-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sf99oCtZLibFo+IZMBn6IOzF4lj6oY1oVZVW0iAxWoQl7gHLxic+KNKtixtGjKGS QutHFnrRDxgK9sHHphIYtA== 0000898430-95-002173.txt : 19951109 0000898430-95-002173.hdr.sgml : 19951109 ACCESSION NUMBER: 0000898430-95-002173 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000818789 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 470713310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16918 FILM NUMBER: 95588322 BUSINESS ADDRESS: STREET 1: 950 TOWER LANE SUITE 600 CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4153586394 MAIL ADDRESS: STREET 2: 950 TOWER LANE SUITE 600 CITY: FOSTER CITY STATE: CA ZIP: 94404 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X Quarterly report pursuant to Section 13 or 15(d) of the Securities ----- Exchange Act of 1934 For the quarterly period ended September 30, 1995 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: 0-16918 AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Delaware 47-0713310 - -------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1004 Farnam Street, Omaha, Nebraska 68102 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (402) 444-1630 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 ----- ----- AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP AND SUBSIDIARY FORM 10-Q SEPTEMBER 30, 1995 TABLE OF CONTENTS
PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets September 30, 1995 and December 31, 1994............ 1 Consolidated Statements of Operations For the quarters ended September 30, 1995 and September 30, 1994 and for the nine months ended September 30, 1995 and September 30, 1994........... 2 Consolidated Statement of Partners' Capital For the nine months ended September 30, 1995........ 3 Consolidated Statements of Cash Flows For the nine months ended September 30, 1995 and September 30, 1994.................................. 4 Notes to Consolidated Financial Statements.......... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................... 13 Item 6. Exhibits and Reports on Form 8-K.................... 13 SIGNATURES..................................................... 14
America First Financial Fund 1987-A Limited Partnership and Subsidiary PART I - FINANCIAL INFORMATION Item 1. - Financial Statements CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------- September 30, 1995 December 31, 1994 - ----------------------------------------------------------------------------------------- Assets Cash and amounts due from depository institutions $ 23,304,363 $ 23,861,654 Federal funds sold 15,000,000 38,000,000 Securities purchased under agreements to resell 22,500,000 5,700,000 Investments held to maturity 39,994,356 39,990,607 Mortgage-backed securities, net Held to maturity 720,389,353 737,896,536 Available-for-sale 53,183,120 53,004,210 Loans receivable, net 1,446,006,904 1,432,997,028 Loans held for sale 699,400 151,500 Accrued interest receivable 13,890,046 11,624,961 Premises and equipment, net 9,737,725 10,638,292 Federal Home Loan Bank stock, at cost 21,226,300 20,460,600 Real estate held for sale or investment, net 2,385,712 4,653,517 Real estate owned, net 1,790,488 4,964,934 Other assets 9,257,653 9,633,418 - ----------------------------------------------------------------------------------------- Total Assets $2,379,365,420 $2,393,577,257 - ----------------------------------------------------------------------------------------- Liabilities and Partners' Capital Customer deposits $1,694,690,762 $1,696,291,789 Securities sold under agreements to repurchase 424,586,000 462,485,000 Other borrowings 70,178,000 50,278,000 Redeemable Preferred Stock; Series A, no par value; 200,000 shares issued; $20 million liquidation value 15,059,048 13,610,226 Distributions payable 2,436,725 2,436,725 Other liabilities and accrued expenses 19,500,685 23,880,176 - ----------------------------------------------------------------------------------------- Total Liabilities 2,226,451,220 2,248,981,916 - ----------------------------------------------------------------------------------------- Partners' Capital: General Partner 4,289,244 2,772,295 Beneficial Unit Certificate (BUC) Holders 6,010,589 BUCs authorized, issued and outstanding 148,624,956 141,823,046 - ----------------------------------------------------------------------------------------- Total Partners' Capital 152,914,200 144,595,341 - ----------------------------------------------------------------------------------------- Total Liabilities and Partners' Capital $2,379,365,420 $2,393,577,257 - -----------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 1 America First Financial Fund 1987-A Limited Partnership and Subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------- For the For the For the Nine For the Nine Quarter Ended Quarter Ended Months Ended Months Ended Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994 - ----------------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $27,483,043 $23,274,202 $77,897,183 $69,424,031 Interest on mortgage-backed securities 