SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- ------- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- ---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-23972
AMERICAN MORTGAGE INVESTORS TRUST
(Exact name of registrant as specified in its charter)
Massachusetts 13-6972380
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
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 ____
<PAGE>
PART I
Item 1. Financial Statements
AMERICAN MORTGAGE INVESTORS TRUST
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Investments in mortgage loans
(Note 2) $ 46,214,163 $ 46,792,853
Investments in REMIC and
GNMA Certificates (Note 3) 10,903,548 12,495,878
Cash and cash equivalents 2,726,148 1,840,715
Deferred costs (net of
accumulated amortization
of $50,000 and $45,000,
respectively) 9,549 14,549
Accrued interest receivable 759,155 501,927
------------ ------------
Total assets $ 60,612,563 $ 61,645,922
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and
accrued expenses $ 71,510 $ 49,123
Due to affiliates (Note 4) 1,610,666 1,210,874
------------ ------------
Total liabilities 1,682,176 1,259,997
------------ ------------
Commitments (Note 5)
Shareholders' equity:
Shares of beneficial interest;
$.10 par value; 12,500,000
shares authorized;
and 4,087,583 shares issued
and outstanding, respectively 415,225 408,759
Treasury shares of beneficial
interest; $.10 par value; 312,998
and 248,339 shares, respectively (31,300) (24,834)
Additional paid-in capital 68,849,747 68,849,725
Distributions in excess of net income (10,477,935) (9,021,323)
Accumulated other comprehensive income:
Net unrealized gain on marketable
securities (Note 3) 174,650 173,598
------------ ------------
Total shareholders' equity 58,930,387 60,385,925
------------ ------------
Total liabilities and
shareholders' equity $ 60,612,563 $ 61,645,922
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
-2-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans
(Note 2) $ 787,949 $ 793,562 $ 2,436,018 $2,354,292
REMIC and
GNMA
Certificates and
FHA Insured
Project Loan
(Note 3) 217,714 245,286 681,283 731,318
Temporary
investments 31,336 28,155 82,955 124,421
----------- ---------- ----------- ----------
Total revenues 1,036,999 1,067,003 3,200,256 3,210,031
----------- ---------- ----------- ----------
Expenses:
General and
administrative 186,345 126,384 494,778 493,667
Realized (gain) loss
on sale of REMIC
and GNMA
Certificates and
FHA Insured
Project Loan
(Note 3) (7,265) 3,614 (6,648) 65,386
Amortization 0 2,500 5,000 7,500
----------- ---------- ----------- ----------
Total expenses 179,080 132,498 493,130 566,553
----------- ---------- ----------- ----------
Net income $ 857,919 $ 934,505 $ 2,707,126 $2,643,478
=========== ========== =========== ==========
Basic net income
per weighted
average share $ .22 $ .24 $ .70 $ .69
=========== ========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
-3-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Statement of Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Shares of Treasury Shares of
Beneficial Interest Beneficial Interest
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at January 1, 4,087,583 $ 408,759 (248,339) $(24,834)
1998
Net Income 0 0 0 0
Distributions 0 0 0 0
Purchase of 0 0 (64,659) (6,466)
treasury shares
Issuance of shares 64,660 6,466 0 0
of beneficial
interest
Change in net 0 0 0 0
unrealized gain
on securities
available for sale
-----------------------------------------------------------
Balance at 4,152,243 $415,225 (312,998) $(31,300)
September 30, 1998
===========================================================
<CAPTION>
Net Unrealized
Gain (Loss) on
Additional Distributions in Securities
Paid-in Excess of Available
Capital Net Income for Sale Total
------- ---------- -------- -----
<S> <C> <C> <C> <C>
Balance at January 1, $68,849,725 $(9,021,323) $173,598 $60,385,925
1998
Net Income 0 2,707,126 0 2,707,126
Distributions 0 (4,163,738) 0 (4,163,738)
Purchase of (1,007,311) 0 (1,013,777)
treasury shares
Issuance of shares 1,007,333 0 0 1,013,799
of beneficial
interest
Change in net 0 0 1,052 1,052
unrealized gain
on securities
available for sale
-----------------------------------------------------------------------
Balance at $68,849,747 $(10,477,935) $174,650 $58,930,387
September 30, 1998
=======================================================================
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,707,126 $ 2,643,478
----------- -----------
Adjustments to reconcile net income
to net cash provided by
operating activities
Amortization expense -
organization costs 5,000 7,500
Amortization expense - loan
premium and origination costs 376,082 357,513
