FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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: 1-11017
NORTH AMERICAN MORTGAGE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 68-0267088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3883 Airway Drive, Santa Rosa, California, 95403-1699
(Address of principal executive offices, zip code)
(707) 523-5000
(Registrant's telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
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 of Common Stock, par value $.01 per share, (the
"Common Stock") outstanding as of August 7, 1996, was 13,950,535.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents ..................... $ 8,384 $ 12,273
Advances and other receivables ................ 89,197 76,628
Real estate loans held for sale to investors
--- net of unearned discounts ............. 539,980 526,913
Purchased loan servicing ...................... 850 1,163
Originated loan servicing ..................... 84,746 56,353
Excess servicing fees ......................... 17,196 20,559
Other intangible assets ....................... 6,235 6,438
Property and equipment ........................ 36,691 36,339
Other assets .................................. 9,198 9,702
--------- ---------
$ 792,477 $ 746,368
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Warehouse line of credit ...................... $ 196,229 $ 146,833
Notes payable ................................. 74,838 74,801
Commercial paper and other borrowings ......... 275,052 279,221
Subordinated debt ............................. 10,070 10,070
Accounts payable and other liabilities ........ 49,398 42,299
--------- ---------
605,587 553,224
STOCKHOLDERS' EQUITY
Convertible preferred stock (1,000,000
shares authorized,748,179 shares issued and
outstanding)................................. -- --
Common stock (50,000,000 shares authorized,
16,273,451 and 16,257,614 shares issued at
June 30, 1996, and December 31, 1995,
respectively) ............................... 163 163
Additional paid-in capital .................... 110,486 110,250
Retained earnings ............................. 116,288 101,909
Treasury stock, at cost - (2,282,916 and 1,140,516
shares at June 30, 1996 and December 31, 1995,
respectively)................................ (40,047) (19,178)
--------- ---------
186,890 193,144
---------- ---------
$ 792,477 $ 746,368
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30, 1996, and June 30, 1995
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
1996 1995
------- -------
Income:
<S> <C> <C>
Loan administration fees, net of excess
servicing fee amortization ........................ $ 11,444 $ 9,910
Loan origination fees ................................ 21,065 16,831
Gain from sales of loans ............................. 27,128 20,132
Interest income, net of warehouse interest expense ... 7,126 6,377
Gain from sales of servicing ......................... 8,047 11,929
Other ................................................ 2,353 2,088
------- -------
77,163 67,267
Expenses:
Personnel ........................................... 38,026 28,942
Other operating expenses ............................ 18,698 15,689
Interest expense .................................... 2,139 2,213
Depreciation and amortization of property and
equipment ....................................... 1,850 1,805
Amortization of purchased loan servicing ............ 155 194
Amortization of originated loan servicing ........... 1,727 637
Provision for impairment of originated loan servicing 0 1,727
Amortization of other intangibles ................... 103 118
------- -------
62,698 51,325
Income before income taxes .......................... 14,465 15,942
Income tax expense .................................. 5,794 5,893
------- -------
NET INCOME .............................................. $ 8,671 $10,049
======= =======
NET INCOME PER SHARE .................................... $ 0.61 $ 0.67
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING ..................... 14,292 15,008
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended June 30, 1996, and June 30, 1995
(Amounts in thousands, except per share data)
<CAPTION>
Six Months Ended
June 30,
1996 1995
-------- --------
Income:
<S> <C> <C>
Loan administration fees, net of excess
servicing fee amortization ...................... $ 22,319 $ 21,251
Loan origination fees ............................... 40,879 27,975
Gain from sales of loans ............................ 48,971 30,977
Interest income, net of warehouse interest expense .. 13,620 12,384
Gain from sales of servicing ........................ 15,487 24,473
Other ............................................... 4,449 3,943
------- -------
145,725 121,003
Expenses:
Personnel .......................................... 73,569 54,874
Other operating expenses ........................... 35,024 29,951
Interest expense ................................... 4,483 4,508
Depreciation and amortization of property and
equipment ...................................... 3,746 3,683
Amortization of purchased loan servicing ........... 312 388
Amortization of originated loan servicing .......... 3,530 752
(Recovery)/provision for impairment of
originated loan servicing........................... (2,052) 1,983
Amortization of other intangibles .................. 214 225
------- -------
118,826 96,364
Income before income taxes ......................... 26,899 24,639
Income tax expense ................................. 10,768 8,932
------- -------
NET INCOME ............................................. $ 16,131 $ 15,707
======= =======
NET INCOME PER SHARE .................................. $ 1.10 $ 1.05
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING .................... 14,676 14,999
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1996, and 1995
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30,
1996 1995
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ........................................ $ 16,131 $ 15,707
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 7,161 9,138
Excess servicing fee income .................... (17,579) (21,225)
Gain from sales of servicing rights ............ (15,487) (24,473)
Cash proceeds from sales of servicing rights ... 72,865 40,190
Net increase in real estate loans held for sale,
net of unearned discounts ...................... (13,067) (54,915)
Increase in advances and other receivables ........ (12,569) (5,482)
Increase in accounts payable and other liabilities 7,099 2,191
(Decrease) increase in other assets ............... 504 (1,922)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ........................... 45,058 (40,791)
INVESTING ACTIVITIES:
Acquisition of assets of branches including
purchase accounting adjustments ................ (11) (26)
Purchase of servicing rights ...................... -- (80)
Acquisition of originated servicing rights ........ (67,717) (36,800)
Purchase of property and equipment ................ (4,098) (848)
Retirement of property and equipment .............. -- 718
-------- --------
NET CASH USED IN INVESTING ACTIVITIES ......... (71,826) (37,036)
FINANCING ACTIVITIES:
Increases in (principal payments on) long-term debt 37 (10,527)
Increase (decrease) in warehouse lines of credit,
commercial paper, repurchase agreements, and
other borrowings ............................... 45,227 (11,493)
Purchases of Treasury Stock ....................... (20,869) --
Dividends ......................................... (1,752) (1,800)
Stock issuance under Incentive Stock Option Plan 236 1,108
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ................................... 22,879 (22,712)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ........ (3,889) (100,539)
Cash and cash equivalents at beginning of year .... 12,273 102,045
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD ................................ $ 8,384 $ 1,506
======== ========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest ...................................... $ 13,652 $ 8,811
======== ========
Income Taxes .................................. $ 2,128 $ 800
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NORTH AMERICAN MORTGAGE COMPANY
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements of North American
Mortgage Company (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
accordance with instructions to Form 10-Q and Article 10 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 of the Company, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six and three month periods ended June
30, 1996, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included on Form 10-K
for the year ended December 31, 1995.