14,019,563 9,665,249 39,913,056 27,444,238 Interest and dividends on investment securities 1,172,123 1,070,761 3,401,482 2,870,783 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 42,674,729 34,010,212 121,211,721 99,739,052 - ----------------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 19,664,815 16,243,102 55,811,432 46,842,360 Interest on borrowings 8,060,250 4,849,270 22,821,627 12,824,860 Preferred Stock accretion 482,940 381,999 1,448,821 1,145,997 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 28,208,005 21,474,371 80,081,880 60,813,217 - ----------------------------------------------------------------------------------------------------------------------- Net interest income before provision for loan losses 14,466,724 12,535,841 41,129,841 38,925,835 Provision for loan losses 234,595 262,431 586,806 1,197,506 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 14,232,129 12,273,410 40,543,035 37,728,329 - ----------------------------------------------------------------------------------------------------------------------- Non-interest income Deposit related fees 502,711 480,693 1,559,505 1,416,770 Loan related fees 484,419 438,652 1,254,714 1,501,669 Gain on disposition of loans 16,057 13,492 60,211 121,227 Other income 1,303,356 2,043,780 4,337,081 4,977,613 - ----------------------------------------------------------------------------------------------------------------------- Total non-interest income 2,306,543 2,976,617 7,211,511 8,017,279 - ----------------------------------------------------------------------------------------------------------------------- Non-interest expense Compensation and benefits 5,133,529 5,135,651 15,097,445 16,073,562 Occupancy and equipment 2,234,668 2,548,358 6,700,271 7,660,253 FDIC premiums and special assessments 1,049,294 1,054,934 3,170,367 3,233,032 Professional services 200,366 168,130 730,613 951,052 Advertising and promotion 172,820 282,102 800,840 909,812 Provision for loss (recovery) on interest rate exchange agreements 68,000 (303,000) 1,097,000 (2,818,000) Other expense 2,568,829 2,498,670 8,068,809 7,964,377 - ----------------------------------------------------------------------------------------------------------------------- Total non-interest expense 11,427,506 11,384,845 35,665,345 33,974,088 - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes 5,111,166 3,865,182 12,089,201 11,771,520 Provision for income taxes - - - - - ----------------------------------------------------------------------------------------------------------------------- Net income $5,111,166 $3,865,182 $12,089,201 $11,771,520 - ----------------------------------------------------------------------------------------------------------------------- Net income allocated to: General Partner $ 518,436 $ 269,239 $ 906,450 $ 842,810 BUC Holders 4,592,730 3,595,943 11,182,751 10,928,710 - ----------------------------------------------------------------------------------------------------------------------- $5,111,166 $3,865,182 $12,089,201 $11,771,520 - ----------------------------------------------------------------------------------------------------------------------- Net income per BUC $ .7641 $ .5983 $ 1.8605 $ 1.8182 - -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 2 America First Financial Fund 1987-A Limited Partnership and Subsidiary CONSOLIDATED STATEMENT OF PARTNER'S CAPITAL For the Nine Months Ended September 30, 1995
- -------------------------------------------------------------------------------- General Partner BUC Holders Total - -------------------------------------------------------------------------------- Balance at December 31, 1994 $2,772,295 $141,823,046 $144,595,341 Net income 906,450 11,182,751 12,089,201 Cash distributions paid or accrued (97,467) (7,212,707) (7,310,174) Net unrealized gains on available-for-sale mortgage-backed securities 707,966 2,831,866 3,539,832 - -------------------------------------------------------------------------------- Balance at September 30, 1995 $4,289,244 $148,624,956 $152,914,200 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 3 America First Financial Fund 1987-A Limited Partnership and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------- For the Nine For the Nine Months Ended Months Ended Sept. 30, 1995 Sept. 30, 1994 - --------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 12,089,201 $ 11,771,520 Adjustments to reconcile net income to net cash provided by operating activities Amortization of: Investments and mortgage-backed securities net premium 366,460 1,562,719 Loan discount (1,504,251) (216,600) Intangibles 1,004,976 1,004,976 Proceeds from sale of loans originated and held for sale 4,652,511 26,470,918 Originations of loans held for sale (5,140,200) (21,357,163) Gain on sale of real estate owned (599,625) (1,254,528) Gain on disposition of mortgage loans (60,211) (121,227) Provision for loan losses 586,806 1,197,506 Provision for loss (recovery) on interest rate exchange agreements 1,097,000 (2,818,000) Increase in accrued interest receivable (2,265,085) (835,142) Decrease in accrued interest payable (1,062,064) (374,882) Depreciation and amortization of premises and equipment 1,533,695 1,906,905 Increase in other assets (1,173,122) (761,274) Decrease in other liabilities (4,414,427) (7,425,320) Other, net 673,412 501,443 - --------------------------------------------------------------------------------------------------------- Total adjustments (6,304,125) (2,519,669) - --------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 5,785,076 9,251,851 - --------------------------------------------------------------------------------------------------------- Cash flows from investing activities Loans originated and held for investment (112,825,203) (159,496,411) Purchases of investment securities - (42,985,937) Purchases of mortgage-backed securities (70,531,607) (186,344,549) Purchases of real estate loans (92,221,198) (58,288,883) Purchases of premises and equipment (633,242) (555,220) Principal payments on mortgage-backed securities 91,029,503 112,110,782 Principal payments on loans 176,875,681 229,352,202 Proceeds from maturities of securities purchased under agreements to resell 3,000,000 10,000,000 Proceeds from sale of consumer loans 12,959,309 - Proceeds from sale of Federal Home Loan Bank stock - 1,781,400 Proceeds from sales of real estate owned 6,544,902 8,945,002 Proceeds from sales of real estate held for sale 1,684,273 - Other, net 1,485,416 (40,338) - --------------------------------------------------------------------------------------------------------- Net cash provided by investing activities 17,367,834 (15,521,952) - --------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net decrease in checking, money market accounts and passbook savings (738,273) (39,288,072) Proceeds from issuance of certificates of deposits 187,973,809 191,179,537 Payments for maturing or early withdrawal of certificates of deposits (188,836,563) (162,290,572) Net decrease in short-term repurchase agreements (37,899,000) (11,450,000) Increase (decrease) in Federal Home Loan Bank advances 19,900,000 (25,000,000) Capital distributions (7,310,174) (7,310,177) - --------------------------------------------------------------------------------------------------------- Net cash used in financing activities (26,910,201) (54,159,284) - --------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (3,757,291) (60,429,385) Cash and cash equivalents at beginning of period 64,561,654 87,378,870 - --------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 60,804,363 $ 26,949,485 - --------------------------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Non cash investing and financing activities: Additions to real estate acquired through foreclosure $ 3,567,755 $ 6,276,160 Additions to consumer loans acquired in settlement of loans $ 188,205 $ 179,345 Cash paid for interest (including interest credited) $ 80,022,684 $ 72,548,159 Cash paid for alternative income and minimum franchise taxes $ 400,000 $ 193,058 - ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 4 America First Financial Fund 1987-A Limited Partnership and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 1. ORGANIZATION America First Financial Fund 1987-A Limited Partnership (the "Partnership") was formed on April 14, 1987 under the Delaware Revised Uniform Limited Partnership Act for the purpose of acquiring one or more federally insured financial institutions through supervisory assisted acquisitions. The Partnership formed a subsidiary corporation, America First Eureka Holdings, Inc. ("AFEH") for the purpose of owning and managing one or more acquired financial institutions. The Partnership will terminate on December 31, 2036, unless terminated earlier under the provisions of the Partnership Agreement. The general partner of the Partnership is America First Capital Associates Limited Partnership Five ("AFCA-5") whose managing general partner is AFCA-5 Management Corporation. 2. BASIS OF PRESENTATION The consolidated financial statements of the Partnership include the accounts of the Partnership, AFEH (its wholly-owned subsidiary) and AFEH's wholly-owned subsidiary, EurekaBank ("Eureka") and its subsidiaries. All significant intercompany transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Partnership's financial condition as of September 30, 1995, and the results of its operations for the quarters and nine months ended September 30, 1995 and 1994. Certain amounts in the consolidated financial statements for 1994 have been reclassified to conform with the current consolidated financial statement presentation. 3. ALLOWANCE FOR LOAN LOSSES The Partnership recorded a loan loss provision of approximately $235,000 and $587,000 for the quarter and nine months ended September 30, 1995, respectively, compared to $262,000 and $1.2 million for comparable periods in 1994. At September 30, 1995 and December 31, 1994, the Partnership maintained loan loss reserves of approximately $6.7 million and $7.8 million, respectively. Management believes that reserves are adequate given the composition, credit characteristics and loss experience of the loan portfolio. 