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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 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 May 12, 1997 was 14,057,420.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................... $ 13,849 $ 22,005
Advances and other receivables............................... 95,879 85,299
Real estate loans held for sale to investors
---net of unearned discounts............................. 513,315 554,415
Capitalized loan servicing................................... 132,799 133,778
Other intangible assets...................................... 9,164 9,391
Property and equipment....................................... 38,704 38,541
Other assets................................................. 14,630 10,228
------ ------
$ 818,340 $ 853,657
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Warehouse line of credit..................................... $ 118,545 $ 158,584
Notes payable................................................ 75,741 75,724
Commercial paper and other borrowings........................ 335,171 340,115
Subordinated debt............................................ 10,070 10,070
Accounts payable and other liabilities....................... 69,771 65,763
------ ------
609,298 650,256
STOCKHOLDERS' EQUITY
Convertible preferred stock (1,000,000 shares authorized,
748,179 shares issued and outstanding)................... --- ---
Common stock (50,000,000 shares authorized,
16,415,037 and 16,394,544 shares issued at
March 31, 1997 and December 31, 1996, respectively)...... 164 164
Additional paid-in capital................................... 112,783 112,492
Retained earnings............................................ 137,479 131,435
Treasury stock, at cost - (2,358,016 and 2,322,916 shares
at March 31, 1997 and December 31, 1996,
respectively)............................................ (41,384) (40,690)
------- -------
209,042 203,401
------- -------
$ 818,340 $ 853,657
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 1997, and March 31, 1996
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
INCOME:
<S> <C> <C>
Loan administration fees.................................. $ 11,570 $ 11,644
Loan origination fees..................................... 18,955 19,814
Gain from sales of loans.................................. 24,645 21,843
Interest income, net of warehouse interest expense........ 6,499 6,494
Gain from sales of servicing.............................. 13,361 7,440
Other..................................................... 3,004 2,096
----- -----
78,034 69,331
EXPENSES:
Personnel................................................. 38,270 35,543
Other operating expenses.................................. 19,477 16,326
Interest expense.......................................... 2,482 2,344
Depreciation and amortization of property and
equipment............................................. 2,065 1,895
Amortization of Capitalized Loan Servicing................ 4,160 2,730
Recovery for Impairment of
Capitalized Loan Servicing............................ (267) (2,052)
Amortization of other intangibles......................... 287 111
--- ---
66,474 56,897
Income before income taxes................................ 11,560 12,434
Income tax expense........................................ 4,672 4,974
----- -----
NET INCOME.................................................... $ 6,888 $ 7,460
========== ===========
NET INCOME PER SHARE.......................................... $ 0.49 $ 0.50
========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 14,066 15,059
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 1997, and March 31, 1996
(Dollars in thousands)
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income............................................................. $ 6,888 $ 7,460
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and impairment......................... 6,245 2,684
Excess servicing fee income........................................ --- (11,527)
Gain from sales of servicing rights................................ (13,361) (7,440)
Cash proceeds from sales of servicing rights....................... 38,994 42,900
Net decrease in real estate loans held for sale,
net of unearned discounts.......................................... 41,100 4,662
Increase in advances and other receivables............................. (10,580) (21,559)
Increase/(decrease) in accounts payable and other liabilities.......... 4,008 (127)
Increase in other assets............................................... (4,402) (86)
------ ---
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 68,892 16,967
INVESTING ACTIVITIES:
Acquisition of assets of branches including
purchase accounting adjustments.................................... (57) 12
Acquisition of capitalized servicing rights............................ (28,550) (33,936)
Purchase of property and equipment..................................... (2,228) (1,744)
------ ------
NET CASH USED IN INVESTING ACTIVITIES.............................. (30,835) (35,668)
FINANCING ACTIVITIES:
Increases in long-term debt............................................ 17 18
Increase (decrease) in warehouse lines of credit, commercial
paper, repurchase agreements, and other borrowings................. (44,983) 34,585
Purchases of Treasury Stock............................................ (694) (6,824)
Dividends.............................................................. (844) (907)
Stock issuance under Incentive Stock Option Plan....................... 291 198
--- ---
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES......................................................... (46,213) 27,070
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS........................................................ (8,156) 8,369
Cash and cash equivalents at beginning of year......................... 22,005 12,273
------ ------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD...................................................... $ 13,849 $ 20,642
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest........................................................... $ 8,879 $ 7,017
=========== ===========
Income Taxes....................................................... $ 52 $ 417
=========== ===========
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 three month period ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included on Form 10-K for the year ended
December 31, 1996.
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 14,066,000 and 15,059,000 for the three months ended
March 31, 1997 and 1996.