Note 2 - Net Income Per Share Information
Net income per common share is computed based on the weighted average
number of shares outstanding during the period. The potential dilutive effect of
common stock equivalents has not been included because that amount is not
considered to be material. The weighted average number of shares outstanding for
net income per share was 14,292,000 and 15,008,000 for the three months ended
June 30, 1996, and 1995, respectively, and 14,676,000 and 14,999,000 for the six
months ended June 30, 1996, and 1995, respectively.
Note 3 - Capitalized Servicing Rights
Purchased loan servicing, excess servicing fees and originated loan
servicing, net of accumulated amortization and impairment were as follows:
<TABLE>
<CAPTION>
Purchased Loan Excess Servicing Originated Loan
Servicing, Net Fees, Net Servicing, Net
-------------- --------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at December 31, 1995.. $ 1,163 $ 20,559 $ 56,353
Additions..................... --- 17,579 67,717
Scheduled Amortization........ (313) (1,410) (3,530)
Recovery of Impairment of
Originated Loan Servicing.... --- --- 2,052
Basis on Servicing Sales...... --- (19,532) (37,846)
-------- -------- --------
Balance at June 30, 1996..... $ 850 $ 17,196 $ 84,746(1)(2)
==== ======= =======
</TABLE>
- ---------------
(1) Includes $7,388 of originated loan servicing rights which are related
to loans held for sale to investors. No revenues have been recognized on this
$7,388 of servicing rights, as the underlying loans have not yet been sold.
(2) At June 30, 1996, the originated loan servicing impairment allowance
was approximately $500,000.
<PAGE>
Note 4 - FAS No. 125
In June 1996, the Financial Accounting Standards Board issued Statement
Number 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" (FAS No. 125), which will become effective on
January 1, 1997. This statement will make the accounting for Originated Mortgage
Servicing Rights and Excess Servicing Rights consistent. The Company is
currently studying the effect of this statement, but does not expect the
adoption of the statement to have a material effect on future reported earnings.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Quarter Ended June 30, 1996, Compared with Quarter Ended June 30, 1995
RESULTS OF OPERATIONS
General Market Conditions - During the second quarter of 1996, U. S.
origination levels increased by 45% over the same period last year, due to a
higher level of new and existing home purchases and refinancings (see table
below). Although the overall level of refinance activity was higher than last
year, refinancings steadily declined, from January through July of 1996,
primarily as a result of the rise in interest rates which began in February
1996. By early August 1996, however, interest rates had begun to decline. For
example, on August 3, 1996, the 30-year fixed mortgage rate was approximately 8%
as compared with a rate of approximately 8.25% on June 30, 1996. To the extent
interest rates remain at existing levels or move lower, demand for refinancings
may increase.
<TABLE>
<CAPTION>
1-4 Family U.S. Mortgage
Originations*
Second Quarter
1996 1995
---------- ---------
(Dollars in billions)
<S> <C> <C>
New and existing home purchases............. $ 141 $ 120
Refinancings................................ 64 21
--- ---
Total $ 205 $ 141
=== ===
</TABLE>
- ---------------
* Sources: Department of Housing and Urban Development (HUD), Mortgage
Bankers Association (MBA), Federal National Mortgage Association (FNMA), and
Federal Home Loan Mortgage Corporation (FHLMC) (1996 market data based on
current estimates).
Summary of Results - Net income for the second quarter of 1996 was $8.7
million or $0.61 per share, a $1.4 million decrease from the $10.0 million, or
$0.67 per share, earned during the second quarter of 1995. The decrease in
earnings occurred, even though loan originations increased to $2.5 billion in
the second quarter of 1996 compared with $1.7 billion in the second quarter of
1996, for three principal reasons: (i) higher discounts given to borrowers to
meet escalating price competition, (ii) lower hedge gains due to higher bond
market volatility during the current quarter, and (iii) lower gains from sales
of servicing due to a higher Originated Mortgage Servicing Rights (OMSR) basis
associated with servicing sales in 1996. From an operational standpoint, the
Company's direct production unit costs (origination fees less origination
expenses) were 6% lower in the current quarter compared with last year, while
direct servicing expenses increased slightly from $69 per loan to $71 per loan.
The Company's $2.5 billion in loan originations during the second
quarter of 1996 were 47% higher than the same quarter last year. This increase
in origination volume is reflective of the 45% increase in total U. S. mortgage
originations for the same period. Refinancings represented 32% of total
originations in the second quarter of 1996 compared with 23% in the second
quarter of 1995.
<PAGE>
The following table sets forth certain information regarding the
servicing portfolio of the Company for the periods indicated:
<TABLE>
<CAPTION>
Quarters Ended June 30,
1996 1995
---- ----
(Dollars in millions, except Average Loan Size)
Servicing Portfolio:
<S> <C> <C>
Beginning Portfolio................ $ 13,603 $ 14,488
Add:
Loans Originated.................... 2,487 1,697
Deduct:
Sales of Servicing Rights........... (1,759) (1,286)
Run-off (1)......................... (495) ( 337)
-------- --------
Ending Portfolio..................... $ 13,836 $ 14,562
====== ======
Average Loan Size of Ending Portfolio $ 98,000 $ 96,000
Weighted Average Interest Rate....... 7.72% 7.08%
</TABLE>
Revenues - Revenues for the second quarter of 1996 were $77.2 million,
a $9.9 million or 15%, increase from $67.3 million in the second quarter of
1995.
Loan administration fees were $11.4 million in the second quarter of
1996, a 15% increase, as compared with $9.9 million in the second quarter of
1995. This increase primarily resulted from a decline in amortization and
impairment of excess servicing fees to $641,000 during the second quarter of
1996 compared with $1.6 million during the second quarter of 1995. This resulted
from changes in mortgage prepayment expectations driven by the general rising
rate environment during the first six months of 1996.