4. INTEREST RATE EXCHANGE AGREEMENTS The Partnership entered into interest rate exchange agreements to reduce the impact of future fluctuations in interest rates on fixed rate mortgages funded by variable rate liabilities. The floating rates to be received by the Partnership under the terms of the these agreements are reset monthly, quarterly or semi-annually and are generally indexed to the FHLB Eleventh District Cost of Funds index or the three or six month London Interbank Offered Rate ("LIBOR"). The sustained decline in interest rates in the general economy and the resultant prepayment of mortgage loans associated with the interest rate exchange agreements caused Eureka to establish a liability based on the estimated fair value of interest rate exchange agreements that were no longer deemed effective as hedges. During the quarter and nine months ended September 30, 1995, Eureka recorded to non-interest expense a provision for losses on interest rate exchange agreements of approximately $68,000 and $1.1 million, respectively, to reflect the effect of interest rate decreases on the market value of Eureka's obligations under interest rate exchange agreements deemed ineffective as hedges. During the quarter and nine months ended September 30, 1994, Eureka recorded recoveries to non-interest expense of approximately $303,000 and $2.8 million, respectively. The recorded liability for the exchange agreements totaled approximately $3.1 million and $4.7 million at September 30, 1995 and December 31, 1994, respectively. Net interest expense on interest rate exchange agreements is included as an adjustment to interest income on loans. For 5 America First Financial Fund 1987-A Limited Partnership and Subsidiary the quarter and nine months ended September 30, 1995, net interest expense on interest rate exchange agreements totaled approximately $213,000 and $2.2 million, respectively, compared to $1.5 million and $5.2 million for the same periods in 1994. For the quarter and nine months ended September 30, 1995, net interest paid or accrued on interest rate exchange agreements totaled approximately $948,000 and $4.8 million, respectively, as compared to $3.5 million and $12.2 million for the same periods in 1994. The decrease in net interest expense and net interest paid or accrued on interest rate exchange agreements is primarily due to the expiration of interest rate exchange agreements. 5. CAPITAL In accordance with Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities," securities classified as available-for-sale are carried at fair market value with the unrealized gain or loss recorded in partners' capital. The net unrealized loss at September 30, 1995 approximated $397,000 after reflecting an appreciation in market value of $3,000 and $3.5 million for the quarter and nine months ended September 30, 1995. 6. PARTNERSHIP INCOME, EXPENSES AND CASH DISTRIBUTIONS The Partnership Agreement contains provisions for the distribution of Distributable Cash and Net Sales Proceeds, and for the allocation of income and loss from operations for both tax and financial reporting purposes among AFCA-5 and BUC Holders. Distributions are made to each BUC Holder based on the number of BUCs held by each BUC Holder as of the last day of the quarter. Allocations of earnings between BUC Holders and the General Partner are based upon non-compounded cumulative return on the adjusted capital as follows:
Allocation to Non-compounded cumulative return of: BUC Holders : General Partner ------------------------------------ ------------------------------ Up to 8% 99 : 1 greater than 8% to 10% 90 : 10 greater than 10% to 12% 80 : 20 greater than 12% 75 : 25
7. TRANSACTIONS WITH RELATED PARTIES The Partnership and AFEH reimburse AFCA-5 for certain costs and expenses incurred in connection with the operation of the Partnership including legal and accounting fees and other administrative costs. The amount of such expenses incurred by AFCA-5 subject to reimbursement by the Partnership or AFEH, was $105,933 and $347,114 for the quarter and nine months ended September 30, 1995, respectively, compared to $108,796 and $535,749 for the same periods in 1994. AFEH, Eureka and an affiliate of AFCA-5, America First Service Corporation ("AFSC"), have entered into a licensing agreement through which AFSC provides services to AFEH and Eureka. AFEH is committed to pay an annual fee equal to 0.5% of Eureka's interest income and other income without deduction for interest and other expenses. For the quarter and nine months ended September 30, 1995, $223,202 and $640,059, respectively, of the annual fee had been paid or accrued, compared to $186,491 and $570,835 for comparable periods in 1994. 