 57,690
Decrease in accrued interest receivable 377 357
Decrease in short-term investments 3 4
-------- --------
Net cash provided by
investing activities 61,694 58,051
-------- --------
FINANCING ACTIVITIES:
Collateralized mortgage securities:
Principal payments on securities (61,314) (57,690)
Decrease in accrued interest payable (352) (335)
Capital contributions 11 10
-------- --------
Net cash used by financing
activities (61,655) (58,015)
-------- --------
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning
of period 1 1
-------- --------
Cash and cash equivalents at end of
period $ 1 $ 1
======== ========
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION I
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1997 are
not necessarily indicative of the results that may be expected for the calendar
year ending December 31, 1997. For further information refer to the financial
statements and footnotes thereto included in the CMC Securities Corporation I
annual report on Form 10-K for the period ended December 31, 1996.
NOTE B -- DISCLOSURES REGARDING FAIR VALUES OF MORTGAGE SECURITIES COLLATERAL
The estimated fair values of mortgage securities collateral have been determined
by 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 could be realized 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 values of mortgage securities collateral were estimated using quoted
market prices, when available, including quotes made by Capstead Mortgage
Corporation's lenders in connection with designating collateral for repurchase
arrangements.
The following table summarizes the fair values of mortgage securities collateral
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Carrying amount $585,602 $647,407
Unrealized gains 9,913 5,620
Unrealized losses (1,783) (7,865)
-------- --------
Fair value $593,732 $645,162
======== ========
</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 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 nine
months ended September 30, 1997 or during 1996.
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NOTE C -- NET INTEREST INCOME ANALYSIS
The following table summarizes interest income and interest expense and the
average effective interest rates for the periods indicated (dollars in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
---------------------------------------------
1997 1996
----------------- -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $11,241 7.57% $12,667 7.59%
Interest expense on
collateralized mortgage
securities 10,879 7.33 12,261 7.35
------- -------
Net interest income $ 362 $ 406
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
---------------------------------------------
1997 1996
----------------- -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $34,691 7.53% $39,057 7.59%
Interest expense on
collateralized mortgage
securities 33,579 7.29 37,808 7.35
------- -------
Net interest income $ 1,112 $ 1,249
======= =======
</TABLE>
The following table summarizes changes in interest income and interest expense
due to changes in interest rates, versus changes in volume for the quarter and
nine months ended September 30, 1997, compared to the same periods in 1996 (in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1997
--------------------------------------
RATE* VOLUME* TOTAL
----- ------- -------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $ (40) $(1,386) $(1,426)
Interest expense on
collateralized mortgage
securities (42) (1,340) (1,382)
----- ------- -------
$ 2 $ (46) $ (44)
===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------
RATE* VOLUME* TOTAL
----- ------- --------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $(286) $(4,080) $(4,366)
Interest expense on
collateralized mortgage
securities (276) (3,953) (4,229)
----- ------- -------
$ (10) $ (127) $ (137)
===== ======= =======
</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.
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<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 other than the
amortization of unrecovered shelf issuance costs. 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 has not issued any CMOs during 1997 or
1996.
The Company's net losses are due to operational costs incurred (management and
professional fees) and the amortization of unrecovered shelf issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
All ongoing CMO 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 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:
Exhibit 27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None.
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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 13, 1997 By /s/ RONN K. LYTLE
------------------------------------
Ronn K. Lytle
Chairman and Chief Executive Officer
Date: November 13, 1997 By /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Senior Vice President - Control
and Treasurer
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<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, 1997 AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 585,603
<CURRENT-LIABILITIES> 38
<BONDS> 585,602
0
0
<COMMON> 10
<OTHER-SE> (47)
<TOTAL-LIABILITY-AND-EQUITY> 585,603
<SALES> 0
<TOTAL-REVENUES> 34,691
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,579
<INCOME-PRETAX> (19)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