Amortization of REMIC premium 0 3,055
Accretion of REMIC
and GNMA and FHA
Insured Project Loan discount (20,298) (24,274)
(Gain) loss on sale of REMIC
certificates (7,560) 21,070
Loss on sale of GNMA Certificates 912 1,236
Loss on sale of FHA
Insured Project Loan 0 43,080
Changes in operating assets and
liabilities:
Increase in accrued
interest receivable (257,228) (74,801)
Increase in due to affiliates 399,792 365,164
Increase (decrease) in accounts
payable and accrued expenses 22,387 (23,442)
----------- -----------
Total adjustments 519,087 676,101
----------- -----------
Net cash provided by
operating activities 3,226,213 3,319,579
----------- -----------
</TABLE>
-5-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Statements of Cash Flows
(continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1998 1997
--------------------------
<S> <C> <C>
Cash flows from investing activities:
Investments in mortgage loans 0 (2,242,671)
Principal repayments of mortgage
loans 202,608 149,726
Purchase of REMIC Certificates 0 (1,889,817)
Purchase of GNMA Certificate 0 (1,981,566)
Principal repayments of GNMA
certificates 233,583 86,164
Principal repayments of REMIC
certificates 1,386,745 646,291
Principal repayments of FHA
Insured Project Loan 0 3,408,238
----------- -----------
Net cash provided by (used in)
investing activities 1,822,936 (1,823,635)
----------- -----------
Cash flows from financing activities:
Distributions to shareholders (4,163,738) (4,172,266)
Proceeds from issuance of shares
of beneficial interest 1,013,799 1,054,250
Purchase of treasury shares (1,013,777) (704,874)
----------- -----------
Net cash used in financing
activities (4,163,716) (3,822,890)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 885,433 (2,326,946)
Cash and cash equivalents at
beginning of period 1,840,715 4,828,561
----------- -----------
Cash and cash equivalents at
end of period $ 2,726,148 $ 2,501,615
=========== ===========
Supplemental schedule of noncash investing activities:
Decrease in deferred costs $ 0 $ 3,032
Increase in investments
in mortgage loans 0 (3,032)
----------- -----------
$ 0 $ 0
=========== ===========
</TABLE>
-6-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 1 - General
American Mortgage Investors Trust (the "Company") was formed on June 11, 1991 as
a Massachusetts business trust for the primary purpose of investing in
government-insured mortgages and guaranteed mortgage-backed certificates. The
Company is electing to be treated as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended.
Pursuant to the Redemption Plan which became effective November 30, 1994, the
Company is required to redeem eligible shares presented for redemption for cash
to the extent it has sufficient net proceeds from the sale of shares under the
Reinvestment Plan. As of September 30, 1998, the backlog of shares to be
redeemed is 164,481.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principals. Actual results could
differ from those estimates.
The fair value of investments in mortgage loans and investments in REMIC and
GNMA Certificates and FHA Insured Project Loan is based on actual market price
quotes, or by determining the present value of the projected future cash flows
using appropriate discount rates, credit losses and prepayment assumptions.
The unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Company's Form 10-K for the year
ended December 31, 1997. In the opinion of the Advisor, the accompanying
unaudited financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Company as of September 30, 1998, the results of its operations for the
three and nine months ended September 30, 1998 and 1997 and its cash flows for
the nine months ended September 30, 1998 and 1997. However, the operating
results for the interim periods may not be indicative of the results for the
full year.
-7-
<PAGE>
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Basic net income per weighted average share is computed based on the net income
for the period, divided by the weighted average number of shares outstanding for
the period. The weighted average number of shares outstanding for the three and
nine months ended September 30, 1998 and 1997 were 3,845,453 and 3,849,480 and
3,845,043 and 3,849,772, respectively.
The Company adopted SFAS No. 130, Reporting Comprehensive Income on January 1,
1998. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. The statement
also requires the accumulated balance of other comprehensive income to be
displayed separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet. Total comprehensive income for the
three and nine months ended September 30, 1998 and 1997 was $902,524 and
$1,102,952 and $2,697,311 and $2,795,237, respectively.