Note 3 - Capitalized Servicing Rights
In June 1996, the Financial Accounting Standards Board issued Statement
Number 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (FAS No. 125), which became effective on January
1, 1997. FAS No. 125 resulted in the recording of Capitalized Loan Servicing
Rights (CLSRs) on the date of the sale of a mortgage loan, as opposed to the
previous practice of recording CLSRs on the date that loans are originated.
Additionally, excess servicing fees are combined with CLSR for balance sheet
presentation as well as for transactions beginning in the first quarter of 1997
and in the table that follows.
Capitalized loan servicing, net of accumulated amortization and impairment
were as follows:
<TABLE>
<CAPTION>
Capitalized Loan
Servicing, Net
(in thousands)
--------------
<S> <C>
Balance at December 31, 1996......................... $ 133,778
Additions............................................ 28,550
Scheduled Amortization............................... (4,163)
Impairment........................................... 267
Servicing Sale Basis................................. (25,633)
-------
Balance at March 31, 1997............................ $ 132,799(1)
=== ===== =============
_______________
(1)At March 31, 1997, the capitalized loan servicing impairment allowance was
approximately $3.8 million.
</TABLE>
Note 4 - FAS No. 125
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement 128 is not expected
to have a material effect on primary and fully diluted earnings per share for
the quarters ended March 31, 1997, and March 31, 1996, respectively.
Note 5 - Reclassification
Certain reclassifications were made to the 1996 balances to conform with
the 1997 presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Quarter Ended March 31, 1997, Compared with Quarter Ended March 31, 1996
Results of Operations
General Market Conditions - Based on current industry estimates, total
United States purchase and refinance origination levels decreased by 13% to $175
billion in the first quarter of 1997 from $200 billion in the same period last
year. While the level of new and existing home purchases increased over last
year due to the strength of the housing market, this increase was more than
offset by a lower level of refinancings (see table below). Refinancings, which
are particularly sensitive to interest rate levels, were stronger during the
first quarter of 1996 due to the relatively lower level of interest rates at
that time.
<TABLE>
<CAPTION>
1-4 Family U.S. Mortgage
Originations*
-------------
First Quarter
-------------
1997 1996
---- ----
(Dollars in billions)
<S> <C> <C>
New and existing home purchases...................... $ 123 $ 111
Refinancings......................................... 52 89
-- --
$ 175 $ 200
====== ======
________________
*Sources: Mortgage Bankers Association (MBA), Federal National Mortgage
Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC). (1997
market data based on current estimates.)
</TABLE>
The Company's $2.0 billion in loan originations during the first quarter of
1997 were 18% lower than during the same quarter last year. This decrease in
loan origination volume (see table below) is primarily reflective of a decrease
in total U.S. refinancing mortgage originations for the same period, as well as
difficulties originating loans in the wholesale channel due to pricing
pressures, especially for refinancing loans Refinancings represented 41% of
total originations in the first quarter of 1997 compared with 51% in the first
quarter of 1996.
<TABLE>
<CAPTION>
Company Originations
--------------------
First Quarter
-------------
1997 1996
---- ----
(Dollars in billions)
---------------------
<S> <C> <C>
Retail.................................. $ 778 $ 813
Wholesale............................... 1,104 1,466
Telemarketing........................... 127 176
--- ---
$ 2,009 $ 2,455
======== =========
</TABLE>
Summary of Results - Net income for the first quarter of 1997 was $6.9
million, or $0.49 per share, as compared to $7.5 million, or $0.50 per share,
for the first quarter of 1996. Loan fundings for the quarter ended March 31,
1997, were $2.01 billion, including $31 million of subprime production, compared
to $2.45 billion during the first quarter of 1996, which had no subprime
production. Production related income declined in the first quarter of 1997 due
to lower originations and higher expense levels. Expenses increased over last
year due to the cost of maintaining the Company's expanded retail distribution.
This expansion, which occurred during the last three quarters of 1996, included
opening offices and the addition of personnel. Substantially offsetting this
decline in production income were improved hedging results and increased gains
on sales of servicing, primarily from the sale of pre-1995 servicing.