Loan origination fees were $21.1 million during the second quarter of
1996, a 25% increase, as compared with $16.8 million during the second quarter
of 1995. This increase resulted primarily from a 47% increase in loan
originations, partially offset by a decrease in average origination fees
collected on each loan. The decrease in the average origination fees collected
resulted from a higher percentage of wholesale and telemarketing production in
the second quarter of 1996 (63% as compared with 57%), on which the Company
receives lower average origination fees than it receives on retail loans.
The gain from sales of loans was $27.1 million during the second
quarter of 1996, as compared with $20.1 million during the second quarter of
1995. Gain on sales of loans is impacted by three factors: hedging activity,
price subsidies and the recognition of gains related to OMSR under FAS 122.
- ---------------
(1) Run-off refers to regular dollar amount of the amortization of loans,
prepayments and foreclosures. Second quarter of 1996 annualized run-off rate was
15% compared with 9% during the second quarter of 1995.
<PAGE>
A summary of the marketing results for the second quarter of 1996 and
1995 follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Hedging Gains ................................... $ 2,077 $ 6,639
Pricing Subsidies................................ (8,808) (4,918)
OMSR - FAS No. 122............................... 33,859 18,411
------ -------
$ 27,128 $ 20,132
====== ======
</TABLE>
Second quarter hedging results continued to be negatively impacted by the
upward turn in interest rates and increased bond market volatility. During the
second quarter of 1996, the Company's hedging gains decreased to $2.1 million or
8 basis points on loans originated during the quarter compared with $6.6
million, or 39 basis points on loans originated during the second quarter of
1995. Included in the second quarter 1996 hedging gains was the benefit of
approximately $2 million of net pair off gains recorded in April which related
to March 1996 coverage. To the extent that interest rates increase or the bond
market remains volatile, the Company's future marketing results could be
negatively impacted.
Pricing subsidies increased to $8.8 million in the second quarter of 1996,
or an average subsidy of 35 basis points on loans produced, compared with $4.9
million in the second quarter of 1995, or 29 basis points. This increase
reflects the continuing price competition for mortgage loans, particularly for
those loans sourced through wholesale brokers. OMSR gains increased to $33.9
million during the second quarter of 1996, an increase of $15.4 million, or 84%,
compared with the second quarter of 1995. This increase principally relates to a
58% increase in loans sold during the second quarter of 1996, as well as changes
in product mix and market values that resulted in a higher capitalization rate.
Interest income, net of warehouse interest expense, increased to $7.1 million
during the second quarter of 1996, as compared with $6.4 million during the
second quarter of 1995, a 12% increase. This increase resulted from a 72%
increase in the average balance of loans held for sale, partially offset by the
Company's decreased use of its working capital to reduce warehouse borrowing
costs. Gain from sales of servicing was $8.0 million during the second quarter
of 1996, as compared with $11.9 million during the second quarter of 1995, a 33%
decrease. Gain on sales of servicing rights is affected by the volume of
servicing rights sold, the proceeds received and the amount of OMSR and excess
servicing basis associated with each sale.
<PAGE>
The following table summarizes the items for the second quarter of 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
(Dollars in millions)
<S> <C> <C>
Principal Sold ..................... $ 1,759 $ 1,286
===== =====
Proceeds*........................... $ 29.9 $ 26.9
OMSR and Excess Basis............... (21.9) (15.0)
------ ------
Net Gain on Servicing Sales......... $ 8.0 $ 11.9
======= =====
</TABLE>
- ---------------
* Represents 170 basis points on the principal balance sold in 1996 vs. 209
basis points in 1995.
The comparatively lower proceeds in basis points for the second quarter of
1996 relate to differences in the type of servicing sold (i.e., government vs.
conventional) and the level of excess servicing fees, which resulted in a lower
average servicing fee in the second quarter of 1996 compared with 1995. The
increased basis on servicing sold resulted from a higher percentage of servicing
sold with OMSR basis during the second quarter of 1996 as compared with 1995.
Expenses - Expenses for the second quarter of 1996 were $62.7 million, a
22% increase, as compared with $51.3 million during the second quarter of 1995.
Personnel costs were $38.0 million for the second quarter of 1996, a 31%
increase, as compared with $28.9 million for the second quarter of 1995. This
increase in personnel expenses from 1995 principally occurred in the residential
loan production area. The increase reflects the additional personnel expenses
that were required to originate a 47% higher loan origination volume. The
percentage increase in personnel expenses was less than the percentage increase
in origination volume in the second quarter of 1996 due to a more efficient use
of production personnel.
Other operating expenses increased 19% to $18.7 million for the second
quarter of 1996 from $15.7 million for the second quarter of 1995. This increase
reflects the additional operating expenses that were required to originate a 47%
higher origination volume. The percentage increase in other operating expenses
during the second quarter of 1996 was less than the percentage increase in loan
origination volume due to better absorption of fixed overhead.
Amortization of originated loan servicing increased to $1.7 million in the
second quarter of 1996, as compared with $637,000 during the second quarter of
1995. This increase related to the increase in the Originated Loan Servicing
asset, which was $84.7 million at June 30, 1996 and $29.3 million at June 30,
1995.
<PAGE>
There was no provision for impairment of originated loan servicing
during the second quarter of 1996, as compared with a $1.7 million provision
during the second quarter of 1995. This reduction in impairment expense was due
to the recent upturn in interest rates which resulted in slower than expected
mortgage prepayment speeds.
Six Months Ended June 30, 1996, Compared with Six Months Ended June 30, 1995
Summary - Net income for the first six months of 1996 was $16.1 million, or
$1.10 per share, a $424,000 increase from the $15.7 million, or $1.05 per share,
earned during the first six months of 1995. The 3% increase in earnings relative
to the 75% increase in originations is primarily attributable to the following
factors: (i) higher discounts given to borrowers to meet escalating price
competition, (ii) lower hedge gains due to higher bond market volatility during
the six months, and (iii) lower gains from sales of servicing due to a higher
OMSR basis associated with servicing sales in 1996.
The aggregate principal amount of loan originations for the first six
months of 1996 was $4.9 billion, a 75% increase, as compared with $2.8 billion
for the first six months of 1995. This increase in production volume is
reflective of the 64% increase in the total U. S. mortgage originations for the
same period and an increased market share in the purchase segment by the Company
to 1.10%* for the first six months of 1996 as compared with 0.97%* for the first
six months of 1995.