6 America First Financial Fund 1987-A Limited Partnership and Subsidiary ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION At September 30, 1995, Partnership assets were approximately $2.379 billion, which was approximately $14.2 million lower than the level at December 31, 1994, and consisted primarily of the assets and liabilities of Eureka. Significant changes in the composition of the balance sheet included the following: . Net loans receivable, loans held for sale and net mortgage-backed securities ("MBS") decreased approximately $3.8 million during the nine months ended September 30, 1995. Net increases of approximately $13.5 million were recorded in the loan portfolio, while net decreases of approximately $17.3 million were recorded in the MBS portfolio. The net decreases in the MBS portfolio were primarily due to prepayments. During the nine months ended September 30, 1995, Eureka originated (net of sales) $70.7 million and $40.9 million in retail and wholesale loans, respectively. Management believes that wholesale loan originations will increase as a percentage of total loan originations through 1995 and 1996. Wholesale loan originations enable Eureka to add assets that meet its credit quality guidelines within its market area. Purchased loans and MBS for the nine months ended September 30, 1995 totaled $90.9 million and $69.4 million, respectively. Of the $90.9 million in purchased loans, $87.8 million was due to the purchase in the third quarter of a seasoned 1-4 family loan portfolio. Repayments of $172.2 million and $91.0 million were recorded in the mortgage loan and MBS portfolios, respectively, during the nine months ended September 30, 1995. In the third quarter of 1995, Eureka sold its credit card portfolio which reduced loans an additional $12.5 million and resulted in a net gain on sale of $33,000. . Retail deposits decreased approximately $1.6 million since December 31, 1994 to $1.695 billion at September 30, 1995. . Securities sold under agreements to repurchase and other borrowings decreased approximately $18.0 million during the first nine months of 1995 from $512.8 million at December 31, 1994 to $494.8 million at September 30, 1995. As of September 30, 1995, other liabilities decreased by $4.4 million since December 31, 1994, primarily due to reductions of approximately $1.5 million in the interest rate exchange agreements liability, $1.4 million for accrued interest on borrowings and $1.1 million in accounts payable. At September 30, 1995 and December 31, 1994, the loan-to-deposit ratio was 85%. Loans, MBS, federal funds sold and investments comprised approximately 96% of Partnership assets at September 30, 1995 and December 31, 1994. Cash distributions paid or accrued during the nine months ended September 30, 1995 totaled $1.20 per BUC, or an 8% per annum return based on original contributions of $20 per BUC. Future distributions are expected to be made principally from dividends paid to the Partnership by AFEH. AFEH funds these dividends by receipt of dividends from Eureka, the payment of which is subject to regulatory limitation. Accordingly, it is not possible to estimate the level of cash distributions to BUC Holders over the long term. ASSET QUALITY The allowance for loan losses was $6.7 million and $7.8 million, or .46% and .54% of loans outstanding at September 30, 1995 and December 31, 1994, respectively. Non-performing assets (loans which were 90 or more days delinquent and real estate acquired through foreclosure) were approximately $9.9 million and $13.3 million, or .42% and .56% of total assets at September 30, 1995 and December 31, 1994, respectively. This compares favorably to 1.69% for non-performing assets as of June 30, 1995, for thrifts located in California as reported by the Office of Thrift Supervision ("OTS"). The ratio of loan loss reserves to non-performing loans was 83% at September 30, 1995 compared to 94% at December 31, 1994. Management believes that reserves are adequate given the composition, credit characteristics and loss experience of the loan portfolio. 7 America First Financial Fund 1987-A Limited Partnership and Subsidiary The level of loans 30 days or more delinquent remained low at approximately $11.8 million or .81% of loans at September 30, 1995, compared to approximately $17.0 million or 1.18% of loans at December 31, 1994. This compares favorably to 2.85% for loans 30 days or more delinquent as of June 30, 1995, for thrifts located in California as reported by the OTS. Loans 30 days or more delinquent at September 30, 1995 included $8.9 million in mortgage loans collateralized by 1-4 family residences. As of January 1994, Eureka had purchased $7.8 million in mortgage loans secured by real estate located in southern California which were affected by the January 17, 1994 Northridge earthquake (Northridge loans). The Northridge loans were serviced by other institutions, and the servicers negotiated with the borrowers on behalf of Eureka temporary forbearance agreements for hardship conditions. Industry practice and regulatory guidelines require the Northridge loans to be reported as delinquent loans if the borrowers' payments under the temporary forbearance agreements are less than the contractual payments of the original loan agreements. As of September 30, 1995 and December 31, 1994, $1.5 