Servicing Rights - The following table sets forth certain information
regarding the servicing portfolio of the Company for the periods indicated:
<TABLE>
<CAPTION>
Quarters Ended March 31,
------------------------
1997 1996
---- ----
(Dollars in millions,
except Average Loan Size)
<S> <C> <C>
Servicing Portfolio:
Beginning Portfolio....................... $ 13,293 $ 14,109
Add:
Loans Originated................... 2,009 2,455
Deduct:
Sales of Servicing Rights (2,250) (2,382)
Run-off(1) (554) (579)
-- ---- ----
Ending Portfolio.......................... $ 12,498 $ 13,603
========= =========
Average Loan Size of Ending Portfolio..... $ 98,000 $ 98,000
Weighted Average Interest Rate............ 7.78% 7.69%
(1)Run-off refers to dollar amount of the amortization of loans, prepayments,
and foreclosures. The annualized run-off rate was 17% and 16% in the first
quarter of 1997 and 1996, respectively.
</TABLE>
Effective January 1, 1997, the Company adopted FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This statement carried forward the provisions of FAS No. 122, "Accounting for
Mortgage Servicing Rights," which the Company adopted on January 1, 1995, and
which was an amendment to FAS No. 65. The primary difference between FAS No. 125
and FAS No. 65, as it related to the Company, is the accounting treatment for
the normal servicing fee associated with in-house Capitalized Loan Servicing
Rights (CLSRs). Virtually all of the additions to the servicing portfolio are
CLSRs. Generally, under FAS No. 65, CLSRs were not recorded as an asset, while
under FAS No. 125, the full value of CLSRs are
capitalized.
As a result of the difference in accounting treatment, the balance sheet
carrying value for servicing rights is significantly different depending on
whether the servicing was originated before January 1, 1995 (pre-1995) or after
January 1, 1995 (post-1995). Management believes that the total fair market
value of its pre-1995 servicing rights is substantially more than the carrying
value, while the fair market value of post-1995 servicing rights is
approximately equal to the total carrying value. In the first quarter of 1997,
the Company sold $945 million of pre-1995 servicing and recorded a net pre-tax
gain of $12.4 million. The prices received for sales in the first quarter of
1997 may not necessarily be reflective of the value of the remaining pre-1995
portfolio, due to differences in portfolio characteristics (i.e., servicing
fees, age, coupon, interest rates) and changes in market conditions. At March
31, 1997, the net balance sheet carrying value and the principal balance of the
Servicing Portfolio originated pre-1995 and post-1995 were as follows:
<TABLE>
<CAPTION>
Pre-1995 Post-1995 Total at 3/31/97
-------- --------- ---------------
<S> <C> <C> <C>
Balance sheet carrying value
(In thousands) $ 1,155 $ 31,644 $ 132,799
-------- --------- ----------
Servicing portfolio principal balance
(In millions) $ 4,586 $ 7,912 $ 12,498
-------- --------- ----------
Carrying value percentage 0.3% 1.66% 1.06%
--- ---- ----
</TABLE>
Management continually evaluates the Company's investment in retained
servicing rights and periodically makes decisions to sell servicing rights after
considering the following criteria: cash requirements, market value for
servicing rights compared to their economic value to the Company, exposure to
prepayment risk, and earnings impact. To the extent the Company elects to sell
pre-1995 servicing rights, virtually all of the net proceeds from such sales are
recognized as a one-time gain from sale of servicing due to their minimal book
value. Of the approximately $4.6 billion of pre-1995 servicing remaining at
March 31, 1997, the Company estimates that it may be economically advantageous
(i.e., where market value equals or exceeds the economic value to the Company)
to sell only approximately $1.5 billion as part of its future servicing sales.
The Company's results of operations have historically been and will continue to
be impacted by the amount and timing of sales of pre-1995 servicing rights.
Historically, when interest rates decline, the incremental value created by
the Company's production organization from higher refinance originations has
more than offset the loss in value to its servicing portfolio resulting from
higher prepayments. Accordingly, the Company has not purchased any financial
prepayment hedges, but it has relied on its ability to produce new servicing as
a macro-hedge. Under FAS No. 125, however, if rates were to decline, the timing
of additional production revenues and any servicing impairment charge, for
financial statement purposes, may not occur in the same period. The Company
could be required to recognize a servicing impairment charge in one reporting
period, while the incremental production revenues could be generated over
several periods.
Revenues - Revenues for the first quarter of 1997 were $78.0 million, an
$8.7 million, or 13% increase, as compared with $69.3 million in the first
quarter of 1996.
Loan administration fees were $11.57 million in the first quarter of 1997,
a 1% decrease, as compared to $11.64 million in the first quarter of 1996. This
decrease resulted from the 5% decrease in the average size of the Company-owned
servicing portfolio, partially offset by an increase in the weighted average
servicing fee collected on loans serviced.