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information on January 1, 1998. SFAS No. 131 establishes standards
for reporting information about operating segments in annual and interim
financial statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating officer in deciding how to allocate
resources and in assessing performance. Categories required to be reported as
well as reconciled to the financial statements are segment profit or loss,
certain specific revenue and expense items, and segment assets. The Company
operates in one segment, investment in mortgages or mortgage backed securities.
Certain prior year amounts have been reclassified to conform with current year
presentation.
-8-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 2 - Investments in Loans
The Company originally funded five Originated Mortgages (excluding GNMAs-see
Note 3), five noninterest bearing Additional Loans and two additional
loan-bridge loans in the aggregate amount of $46,837,304.
Information relating to investments in Originated Mortgages and Additional Loans
as of September 30, 1998 and December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Date of
Invest-
ment/ Amounts Advanced Total
Final --------------------------------- Amounts Out-
Matu- Total Advanced standing Origi-
Descrip rity Mortgage Additional Amounts Amounts and Loan nation
Property tion Date Loans Loans Advanced Unadvanced Unadvanced Balance Costs
- -------- ---- ---- ----- ----- -------- ---------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Cove 308 12/93 $6,800,000 $840,500 $7,640,500 $ 0 $ 7,640,500 $ 7,422,827 $444,215
Apts. Apt. 1/29
Houston, Units (D)
TX(A)
Oxford on 405 12/93 9,350,000 1,156,000 10,506,000 0 10,506,000 10,206,700 610,814
Greenridge Apt. 1/29
Apts. Units (D)
Houston,
TX(A)
Town & 330 4/94 9,348,000 1,039,000 10,387,000 0 10,387,000 10,097,359 603,895
Country IV Apt. 5/29
Apts. Units (E)
Urbana,
IL(B)
Columbiana 204 4/94 8,276,895 563,000 8,839,895 406,105 9,246,000 8,806,376 532,835
Lakes Apts. Apt. 11/35
Columbia, Units (F)
SC(C)
Stony Brook 125 12/95 8,500,000 763,909 9,263,909 0 9,263,909 9,222,831 413,492
Village II Apt. 6/37
Apts. Units (F)
East Haven,
CT(G)
-----------------------------------------------------------------------------------------------
Total $42,274,895 $4,362,409 $46,637,304 $406,105 $47,043,409 $45,756,093 $2,605,251
===============================================================================================
<CAPTION>
Accum-
ulated
Amor-
tization Interest
Additional Balance Earned Less
Loans and at Balance at by the 1998 Net
Origina- September December Company Amor- Interest
Property tion Costs 30, 1998 31,1997(H) for 1998 tization Earned
- -------- ------------------- ---------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
The Cove $484,775 $7,382,267 $7,498,346 $446,556 $75,690 $370,866
Apts.
Houston,
TX(A)
Oxford on 666,701 10,150,813 10,310,443 685,473 104,095 581,378
Greenridge
Apts.
Houston,
TX(A)
Town & 517,554 10,183,700 10,327,840 608,866 87,186 521,680
Country IV
Apts.
Urbana,
IL(B)
Columbiana 247,564 9,091,647 9,158,473 497,291 42,225 455,066
Lakes Apts.
Columbia,
SC(C)
Stony Brook 230,587 9,405,736 9,497,751 573,914 66,886 507,028
Village II
Apts.
East Haven,
CT(G)
----------------------------------------------------------------------
Total $2,147,181 $46,214,163 $46,792,853 $2,812,100 $376,082 $2,436,018
======================================================================
</TABLE>
-9-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
(A) The interest rates for The Cove and Oxford are 7.625%-9.129%. In addition to
the interest rate, the Company is entitled to 30% of the cash flow remaining
after payment of 9.129% interest and accrued interest, if any.
(B) The interest rates for Town and Country are 7.375%-9.167%. In addition to
the interest rate, the Company is entitled to 30% of the cash flow remaining
after payment of 9.167% interest.
(C) The interest rates for Columbiana are 7.9%-8.678% during the permanent loan
period and 7.4% during the construction period. In addition to the interest rate
during the permanent loan period, the Company will be entitled to 25% of the
cash flow remaining after payment of 8.678% interest. Payments at the rate of
8.678% are guaranteed by the developer until December 1998.
(D) The Originated Mortgages have terms of 35 years, subject to mandatory
prepayment at any time after 10 years and upon one year's notice.
(E) The Originated Mortgage has a term of 35 years, subject to mandatory
prepayment at any time after 12 years and upon one year's notice.