million and $4.6 million, respectively, of the Northridge loans were included in delinquent loans. All of the Northridge loans were performing and current under the terms of the temporary forbearance agreements at September 30, 1995. Excluding the Northridge loans, the ratio of loans thirty days or more delinquent to total loans was .71% and .86% at September 30, 1995 and December 31, 1994, respectively. Eureka's determination of loan loss reserves and the resulting provision for loan losses are based upon judgments and assumptions regarding various factors including general economic conditions, internal asset review findings, composition of the loan portfolio, historical loss experience and estimates of potential future losses. Management believes that it has provided adequate loan loss reserves to cover potential losses, particularly considering the low level of delinquencies and charge-offs experienced by Eureka over the past five years and continued adherence to strict credit quality control guidelines. Future changes in interest rates may have an impact on Eureka's determination of loan loss reserves and the resulting provision for loan losses. The future losses related to changes in interest rates cannot be predicted. RESULTS OF OPERATIONS Net income for the quarter and nine months ended September 30, 1995 was approximately $5.1 million and $12.1 million, respectively, compared to $3.9 million and $11.8 million for comparable periods in 1994. Net income per BUC for the quarter and nine months ended September 30, 1995 was $.7641 and $1.8605, respectively, compared to $.5983 and $1.8182 during the quarter and nine months ended September 30, 1994. NET INTEREST INCOME Net interest income before the provision for loan losses for the quarter and nine months ended September 30, 1995, was approximately $14.5 million and $41.1 million, respectively, compared to $12.5 million and $38.9 million for the same periods in 1994. The net interest margin improved in the third quarter of 1995 as earnings on adjustable rate mortgage loans increased faster than the cost of funds. Net interest income is the Partnership's principal income component and is determined by the relative levels of, and interest rates paid on, interest earning assets and interest bearing liabilities. Average interest earning assets were approximately $2.3 billion for the quarter and nine months ended September 30, 1995, compared to approximately $2.2 billion for the quarter and nine months ended September 30, 1994. The net interest margin, the net yield on average assets, for the three months ended September 30, 1995 was 2.47% compared to 2.21% for the same period a year earlier. The net interest margin improved in the third quarter of 1995 as earnings on adjustable rate mortgage loans increased faster than the cost of funds. For the nine months ended September 30, 1995 and 1994, the net interest margin was 2.33% and 2.25%, respectively. 8 America First Financial Fund 1987-A Limited Partnership and Subsidiary PROVISION FOR LOAN LOSSES The Partnership recorded loan loss provisions of approximately $235,000 and $587,000 for the quarter and nine months ended September 30, 1995, respectively. Loan loss provisions recorded during the quarter and nine months ended September 30, 1994 totaled $262,000 and $1.2 million, respectively. Net loan charge-offs were $432,000 and $1.2 million for the quarter and nine months ended September 30, 1995, respectively. Net loan charge-offs for the quarter and nine months ended September 30, 1994 approximated $349,000 and $1.4 million, respectively. Of the total net charge-offs recorded during the quarter and nine months ended September 30, 1995, $373,000 and $856,000, respectively, were for Eureka's consumer loan portfolio, as compared to $226,000 and $959,000, respectively, for the quarter and nine months ended September 30, 1994. As previously discussed, Eureka sold its credit card portfolio during the quarter ended September 30, 1995. Future provisions and charge-offs for the consumer loan portfolio are expected to decline due to the sale of the credit card portfolio. Mortgage loan charge-offs totaled $59,000 and $312,000 for the quarter and nine months ended September 30, 1995, compared to $124,000 and $454,000 for the same periods in 1994, respectively. Management continually reviews the adequacy of loan loss reserves and believes that it has provided adequate loan loss reserves to cover potential losses. This includes consideration of the low level of delinquencies and charge-offs experienced by Eureka over the past five years and continued adherence to strict credit quality control guidelines. NON-INTEREST INCOME The principal components of non-interest income are deposit and loan related fee income, gain on the disposition of loans and other income. Non-interest income totaled approximately $2.3 million and $7.2 million for the quarter and nine months ended September 30, 1995, respectively, compared to $3.0 million and $8.0 million for the same periods in 1994. Deposit and loan related fees for