Loan origination fees were $19.0 million in the first quarter of 1997, a 4%
decrease, as compared with $19.8 million in the first quarter of 1996. This
decrease resulted from an 18% decrease in loan originations, partially offset by
an increase in the average origination fees collected on each loan. The increase
in average origination fees collected resulted from a higher percentage of
retail production in the first quarter of 1997 (39% as compared to 33%), on
which the Company receives higher average origination fees than it receives on
wholesale loans.
The gain from sales of loans was $24.6 million during the first quarter of
1997, as compared with $21.8 million during the first quarter of 1996. In 1996,
gain from sales of loans was impacted by hedging activity, price subsidies, and
the recognition of Capitalized Loan Servicing Rights under FAS No. 122 and FAS
No. 125. In 1997, gain from sales of loans was affected by the above factors,
but also by the gain on sale of subprime loans, which is a new product offered
by the Company. A summary of these items for the first quarters of 1997 and 1996
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(Dollars in millions)
<S> <C> <C>
Hedging Gains (Losses)...................... $ 3.8 $ (2.4)
Pricing Subsidies........................... (6.6) (8.9)
Capitalized Loan Servicing Rights........... 26.5 33.1
Gain on Sale of Subprime Loans.............. 0.9 ---
--- ---
$ 24.6 $ 21.8
======= ========
</TABLE>
During the first quarter of 1997, hedging results benefited from low bond
market volatility. As a result, the Company's hedging results produced strong
gains of 19 basis points on originations in the first quarter of 1997 compared
to a loss of 10 basis points on originations in the first quarter of 1996. To
the extent that there is a significant change in the direction of interest rates
or an increase in bond market volatility, the Company's future hedging results
may be negatively affected.
Pricing subsidies decreased to $6.6 million during the first quarter of
1997, or an average subsidy of 33 basis points on loans produced, compared to
$8.9 million in the first quarter of 1996, or 36 basis points. The decrease
primarily was due to the increased percentage of retail originations, which have
a much lower price subsidy. The overall level of price subsidy remained high,
reflecting the continuing price competition in the industry, particularly on
loans originated through the wholesale channel.
Capitalized Loan Servicing gains decreased to $26.5 million during the
first quarter of 1997, as compared with $33.1 million in the first quarter of
1996, as a result of a decrease in the principal balance of loans sold.
Gain on sale of subprime loans was $889,000 or 400 basis points on the sale
of $22.2 million of subprime loans, during the first quarter of 1997. This is a
new product for the Company.
Interest income, net of warehouse interest expense, was $6.5 million during
the first quarter of 1997 and 1996. In the first quarter of 1997, the average
balance of loans held for sale increased by 14%, which had the effect of
increasing interest income. The effect of this increase was offset by (i) a
decrease in working capital used by the Company to reduce its warehouse
borrowing cost and (ii) a reduced amount of compensating balances used to reduce
borrowing costs.
Gain from sales of servicing was $13.4 million during the first quarter of
1997, as compared to $7.4 million during the first quarter of 1996, an 80%
increase. In the first quarter of 1997, the Company sold $2.2 billion (or 112%
of originations) of servicing rights, compared with the sale of $2.4 billion (or
97% of originations) in the first quarter of 1996.
The following table summarizes the significant factors impacting the
quarterly gain from servicing sales:
<TABLE>
<CAPTION>
1997 1996
---- ----
(Dollars in millions)
<S> <C> <C>
Principal Balance of Servicing Sold.......... $ 2,250 $ 2,382
======== =========
Net Proceeds................................. $ 39.0 $ 42.9
Capitalized Loan Servicing Basis............. (25.6) (35.5)
----- -----
Gain on Sales of Servicing.............. $ 13.4 $ 7.4
======== =========
</TABLE>
As previously discussed under "Servicing Rights," the Company's servicing
originated before 1995 had virtually no accounting basis. Included in the gain
on servicing sold for the first quarter of 1997 was $12.4 million of gain on the
sale of pre-1995 originated servicing rights (on $945 million principal balance
sold), as compared to a gain of $6.0 million (on $521 million principal balance
sold) in the first quarter of 1996.
Other income was $3.0 million during the first quarter of 1997, a 43%
increase from $2.1 million for the first quarter of 1996. This increase was
largely due to a $773,000 increase in insurance commission revenues earned by
the Company's insurance agency subsidiary which purchased certain assets of
Lomas Insurance Services during the fourth quarter of 1996.
Expenses - Expenses for the first quarter of 1997 were $66.5 million, a 17%
increase, as compared to $56.9 million during the first quarter of 1996.
Personnel costs were $38.3 million for the first quarter of 1997, an 8%
increase, as compared with $35.5 million for the first quarter of 1996. This
increase occurred during a period which had 18% lower originations and 4% lower
origination fees, because of costs associated with the Company's expanded retail
distribution network. The expansion, which was largely completed by the end of
1996, included the addition of 172 new retail loan officers.