The following table summarizes the activity in the Company's servicing
portfolio for the first six months of 1996:
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
---- ----
(Dollars in millions, except Average Loan Size)
Servicing Portfolio:
<S> <C> <C>
Beginning Portfolio .......... $ 14,109 $ 14,836
Add:
Loans Originated ............. 4,942 2,824
Deduct:
Sales of Servicing Rights .... (4,141) (2,517)
Run-off (1) .................. (1,074) (581)
-------- --------
Ending Portfolio ............. $ 13,836 $ 14,562
======== ========
</TABLE>
- ---------------
* Sources: HUD, MBA, FNMA, and FHLMC (1996 market data based on current
estimates).
(1) Run-off refers to regular dollar amount of the amortization of loans,
prepayments and foreclosures. For the first six months of 1996, the annualized
run-off rate was 15% compared with 8% for the first six months of 1995.
Revenues - Revenues for the six months ended June 30, 1996, were $145.7
million, a $24.7 million, or 20% increase, as compared with $121.0 million in
the first six months of 1995.
<PAGE>
Loan administration fees were $22.3 million during the first six months of
1996, a 5% increase, as compared with $21.3 million in the first six months of
1995. This increase occurred in spite of a 1% decline in the average size of the
Company-owned servicing portfolio, because of a $1.5 million charge for the
impairment of excess servicing rights during the first six months of 1995, which
did not recur during the first six months of 1996, due to increasing interest
rates during the later period.
Loan origination fees were $40.9 million during the first six months of
1996, a 46% increase, as compared with $28.0 million in the first six months of
1995. This increase resulted primarily from a 75% increase in loan originations,
partially offset by a decrease in the average origination fees collected on each
loan. The decrease in the average origination fees collected resulted from a
higher percentage of wholesale and telemarketing production in the first six
months of 1996 (65% as compared with 58%), on which the Company receives lower
average origination fees than it receives on retail loans.
The gain from sales of loans was $49.0 million for the first six months of
1996, as compared with $31.0 million during the first six months of 1995. Gain
on sales of loans is impacted by three factors: hedging activity, price
subsidies and the recognition of gains related to OMSR under FAS 122.
A summary of the marketing results for the first six months of 1996 and
1995 follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Hedging Gains (Losses) ................... $ (346) $ 9,838
Pricing Subsidies......................... (17,702) (8,159)
OMSR - FAS No. 122........................ 67,019 29,298
------ ------
$ 48,971 $ 30,977
====== ======
</TABLE>
During the first six months of 1996, hedging results were negatively
impacted by the upward turn in interest rates and increased bond market
volatility. To the extent that interest rates continue to increase or the bond
market remains volatile, the Company's future marketing results may be
negatively affected.
Pricing subsidies increased to $17.7 million during the first six months of
1996, or an average subsidy of 36 basis points on loans produced, compared with
$8.2 million in the first six months of 1995, or 29 basis points. This increase
reflects the continuing price competition within the industry, particularly for
loans sourced through wholesale brokers.
OMSR gains increased to $67.0 million during the first six months of 1996,
an increase of $37.7 million, or 129%, compared with the first six months of
1995. This increase was due to a 78% increase in loans sold during the first six
months of 1996, and the fact that nearly 20% of loans sold during the first six
months of 1995 were originated in 1994, prior to the implementation of FAS No.
122, and accordingly did not reflect the additional gain for the capitalization
of the OMSRs.
<PAGE>
Interest income, net of warehouse interest expense, increased by 10% to
$13.6 million during the first six months of 1996, as compared with $12.4
million during the first six months of 1995. This increase resulted from a 54%
increase in the average balance of loans held for sale, partially offset by a
decrease in working capital used by the Company to reduce its warehouse
borrowing costs. This reduction in working capital available to finance loans
held for sale relates primarily to the repayment of $35.3 million in debt since
late March 1995 and $20.9 million used to repurchase Company stock during the
first six months of 1996.
Gain from sales of servicing was $15.5 million during the first six months
of 1996, as compared with $24.5 million during the first six months of 1995, a
37% decrease. In the first six months of 1996, the Company sold $4.1 billion of
servicing rights at an average price of 176 basis points for total proceeds of
$72.9 million. This compares with $2.5 billion sold in the first six months of
1995 at an average price of 160 basis points for total proceeds of $40.2
million. The related gain on sales of servicing decreased, however, due to a
higher level of OMSR and excess servicing basis associated with sales ($57.4
million for the first six months of 1996, as compared with $15.7 million for the
first six months of 1995).
Expenses - Expenses for the first six months of 1996 were $118.8
million, a 23% increase, as compared with $96.4 million during the first six
months of 1995.
Personnel expenses were $73.6 million for the first six months of 1996, a
34% increase, as compared with $54.9 million for the first six months of 1995.
This increase in personnel expenses from 1995 primarily occurred in the
residential loan production area. The increase reflects the additional personnel
expenses that were required to produce a 75% higher loan origination volume. The
percentage increase in personnel expenses was less than the percentage increase
in origination volume in the first six months of 1996 due to a more efficient
use of production personnel.
Other operating expenses increased 17% to $35.0 million for the first six
months of 1996, as compared with $30.0 million for the first six months of 1995.
This increase reflects additional operating expenses that were required to
originate a 75% higher origination volume. The percentage increase in other
operating expenses during the first six months of 1996 was less than the
percentage increase in loan production volume due to better absorption of fixed
overhead.
Amortization of originated loan servicing increased to $3.5 million during
the first six months of 1996, as compared with $752,000 during the first six
months of 1995. This increase related to the implementation of FAS No. 122 and
the increase in the Originated Loan Servicing asset, which was $56.4 million at
December 31, 1995, but which had no book value prior to 1995.
Provision for (recovery of) impairment of originated loan servicing was a $2.1
million recovery in the first six months of 1996, as compared with a $2.0
million impairment provision during the first six months of 1995. This recovery
was caused by increasing interest rates during the first six months of 1996,
which slowed expected mortgage prepayment rates on loans the Company services
and, as a result, increased the expected life and value of the servicing asset.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary financing requirements are the financing of its
warehouse loan fundings and the ongoing net cost of the Company's loan
originations. The Company's future cash flow requirements will depend primarily
on the level of its loan originations and the cash flow generated by, or
<PAGE>
required by, its operations. The Company expects that loan origination volume
will be financed through warehouse borrowings, borrowings under a commercial
paper program, through the use of "gestation" facilities and with corporate
funds.