(F) The Originated Mortgage has a term of 40 years, subject to mandatory
prepayment at any time after 10 years and upon one year's notice.
(G) The interest rates for Stony Brook are 7.75%-9.128%. In addition to the
interest rate, the Company is entitled to 40% of the cash flow remaining after
payment of 9.128% interest.
(H) Aggregate cost for federal income tax purposes is $45,707,370.
-10-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 3 - Investment in REMIC and GNMA Certificates
Information relating to investments in REMIC and GNMA Certificates as of
September 30, 1998 and December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Original Accum-
Date Purchase ulated
Purchased Price (Discount) Amorti-
/Final Stated Including Principal at at zation at
Seller Certificate Payment Interest Prem/ September September September
GNMA Certificates Number Date Rate (Disc) 30, 1998 30, 1998 30, 1998
- ----------------- ------ ---- ---- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bear Stearns 0355540 7/27/94 7.125% $2,407,102 $2,571,825 $(237,894) $83,777
3/15/29
Malone Mortgage 0382486 7/28/94 8.500% 2,197,130 2,158,587 (8,094) 2,976
8/15/29
Goldman Sachs 0328502 7/29/94 8.250% 3,928,615 3,655,642 (3,425) 1,370
7/15/29
SunCoast Capital Group, Ltd. G22412(6) 6/23/97 7.000% 1,981,566 1,820,629 (11,948) 3,319
4/20/27
REMIC Certificates
SunCoast Capital Group, Ltd. FHLMC 3/30/97 7.000% 507,288 0 0 0
17218 2/1/98
SunCoast Capital Group, Ltd. FHLMC 5/30/97 6.500% 251,967 0 0 0
17161 2/1/98
SunCoast Capital Group, Ltd. FHLMC 6/23/97 7.000% 147,437 0 0 0
17125 4/20/27(1)
SunCoast Capital Group, Ltd. FNMA 6/30/97 7.500% 983,125 420,228 (7,091) 1,611
1997-42V 10/18/09
-------------------------------------------------
Total $12,404,230 $10,626,911 $(268,452) $93,053
=================================================
<CAPTION>
Loan Interest
Origination Unrealized Balance Earned
Costs at Gain at at Balance at by the Net
Seller September September September December Company 1998 Interest
GNMA Certificates 30, 1998 30, 1988 30, 1998 31, 1997 for 1998 Accretion Earned
- ----------------- -------- -------- -------- -------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Bear Stearns $ 79,566 $95,247 $2,592,521 $2,604,394 $137,824 $15,126 $152,950
Malone Mortgage 73,312 17,475 2,244,256 2,253,185 137,894 537 138,431
Goldman Sachs 124,508 925 3,779,020 3,833,576 227,783 249 228,032
SunCoast Capital Group, Ltd. 0 56,705 1,868,705 1,982,055 99,598 2,085 101,683
REMIC Certificates
SunCoast Capital Group, Ltd. 0 0 0 473,051 767 0 767
SunCoast Capital Group, Ltd. 0 0 0 198,075 869 0 869
SunCoast Capital Group, Ltd. 0 0 0 148,495 0 0 0
SunCoast Capital Group, Ltd. 0 4,298 419,046 1,003,047 56,250 2,301 58,551
----------------------------------------------------------------------------------
Total $277,386 $174,650 $10,903,548 $12,495,878 $660,985 $20,298 $681,283
==================================================================================
</TABLE>
(1) The stated final payment date was April 20, 2027. The actual final payment
amounting to $145,942 was received January 22, 1998.