Other operating costs increased 19% to $19.5 million for the first quarter
of 1997 from $16.3 million for the first quarter of 1996. This increase
primarily was related to the retail expansion, for which the Company added 44
new production locations during 1996.
Amortization of capitalized loan servicing increased to $4.2 million in the
first quarter of 1997, as compared to $2.7 million during the first quarter of
1996. This increase was primarily attributable to the higher carrying value of
the asset during the first quarter of 1997.
Recovery for impairment of capitalized loan servicing was $267,000 during
the first quarter of 1997, as compared to $2.1 million in the first quarter of
1996. This resulted from a relatively stable interest rate environment during
the first quarter of 1997, as compared with the upward turn in rates which
occurred during March of 1996. Interest rates affect the prepayment speeds,
which impact the value of the capitalized loan servicing asset.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements primarily depend on both the level and
cost of its originations, the level of its servicing sales and the cash flow
generated by, or required by, its other operating activities. Additionally, the
Company may use or provide cash through its investing and other financing
activities.
Liquidity Sources - The Company's loan originations are primarily financed
through warehouse borrowings, commercial paper borrowings, and with corporate
funds. 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 which will expire on January 23, 1999. The outstanding
commitment under this facility was $1.0 billion at March 31, 1997. The Company's
management expects, although there can be no assurance, that this facility will
continue to be available in the future.
The Company also has a commercial paper 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.
At times, the Company will accelerate the sale of its mortgage loan
inventory through the use of "gestation" facilities provided by an investment
bank and the Federal National Mortgage Association.
The Company's corporate funds are generally invested in its inventory of
mortgage loans held for sale. The level of funds available to support its
inventory has decreased since 1995 because of the cash used for the investing
and other financial activities detailed below.
In October 1993, the Company implemented a $250 million Medium Term Note
(MTN) program. Since 1993, $126 million in MTNs have been issued and $76 million
remain outstanding at March 31, 1997.
INVESTING AND OTHER FINANCIAL ACTIVITIES
Common Stock Repurchases - On February 7, 1996, the Company authorized the
repurchase of up to 1.5 million shares of Common Stock. Through March 31, 1997,
the Company had repurchased 1,217,500 shares under this authorization at an
aggregate cost of $22.2 million. As of March 31, 1997, the Company held
2,358,016 shares in treasury stock, which have been acquired since 1994 under
the current and prior repurchase authorizations at an aggregate cost of $41.4
million. The Company repurchased 35,100 shares at a cost of $694,000 during the
first quarter of 1997.
Dividends - The Company has paid quarterly Common Stock dividends since the
initial public offering on July 15, 1992. Dividend payments totaled $844,000 in
the first quarter of 1997 and $907,000 in the first quarter of 1996. In May
1997, the Company's board of directors approved a Common Stock dividend of $.06
per share.
Property, Plant and Equipment During the first quarter of 1997 and 1996,
the Company purchased property and equipment totaling $2.2 million and $1.7
million, 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.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
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 by the undersigned thereunto
duly authorized.
NORTH AMERICAN MORTGAGE COMPANY
May 14, 1997 By: /s/ Martin S. Hughes
--------------------
(Martin S. Hughes)
Executive Vice President
Chief Financial Officer and
Principal Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page Number
- ------ ----------- -----------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
Exhibit 11
<TABLE>
Computation of Earnings Per Share
Quarter Ended March 31, 1997
Primary Earnings Per Share
<CAPTION>
Quarterly
Shares EPS
------ ---
<S> <C> <C>
Average Shares Outstanding 14,066,000 $ 0.49
CSE Incremental Shares 217,004
----------
Total Average Shares Outstanding 14,283,004 $ 0.48
==========
Dilution 1.52%
Net Income $ 6,888,000
=========
Fully Diluted Earnings Per Share
Quarterly
Shares EPS
------ ---
<S> <C> <C>
Average Shares Outstanding 14,066,000 $ 0.49
CSE Incremental Shares 217,478
----------
Total Average Shares Outstanding 14,283,478 $ 0.48
==========
Dilution 1.52%
Net Income $ 6,888,000
=========
</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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 13,849
<SECURITIES> 0
<RECEIVABLES> 95,879
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38,704
<DEPRECIATION> 2,065
<TOTAL-ASSETS> 818,340
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 164
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 818,340
<SALES> 0
<TOTAL-REVENUES> 78,034
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,482
<INCOME-PRETAX> 11,560
<INCOME-TAX> 4,672
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,888
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0
</TABLE>