The Company finances its warehouse loan funding requirements primarily
through a bank warehouse line of credit and through its commercial paper
program. This financing requirement begins at the time of loan closing and
extends for an average of approximately 30 days until the loan is sold into the
secondary market. On January 23, 1996, the Company entered into a new warehouse
line of credit facility totaling $1.21 billion. This line of credit expires on
January 23, 1999. Effective August 7, 1996, the commitment amount for the
warehouse line of credit facility was reduced, at the Company's request, to $1.0
billion.
The Company also has a commercial paper borrowing program. Borrowings under
this $500 million program replace, at a reduced interest rate, borrowings under
the Company's warehouse line of credit. The warehouse line of credit acts as the
liquidity backup facility for the commercial paper borrowings. In addition to
the warehouse line of credit and commercial paper borrowings, the Company makes
use of gestation facilities provided by an investment bank, FNMA and FHLMC.
During the fourth quarter of 1993, the Company sold a combined $100 million
of two, three, five, and seven year medium term notes. The proceeds from the
sale of these notes are being used for general corporate purposes, which include
the replacement of indebtedness, financing loan origination volume and the
expansion of loan origination capacity. At June 30, 1996, $75 million of medium
term notes were outstanding, of which $25.0 million will mature in the fourth
quarter of 1996. The Company intends to issue $25.0 million of medium term notes
in the near future.
The Company has paid quarterly common stock dividends since the initial
public offering on July 15, 1992. During the second quarter of 1996, the Company
paid dividends of $.06 per share totaling $845,312 for 14,088,535 shares
outstanding on May 20, 1996. This compares with dividends paid in the second
quarter of 1995 of $.06 per share totaling $899,659 for 14,994,311 shares
outstanding on May 15, 1995.
On February 7, 1996, the Board of Directors authorized the repurchase of up
to 1.5 million shares of common stock. During the first and second quarters of
1996, the Company repurchased 329,900 and 812,500 shares with an aggregate cost
of $6.8 million and $14.1 million, respectively. As of June 30, 1996, the
Company held 2,282,916 shares in treasury stock which were acquired at an
aggregate cost of $40.0 million, of which 1,140,516 shares were acquired under a
prior Board authorization.
The Company's net cost of its owned servicing rights is financed through
cash flow from its operations, including the sale of servicing rights.
During the first six months of 1996 and 1995, the Company generated $17.6
million and $21.2 million, respectively, of excess servicing fees as a result of
loan sale transactions. In general, the Company creates excess servicing because
the secondary market price offered for servicing assets was lower than the
economic value or the amount the Company could receive by accumulating the
assets and selling them as part of a bulk sale at a later date. During the
Company's holding period of the excess servicing fee asset, the Company is at
risk that the asset will decline in value and a write down will be required,
primarily due to faster prepayment speeds or such expectations resulting from
lower interest rates, which would encourage borrowers to refinance the mortgage
loans being serviced. The carrying amount of excess servicing rights was $17.2
million and $20.6 million at June 30, 1996, and December 31, 1995, respectively.
<PAGE>
During the first six months of 1996 and 1995, the Company purchased
property and equipment totaling $4.1 million and $848 thousand, respectively.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in certain litigation arising in the
normal course of its business. Although the ultimate outcome of
all pending litigation cannot be precisely determined at this
time, the Company believes that any liability resulting from the
aggregate amount of damages for outstanding lawsuits and claims
will not have a material adverse effect on its financial
position.
Item 2. Changes in Securities.
On July 18, 1996, the Board of Directors amended the Company's
By-Laws to provide that the business conducted at an annual
meeting be limited to matters properly brought before the
meeting. To be properly brought before the meeting, business must
be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors,
(b) proposed by or at the direction of the Chairman of the Board
or (c) proposed by any stockholder of the Company who is entitled
to vote at the meeting, who complied with certain notice
provisions of and who is a stockholder of record at the time such
notice is delivered to the Secretary of the Company. Such
stockholder's notice must set forth (a) a brief description of
the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made;
and (b) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made
(i) the name and address of such stockholder, as they appear on
the Company's books, and of such beneficial owner and (ii) the
class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such
beneficial owner.
To be timely, a stockholder's notice must be delivered not less
than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than twenty days, or delayed by more than
seventy days, from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than
the ninetieth day prior to such annual meeting and not later than
the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made.
In addition, the Board amended the By-Laws to provide that the
business transacted upon at any special meeting of stockholders
be limited to the purposes stated in the notice of meeting.
Item 3. Defaults Upon Senior Securities.
None.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Company held its Annual Meeting of Stockholders on
May 6, 1996.
b. Not applicable.
c. i. The following individuals were elected to the Board of
Directors of the Company:
Votes For Votes Withheld
John F. Farrell, Jr. 13,700,275 47,649
Terrance G. Hodel 13,697,870 50,054
William L. Brown 13,699,775 48,149
William F. Connell 13,699,775 48,149
Magna L. Dodge 13,698,975 48,949
William O. Murphy 13,698,775 49,149
Robert J. Murray 13,698,775 49,149
James B. Nicholson 13,699,775 48,149
ii. Other matters voted upon at the meeting and the
number of votes cast for, against and to abstain
with respect to each such matter appear below. There
were no broker non-votes.
Votes Votes Votes to
For Against Abstain
--- ------- -------
A. Proposal to amend the 13,264,682 406,665 76,557
Stock Purchase Plan
B. Ratification of the 13,703,403 18,529 25,992
appointment of Ernst
& Young, LLP as
independent public
accountants for the
fiscal year ending
December 31, 1996
d. Not applicable.
Item 5. Other Information.
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
3.7 Amended and Restated By-Laws of the Company
10.44 Master Commitment Amendment dated May 31, 1996
between Federal Home Loan Mortgage Corporation and
the Company
10.45 Master Commitment Amendment dated July 23, 1996
between Federal Home Loan Mortgage Corporation and
the Company
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
b. Reports on Form 8-K
None.
<PAGE>
SIGNATURE
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.