-11-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 3 - Investment in REMIC and GNMA Certificates (continued)
The amortized cost, unrealized gain (loss) and fair value for the investment in
REMIC and GNMA Certificates at September 30, 1998 and December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Gross
Amortized Unrealized Fair Value Amortized
Cost at Gain at at Cost at
September September September December
Security 30, 1998 30, 1998 30, 1998 31, 1997
- -------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fannie Mae REMICs $ 414,748 $ 4,298 $ 419,046 $ 984,659
Federal Home Loan REMICs 0 0 0 806,972
Ginnie Mae Certificates 10,314,150 170,352 10,484,502 10,530,649
----------- -------- ----------- -----------
$10,728,898 $174,650 $10,903,548 $12,322,280
=========== ======== =========== ===========
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Gain at (Loss) at Value at
December December December
Security 31, 1997 31, 1997 31, 1997
- -------- ------------ ---- -------- ------------
<S> <C> <C> <C>
Fannie Mae REMICs $ 18,388 $ 0 $ 1,003,047
Federal Home Loan REMICs 12,649 0 819,621
Ginnie Mae Certificates 146,012 (3,451) 10,673,210
------- ------- ----------
$177,049 $ (3,451) $12,495,878
======= ======= ==========
</TABLE>
-12-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
The change in the unrealized gain (loss) for the nine months ended September 30,
1998 and the year ended December 31, 1997 were as follows:
<TABLE>
<S> <C>
Unrealized loss at January 1, 1997 $ (81,386)
Sale of securities during the year ended
December 31, 1997 included in
unrealized loss at December 31, 1996 15,647
Unrealized gain on securities
purchased during the twelve months
ended December 31, 1997 53,925
Unrealized gain on securities held at
December 31, 1997 and 1996 185,412
---------
Unrealized gain at December 31, 1997 $ 173,598
Sale of securities during the nine months
ended September 30, 1998 included in
unrealized gain at December 31, 1997 (25,749)
Unrealized gain on securities held at
September 30, 1998 and December 31, 1997 26,801
---------
Unrealized gain at September 30, 1998 $ 174,650
=========
</TABLE>
For the nine months ended September 30, 1998, there were gains and losses of
$8,875 and $2,227, respectively, (including acquisition fees and expenses) on
principal repayments of REMICs and GNMAs.
Note 4 - Related Party Transactions
The Company has an agreement with the Advisor pursuant to which the Advisor
receives compensation consisting primarily of (i) asset management fees
calculated as a percentage of total assets invested by the Company, (ii) a
subordinated incentive fee based on the economic gain on the sale of Mortgage
Investments; (iii) certain other fees. In addition to the fees discussed above,
the Company will reimburse affiliates of the Advisor for certain administrative
and other costs incurred on behalf of the Company.
-13-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
The costs incurred to related parties for the three and nine months ended
September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------------- -------------------
<S> <C> <C> <C> <C>
Expense reimburse-
ment $ 31,944 $ 9,537 $100,029 $ 91,460
Asset manage-
ment fees 90,329 93,958 272,118 273,203
-------- -------- -------- --------
$122,273 $103,495 $372,147 $364,663
======== ======== ======== ========
</TABLE>
Asset management fees and expense reimbursements owed to the Advisor and its
affiliates amounting to approximately $1,216,000 and $844,000 were accrued and
unpaid at September 30, 1998 and December 31, 1997, respectively.
Note 5 - Commitments and Contingencies
The Company has filed preliminary proxy materials with the Securities and
Exchange Commission ("SEC") regarding, among other matters, proposals to
restructure the Company from a finite to infinite life-REIT, modify the
investment objectives of the Company, permit the Company to incur a specified
amount of indebtedness and list the Company's shares on a national exchange. The
SEC is currently reviewing these preliminary materials and the Company
anticipates that it will present the proposals to shareholders late in the
fourth quarter of 1998 or in the first quarter of 1999 after the SEC has
completed its review. There can be no assurance, however, as to when or if the
Company will mail definitive proxy materials to shareholders or as to the
content and scope of the final proposals.
Note 6 - Subsequent Event
On October 18, 1998, the Company received the final payment of a REMIC
Certificate with a principal balance of $420,228 at September 30, 1998 and a
stated final payment date of October 18, 2009.
On November 13, 1998, a distribution of $1,385,509 and $17,656 was paid to the
Investors and the Advisor, respectively, representing the 1998 third quarter
distribution. The distribution was
-14-
<PAGE>
AMERICAN MORTGAGE INVESTORS TRUST
Notes to Financial Statements
September 30, 1998
(Unaudited)
funded from cash collections of debt service payments, the continued accrual
without payment of asset management fees and expense reimbursements to the
Advisor and its affiliates and interest income through approximately the
distribution date, November 13, 1998.
-15-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
When used in this quarterly report on Form 10-Q, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this quarterly report on Form 10-Q pursuant to the "safe harbor" provision of
the private securities litigation reform act of 1995. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially, including, but not limited to, those set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.
Liquidity and Capital Resources
The Company has utilized the Net Proceeds of the Offering primarily to invest in
Originated Mortgages and Acquired Mortgages ("Mortgage Investments") and has
also invested in uninsured Additional Loans made directly to the developers or
sponsors of Developments. The Company's liquidity is based primarily on interest
received from its Mortgage Investments.