NORTH AMERICAN MORTGAGE COMPANY
Date: August 12, 1996 By: /s/ MARTIN S. HUGHES
-----------------------------------
(Martin S. Hughes)
Executive Vice President,
Chief Financial Officer and
Principal Financial Officer
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page Number
- ------ ----------- -----------
3.7 Amended and Restated By-Laws of the Company
10.44 Master Commitment Amendment dated May 31, 1996
between Federal Home Loan Mortgage Corporation
and the Company
10.45 Master Commitment Amendment dated July 23, 1996
between Federal Home Loan Mortgage Corporation
and the Company
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.7
AMENDED AND RESTATED BY-LAWS
NORTH AMERICAN MORTGAGE COMPANY
ARTICLE I
OFFICES
SECTION 1. The registered office shall be located in Wilmington, Delaware.
(Adopted 3/31/92).
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require. (Adopted
3/31/92).
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the Corporation,
commencing with the year 1991 shall be held at such place, within or without the
State of Delaware, at such time and on such day as may be determined by the
Board of Directors and as such shall be designated in the notice of said
meeting, for the purpose of electing directors and for the transaction of such
other business as may properly be brought before the meeting. If for any reason
the annual meeting shall not be held during the period designated herein, the
Board of Directors shall cause the annual meeting to be held as soon thereafter
as may be convenient. (Adopted 3/31/92).
SECTION 2. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be held at any place, within or without the State of
Delaware, and may be called by resolution of the Board of Directors. (Adopted
3/31/92). Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice of meeting. (Adopted 7/18/96).
SECTION 3. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the stock holders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If a quorum is present or represented, the affirmative vote of a
majority of the shares of stock present or represented at the meeting shall be
the act of the stockholders unless the vote of a greater number of shares of
stock is required by law or by the Certificate of Incorporation. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. (Adopted 3/31/92).
SECTION 4. Any action required to be taken at a meeting of the stockholders
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the stockholders entitled to vote with
respect to the subject matter thereof. (Adopted 3/31/92).
SECTION 5. At an annual meeting of stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before the meeting business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) proposed by or at the direction of the Chairman of the Board
or (c) proposed by any stockholder of the Corporation who is entitled to vote at
the meeting, who complied with the notice provisions of this Section 5 and who
is a stockholder of record at the time such notice is delivered to the Secretary
of the Corporation. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation, and, such business must be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than twenty
days, or delayed by more than seventy days, from such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a) a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (b) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner. (Adopted 7/18/96).
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole board
shall initially be seven. Thereafter, the number of directors which shall
constitute the board shall be such as from time to time shall be fixed by the
Board of Directors, but in no case shall such number be greater than nine or
less than two, provided that no decrease in the number of directorships shall
shorten the term of any incumbent director. Any change in the number of
directorships must be authorized by a majority of the whole board, as
constituted immediately prior to such change. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until the next annual
meeting of stockholders and until his successor is elected and qualified or
until his earlier death or resignation. Directors need not be stockholders.
(Adopted 7/27/93).
SECTION 2. Vacancies and newly created directorships resulting from any
increase in the number of directorships may be filled by a majority of the
directors then in office, though less than a quorum, or elected by a sole
stockholder, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified. A vacancy
created by the removal of a director by the stockholders may be filled by the
stockholders. (Adopted 3/31/92).
SECTION 3. The first meeting of each newly elected Board of Directors shall
be held at such time and place as shall be announced at the annual meeting of
stockholders and no other notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present, or in the event such meeting is not held at the time and place
so fixed by the stockholders, the meeting may be held atsuch time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors. (Adopted 3/31/92).
SECTION 4. Regular meetings of the Board of Directors may be held upon such
notice, or without notice, and at such time and at such place as shall from time
to time be determined by the board. (Adopted 3/31/92).
SECTION 5. Special meetings of the Board of Directors may be called by the
President on two days' notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two directors. (Adopted
3/31/92).
SECTION 6. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction in any business because the
meeting is now lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting. (Adopted 3/31/92).
SECTION 7. At all meetings of the board a majority of the total number of
directors then constituting the whole board but in no event less than two
directors shall constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation or by
these By-Laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present. (Adopted 3/31/92).
SECTION 8. Unless otherwise restricted by the Certificate of Incorporation
or by these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if prior to such action a written consent thereto is signed by all
members of the board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the board or committee.
(Adopted 3/31/92).
SECTION 9. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of two or more of the directors of the Corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors. (Adopted 3/31/92).
SECTION 10. Subject to any exclusive rights of holders of any class or
series of stock having a preference over the common stock, par value $0.01 per
share, of the Corporation as to dividends or upon liquidation to elect directors
upon the happening of certain events, only persons who are nominated at any
meeting of stockholders of the Corporation in accordance with the following
procedures shall be eligible for election as directors. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders at which directors are to be elected only (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of directors generally at the
meeting who complies with the notice procedures set forth in this Section 10.
Such nominations by a stockholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the date of the meeting; provided, however, that in the event that less than 75
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such persons's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
and (ii) as to the stockholder giving the notice (x) the name and address, as
they appear on the Corporation's books, of such stockholder and (y) the class
and number of shares of the Corporation's stock that are beneficially owned by
such stockholder. At the request of the Board of Directors, any person nominated
by the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the provisions of this Section 10. The officer of the
Corporation or other person presiding at the meeting shall, if the facts so
warrant, determine and declare to the meeting that a nomination was not made in
accordance with such provisions and, if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded. In
addition to any other requirements relating to amendments to these By-Laws, no
proposal to amend or repeal this Section 10 shall be brought before any meeting
of the stockholders of the Corporation unless written notice is given of (i)
such proposed repeal or the substance of such proposed amendment, (ii) the name
and address of the stockholder who intends to propose such repeal or amendment,
and (iii) a representation that the stockholder is a holder of record of stock
of the Corporation specified in such notice, is or will be entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to make
the proposal. Such notice shall be given in the manner and at the time specified
above in this Section 10. (New section adopted 6/14/94).
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of statute or Certificate of
Incorporation or of these By-Laws, notice is required to be given to any
director or shareholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram and by facsimile transmission. Notices
to be given to shareholders in connection with any annual or special meeting or
shareholders shall be given to all shareholders of record as determined at least
30 days prior to such meeting. (Adopted 3/31/92).
SECTION 2. Whenever notice is required to be given under the provisions of
statute or of the Certificate of Incorporation or of these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. (Adopted 3/31/92).