For a description of the Company's investments in Originated Mortgages, REMIC
and GNMA Certificates (see Notes 2 and 3 of Notes to Financial Statements).
During the nine months ended September 30, 1998, cash and cash equivalents
increased approximately $885,000 due to principal repayments of loans and GNMA
and REMIC Certificates ($1,823,000) and cash provided by operating activities
($3,226,000) which exceeded distributions to shareholders ($4,164,000). Included
in the adjustments to reconcile the net income to cash provided by operating
activities is net amortization in the amount of $361,000.
Net unrealized gains on REMIC and GNMA investments included in shareholders'
equity pursuant to Statement of Financial Accounting Standards No. 115
aggregated $174,650 at September 30, 1998. This represents an increase of $1,052
in the unrealized gain for the nine months ended September 30, 1998, of which a
decrease of $25,749 is attributable to the sale of securities (which
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resulted in a net realized gain of $6,648) and an increase of $26,801 is
attributable to an increase in market prices for the investments held at
September 30, 1998 and December 31, 1997. As of November 3, 1998, the net
unrealized gain was approximately $154,000.
The yield on the REMIC and GNMA Certificates will depend, in part, upon the rate
and timing of principal prepayments on the underlying mortgages in the asset
pool. Generally, as market interest rates decrease, mortgage prepayment rates
increase and the market value of interest rate sensitive obligations like the
REMIC and GNMA Certificates increases. As market interest rates increase,
mortgage prepayment rates tend to decrease and the market value of interest rate
sensitive obligations like the REMICs and GNMAs tends to decrease. The effect of
prepayments on yield is greater the earlier a prepayment of principal is
received. Due to the complexity of the REMIC structure and the uncertainty of
future economic and other factors that affect interest rates and mortgage
prepayments, it is not possible to predict the effect of future events upon the
yield to maturity or the market value of the REMIC and GNMA Certificates upon
any sale or other disposition or whether the Company, if it chose to, would be
able to reinvest proceeds from prepayments at favorable rates relative to the
coupon rate.
Pursuant to the Redemption Plan which became effective November 30, 1994, the
Company is required to redeem eligible shares presented for redemption for cash
to the extent it has sufficient net proceeds from the sale of shares under the
Reinvestment Plan and does not expect to have reinvested dividends available for
investment. As of September 30, 1998, the backlog of shares to be redeemed is
164,481. Unadvanced amounts of Originated Mortgages are invested in temporary
investments. The Company expects that cash generated from the Company's
investments will be sufficient to pay all of the Company's expenses in the
foreseeable future.
In order to qualify as a REIT under the Internal Revenue Code, as amended, the
Company must, among other things, distribute at least 95% of its taxable income.
The Company is in compliance with the Code.
The Company has filed preliminary proxy materials with the Securities and
Exchange Commission ("SEC") regarding, among other matters, proposals to
restructure the Company from a finite to infinite life-REIT, modify the
investment objectives of the Company, permit the Company to incur a specified
amount of indebtedness and list the Company's shares on a national exchange. The
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<PAGE>
SEC is currently reviewing these preliminary materials and the Company
anticipates that it will present the proposals to shareholders late in the
fourth quarter of 1998 or in the first quarter of 1999 after the SEC has
completed its review. There can be no assurance, however, as to when or if the
Company will mail definitive proxy materials to shareholders or as to the
content and scope of the final proposals.
Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way.
Results of Operations
Results of operations for the three and nine months ended September 30, 1998
consisted primarily of interest income from Originated Mortgages, REMIC
certificates and temporary investments less administrative expenses. Results of
operations for the three and nine months ended September 30, 1997 consisted
primarily of interest income from Originated Mortgages, REMIC certificates, an
FHA Insured Project Loan and temporary investments less administrative expenses
and realized losses on sale of REMICs and GNMAs, and an FHA Insured Project
Loan. The total of the annual operating expenses of the Company may not exceed
the greater of (i) 2% of the Average Invested Assets of the Company or (ii) 25%
of the Company's Net Income, unless such excess is approved by the Independent
Trustees. On an annualized basis, there was no such excess for the nine months
ended September 30, 1998 and 1997.
Interest income from Originated Mortgages (excluding GNMAs) increased
approximately $82,000 for the nine months ended September 30, 1998 as compared
to the corresponding period in 1997 primarily due to additional advances on the
Stonybrook Originated Mortgage during 1997 and the receipt of cash flow interest
in the first quarter of 1998 from the Oxford Originated Mortgage.
Interest income from temporary investments decreased approximately $41,000 for
the nine months ended September 30, 1998 as compared to the corresponding period
in 1997 primarily due to a smaller amount of temporarily invested proceeds
earning interest during the six months ended June 30, 1998.
General and administrative expenses increased approximately $60,000 for the
three months ended September 30, 1998 as compared to the corresponding period in
1997 primarily due
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<PAGE>
to the timing of printing expense and expense reimbursements to the Advisor for
certain administrative and other costs incurred on behalf of the Company.
Realized loss on sale of REMICs and GNMAs and FHA Insured Project Loan decreased
approximately $11,000 and $72,000 for the three and nine months ended September
30, 1998 as compared to the corresponding periods in 1997 primarily due to the
repayment, in 1997, of four REMICs and the FHA Insured Project Loan on which
losses had been recognized and a gain on a partial repayment of one REMIC during
the three months ended September 30, 1998.
Distribution Policy
The Company has completed the offering and acquisition stage and therefore, in
1997 the Board reviewed and changed the distribution policy. Beginning in 1998,
the Company's distribution policy calls for quarterly distributions which more
closely reflect collections of interest payments and regularly scheduled
principal amortization.
Of the total distributions of $4,163,738 and $4,172,266 made for the nine months
ended September 30, 1998 and 1997, $1,456,612 ($.38 per share or 35%) and
$1,528,788 ($.40 per share or 37%) represents a return of capital determined in
accordance with generally accepted accounting principles. As of September 30,
1998, the aggregate amount of the distributions made since the commencement of
the Offering representing a return of capital, in accordance with generally
accepted accounting principles, totaled $10,469,344. The portion of the
distributions which constitutes a return of capital was significant during the
acquisition stage in order to maintain level distributions to shareholders.
Management expects that cash flow from operations will be sufficient to fund the
Company's operating expenses and to make distributions as determined by the
Board on a quarterly basis.
Accounting Standards Issued but not yet Adopted
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at
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<PAGE>
fair value. This Statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of SFAS 133 is not expected to have
any impact on the financial position or results of operations of the Company.
Year 2000 Compliance
The Company utilizes the computer services of an affiliate of the Advisor. The
affiliate of the Advisor is in the process of upgrading its computer information
systems to be year 2000 compliant and beyond. The Year 2000 compliance issue
concerns the inability of a computerized system to accurately record dates after
1999. The affiliate of the Advisor recently underwent a conversion of its
financial systems applications and is in the process of upgrading and testing
the in house software and hardware inventory. The workstations that experienced
problems from this process were corrected with an upgrade patch. The affiliate
of the Advisor has incurred costs of approximately $1,000,000 to date and
estimates the total costs to be approximately $2,000,000. These costs are not
being charged to the Company. In regard to third parties, the Advisor is in the
process of evaluating the potential adverse impact that could result from the
failure of material service providers and mortgagors to be year 2000 compliant.
A detailed survey and assessment of third party readiness will be sent to
material third parties in the fourth quarter of 1998. The results of the surveys
will be compiled in early 1999. No estimate can be made at this time as to the
impact of the readiness of such third parties. The Advisor plans to have these
issues fully assessed by early 1999, at which time the risks will be addressed
and a contingency plan will be implemented if necessary.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
Alan P. Hirmes ceased to serve as Chief Financial Officer effective
June 18, 1998. Mr. Hirmes remains as Senior Vice President. Effective June 18,
1998, John B. Roche was elected Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter.
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<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.
AMERICAN MORTGAGE INVESTORS TRUST
(Registrant)
Date: November 13, 1998
By: /s/ John B. Roche
-----------------
John B. Roche
Senior Vice President and
Chief Financial Officer
Date: November 13, 1998
By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for American Mortgage Investors Trust and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000878774
<NAME> American Mortgage Investors Trust
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,726,148
<SECURITIES> 10,903,548
<RECEIVABLES> 46,973,318
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,612,563
<CURRENT-LIABILITIES> 1,682,176
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 58,930,387
<TOTAL-LIABILITY-AND-EQUITY> 60,612,563
<SALES> 0
<TOTAL-REVENUES> 3,200,256
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 493,130
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,707,126
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,707,126
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