ARTICLE V
OFFICERS
SECTION 1. The officers of the Corporation may include a chairman of the
board (who shall also be the chief executive officer), a president, one or more
executive vice presidents, one or more senior vice presidents, one or more vice
presidents, a secretary, a treasurer, a controller, one or more assistant vice
presidents, one or more assistant secretaries, one or more assistant treasurers
and one or more assistant controllers. The Board of Directors shall have the
power to choose all or any of such officers. In addition, each of the chief
executive officer and the president, acting alone, may from time to time appoint
one or more senior vice presidents, vice presidents, assistant vice presidents,
assistant secretaries, assistant controllers and assistant treasurers. Two or
more offices may be held by the same person except the offices of president and
secretary or the offices of president and vice president. (Adopted 10/19/92).
SECTION 2. The Board of Directors shall elect officers of the Corporation
at its first meeting after each annual meeting of stockholders. (Adopted
3/31/92).
SECTION 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board. (Adopted 3/31/92).
SECTION 4. All salaries and bonuses of officers of the Corporation at the
rank of executive vice president or above shall be subject to approval by the
Board of Directors. (Adopted 10/19/92).
SECTION 5. Each officer of the Corporation shall hold office until the
first meeting of the Board of Directors next following the annual meeting of
stockholders next following the election or appointment of such officer. The
Board of Directors may remove any officer at any time. The chief executive
officer or the president may each, acting alone, remove at any time any person
from any office other than the office of president or chief executive officer.
Any vacancy occurring in any office of the Corporation may be filled by the
Board of Directors or by an officer having the power make an appointment to such
vacant office. (Adopted 10/19/92).
CHAIRMAN OF THE BOARD
SECTION 6. The chairman of the Board of Directors, if there be a chairman,
shall be chosen from among the directors and shall be the chief executive
officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors. The chief executive officer shall be vested with
general supervisory power and authority over the business affairs of the
Corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. Any vice-chairman or vice- chairmen, shall be
chosen from among the directors and shall have such powers and duties as may
from time to time be assigned by the Board of Directors. (Adopted 10/25/93).
PRESIDENT
SECTION 7. The president shall be the chief operating officer of the
Corporation, unless there is no chairman of the Board of Directors, in which
case the president shall be the chief executive officer of the corporation as
well as the chief operating officer. In the absence of the chairman of the
board, or if there be no chairman, the president shall preside at all meetings
of the stockholder and the Board of Directors; the president shall have general
and active management of the business of the corporation, subject to the
direction of the Board of Directors, and shall see that all orders and
resolutions of the Board of Directors are carried into effect, and shall perform
all duties incident to the office of a president of a corporation, and such
other duties as from time to time may be assigned by the Board of Directors.
(Adopted 3/31/92).
EXECUTIVE VICE PRESIDENTS
SECTION 8. Any executive vice-presidents elected shall have such duties as
the Board of Directors or Chief Executive Officer, or President may from time to
time prescribe, and shall, except as the Board of Directors may otherwise
direct, perform such duties under the general supervision of the President. (New
section adopted 10/19/92).
SENIOR VICE-PRESIDENTS
SECTION 9. Any senior vice-presidents elected shall have such duties as the
Board of Directors or president may from time to time prescribe, and shall,
except as the Board of Directors may otherwise direct, perform such duties under
the general supervision of the president. (Adopted 3/31/92. Section renumbered
10/19/92).
VICE-PRESIDENTS
SECTION 10. Any vice-presidents elected shall have such duties as the Board
of Directors or president may from time to time prescribe, and shall, except as
the Board of Directors may otherwise direct, perform such duties under the
general supervision of the president. (Adopted 3/31/92. Section renumbered
10/19/92). SECRETARY SECTION 11. The secretary shall take minutes of the
proceedings of the stockholders and the Board of Directors and record the same
in a suitable book for preservation. The secretary shall give notice of all
regular and duly called special meetings of the stockholders and the Board of
Directors. The secretary shall have charge of and keep the seal of the
Corporation, and shall affix the seal, attested by his signature, to such
instruments as may require the same. Unless the Board of Directors shall have
appointed a transfer agent, the secretary shall have charge of the certificate
books, transfer books, and stock ledgers, and shall prepare voting lists prior
to all meetings of stockholders. The secretary shall have charge of such other
books and papers as the Board of Directors may direct and shall perform such
other duties as may be prescribed from time to time by the Board of Directors or
the president. (Adopted 3/31/92. Section renumbered 10/19/92).
ASSISTANT SECRETARY
SECTION 12. The assistant secretary, if there shall be one, or, if there
shall be more than one, the assistant secretaries in the order determined by the
Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors or the
officer to whom such assistant secretary reports may from time to time
prescribe. (Adopted 3/31/92. Section renumbered 10/19/92).
TREASURER
SECTION 13. The treasurer shall have custody of the funds, securities and
other assets of the Corporation. The treasurer shall keep a full and accurate
record of all receipts and disbursements of the corporation, and shall deposit
or cause to be deposited in the name of the corporation all monies or other
valuable effects in such banks, trust companies, or other depositories as may
from time to time be selected by the Board of Directors. The treasurer shall
have power to make and endorse notes and pay out monies on check without
countersignature and shall perform such other duties as may be prescribed from
time to time by the Board of Directors or the president. (Adopted 3/31/92.
Section renumbered 10/19/92).
ASSISTANT TREASURER
SECTION 14. The assistant treasurer, if there shall be one, or, if there
shall be more than one, the assistant treasurers in the order determined by the
Board of Directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the Board of Directors or the
officer to whom such assistant treasurer reports may from time to time
prescribe. (Adopted 3/31/92. Section renumbered 10/19/92).
ARTICLE VI
CERTIFICATES FOR SHARES
LOST CERTIFICATES
SECTION 1. The Board of Directors may direct a new certificate to be issued
in place of any certificate theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed. When authorizing each such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate to
protect the Corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost, stolen or destroyed. (Adopted
3/31/92).
TRANSFER OF SHARES
SECTION 2. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate canceled and the transaction recorded upon the books of the
Corporation. (Adopted 3/31/92).
REGISTERED STOCKHOLDERS
SECTION 3. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware. (Adopted 3/31/92).
SIGNING AUTHORITY
SECTION 4. All contracts, agreements, assignments, transfers, deeds, stock
powers or other instruments of the Corporation may be executed and delivered by
(i) the Chief Executive Officer or President, or (ii) by such other officers or
agent or agents, of the Corporation as shall be thereunto authorized from time
to time by the Chief Executive Officer or President or the Board of Directors,
or (iii) by power of attorney executed by any person pursuant to authority
granted by the Chief Executive Officer or President or Board of Directors; and
the secretary or any assistant secretary or the treasurer or any assistant
treasurer may affix the seal of the Corporation thereto and attest the same.
(Adopted 7/27/93).
ARTICLE VII
GENERAL PROVISIONS CHECKS
SECTION 1. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate. (Adopted 3/31/92).
FISCAL YEAR
SECTION 2. The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors. (Adopted 3/31/92).
SEAL
SECTION 3. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words Corporation Seal,
Delaware. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced. (Adopted 3/31/92).
INDEMNIFICATION
SECTION 4. The Corporation shall indemnify its officers, directors,
employees and agents to the fullest extent permitted by the General Corporation
Law of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment). (Adopted 3/31/92).
ARTICLE VIII
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed or new By-Laws
may be adopted (a) at any regular or special meeting of stockholders at which a
quorum is present or represented subject to Section 10 of Article III of these
By-Laws, by the affirmative vote of a majority of the stock entitled to vote,
provided notice of the proposed alteration, amendment or repeal be contained in
the notice of such meeting, or (b) by the affirmative vote of a majority of the
Board of Directors at any regular or special meeting of the Board. The
stockholders shall have authority to change or repeal any By-Laws adopted by the
directors, subject to Section 10 of Article III of these By-Laws. (Adopted
6/14/94).
Exhibit 10.44
MASTER COMMITMENT AMENDMENT
RE: Master Commitment Contract #M96031884 (Mandatory)
Master Agreement #MA92092300
Seller/Servicer #184202
This Master Commitment Amendment dated as of May 31, 1996 amends and
supplements the above referenced Master Commitment, dated as of March 18, 1996,
as amended as of May 6, 1996 (collectively the "Master Commitment"), under which
Federal Home Loan Mortgage Corporation ("Freddie Mac") agreed to purchase
mortgages having a maximum aggregate unpaid principal balance of $525 million
from North American Mortgage Company ("Seller").
The amended and supplemental terms are as follows:
Paragraph 1 titled "Contract Commitment Amount" of the Master Commitment
shall be and is hereby deleted in its entirety and a new paragraph 1 is
substituted in lieu thereof which shall read as follows:
1. Contract Commitment Amount: $800 million
Except as modified herein, all of the terms and conditions of the Master
Commitment remain in full force and effect.
IN WITNESS WHEREOF, Seller and Freddie Mac have caused this instrument to
be executed by their duly authorized representatives as of the date first set
forth above.
FEDERAL NATIONAL MORTGAGE CORPORATION
By: /s/ Beverly Twigg Kennedy
-------------------------
Name: Beverly Twigg Kennedy
Title: Vice President, Sales
NORTH AMERICAN MORTGAGE COMPANY
By: /s/ Michael G. Conway
---------------------
(Signature of Authorized Officer)
Print
Name: Michael G. Conway
Print
Title: Executive Vice President
Date: July 24, 1996
Exhibit 10.45
MASTER COMMITMENT AMENDMENT
RE: Master Commitment Contract #M96031884 (Mandatory)
Master Agreement #MA92092300
Seller/Servicer #184202
This Master Commitment Amendment dated as of July 23, 1996 amends and
supplements the above referenced Master Commitment, dated as of March 18, 1996,
as amended as of May 6, 1996 and May 31, 1996 (collectively the "Master
Commitment"), under which Federal Home Loan Mortgage Corporation ("Freddie Mac")
agreed to purchase mortgages having a maximum aggregate unpaid principal balance
of $800 million from North American Mortgage Company ("Seller").
The amended and supplemental terms are as follows:
Paragraph 1 titled "Contract Commitment Amount" of the Master Commitment
shall be and is hereby deleted in its entirety and a new paragraph 1 is
substituted in lieu thereof which shall read as follows:
1. Contract Commitment Amount: $1 billion
Except as modified herein, all of the terms and conditions of the Master
Commitment remain in full force and effect.
IN WITNESS WHEREOF, Seller and Freddie Mac have caused this instrument to
be executed by their duly authorized representatives as of the date first set
forth above.
FEDERAL NATIONAL MORTGAGE CORPORATION
By: /s/ Beverly Twigg Kennedy
-------------------------
Name: Beverly Twigg Kennedy
Title: Vice President, Sales
NORTH AMERICAN MORTGAGE COMPANY
By: /s/ Michael G. Conway
---------------------
(Signature of Authorized Officer)
Print
Name: Michael G. Conway
Print
Title: Executive Vice President
Date: July 24, 1996
<TABLE>
Exhibit 11
Computation of Earnings Per Share
Quarter Ended June 30, 1996
Primary Earnings Per Share
<CAPTION>
Quarterly Year-to-Date
Shares EPS Shares EPS
------ --- ------ ---
<S> <C> <C> <C> <C>
Average Shares Outstanding 14,292,219 $ 0.61 14,675,542 $ 1.10
CSE Incremental Shares 138,551 221,935
------- -------
Total Average Shares Outstanding 14,430,770 $ 0.60 14,897,477 $ 1.08
========== ==========
Dilution 0.96% 1.49%
Net Income $ 8,671,000 $ 16,131,000
=========== ============
Fully Diluted Earnings Per Share
Quarterly Year-to-Date
Shares EPS Shares EPS
------ --- ------ ---
<S> <C> <C> <C> <C>
Average Shares Outstanding 14,292,219 $ 0.61 14,675,542 $ 1.10
CSE Incremental Shares 138,553 226,474
------- -------
Total Average Shares Outstanding 14,430,772 $ 0.60 14,902,016 $ 1.08
========== ==========
Dilution 0.96% 1.52%
Net Income $ 8,671,000 $ 16,131,000
=========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Operations found on
pages 2 through 5 of the Company's Form 10-Q for the year-to-date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000882261
<NAME> Financial Data Schedule
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,384
<SECURITIES> 0
<RECEIVABLES> 89,197
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 36,691
<DEPRECIATION> 1,850
<TOTAL-ASSETS> 792,477
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 163
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 792,477
<SALES> 0
<TOTAL-REVENUES> 77,163
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,139
<INCOME-PRETAX> 14,465
<INCOME-TAX> 5,794
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,131
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 0
</TABLE>