the quarter and nine months ended September 30, 1995 were approximately $987,000 and $2.8 million, compared to $919,000 and $2.9 million for the same periods in 1994. Fixed rate loans which meet the FHLMC lending requirements, "conforming loans," are originated by Eureka for sale in the secondary mortgage market. The net gain from Eureka's loan sale activities was approximately $16,000 and $60,000 for the quarter and nine months ended September 30, 1995, respectively, on sales of loans of approximately $1.2 million and $4.6 million, respectively. During comparable periods a year earlier, Eureka sold conforming loans with principal balances which totaled $1.8 million and $26.5 million at a net gain of approximately $13,000 and $121,000, respectively. The decline in loan sale transactions and related income was due, in part, to a shift in borrowers preferences in 1995 to adjustable mortgages in the first quarter and convertible mortgages in the second and third quarters, which are generally not sold in the secondary market. Other non-interest income for the quarter and nine months ended September 30, 1995 was approximately $1.3 million and $4.3 million, respectively, compared to $2.0 million and $5.0 million for comparable periods in 1994. Other income included rental income, fee income from Eureka Financial Services Inc., a Eureka subsidiary licensed to sell mutual funds and insurance annuities, income from real estate held for investment, gain on sale of real estate foreclosed, and other non-operating income items. Net gains on the sale of REO for the quarter and nine months ended September 30, 1995 were $362,000 and $600,000, respectively, compared to $209,000 and $1.3 million for the same periods in 1994, respectively. Other income includes adjustments of $1.1 million for the nine months ended September 30, 1995 for the reduction of previously established reserves no longer deemed necessary. No similar adjustments were recorded for the quarter ended September 30, 1995. Similar reserve reductions of $978,000 and $1.2 million were recorded for the quarter and nine months ended September 30, 1994. 9 America First Financial Fund 1987-A Limited Partnership and Subsidiary NON-INTEREST EXPENSE The principal components of non-interest expense are compensation and benefits expenses, occupancy and equipment expenses, FDIC insurance premiums, professional and advertising expenses, provision for loss(recovery) on interest rate exchange agreements and other administrative expenses. Non-interest expense for the quarter and nine months ended September 30, 1995 was approximately $11.4 million and $35.7 million, respectively, compared to $11.4 million and $34.0 million for the same periods in 1994. Compensation and benefits expenses were approximately $5.1 million and $15.1 million for the quarter and nine months ended September 30, 1995, respectively, compared to approximately $5.1 million and $16.1 million for the quarter and nine months ended September 30, 1994. In addition to management's general effort to reduce controllable costs, the decline in retail loan funding volume in 1995 reduced loan agent commissions for the quarter and nine months ended September 30, 1995, as compared to the same periods in 1994. Non-interest expense for the quarter and nine months ended September 30, 1995 included adjustments to the interest rate exchange agreements liability established in 1993. During the quarter and nine months ended September 30, 1995, provisions of approximately $68,000 and $1.1 million, respectively, were recorded to increase the interest rate exchange agreements liability to reflect the effect of interest rate decreases on the market value of Eureka's obligations under the interest rate exchange agreements deemed ineffective as hedges. The recorded exchange agreements liability was reduced by $303,000 and $2.8 million for the quarter and nine months ended September 30, 1994, respectively, to reflect the effect of interest rate increases on the market value of Eureka's obligations under the interest rate exchange agreements. The change in the exchange agreements liability during the quarter and nine months ended September 30, 1995 included scheduled accretion of $735,000 and $2.6 million, as compared to $2.3 million and $9.8 million for the same periods in 1994. Such accretion was an adjustment to the yield on mortgage loans. Occupancy and equipment expenses totaled $2.2 million and $6.7 million for the quarter and nine months ended September 30, 1995, respectively, compared to $2.5 million and $7.7 million for the same periods a year earlier. FDIC insurance premiums, professional and advertising expenses, and other expenses were approximately $4.0 million and $12.8 million for the quarter and nine months ended September 30, 1995, respectively, and $4.0 million and $13.1 million for comparable periods a year earlier. Decreases in professional services and advertising in 1995 were primarily attributable to the general effort to manage these controllable costs. PROVISION FOR INCOME TAXES Due to the net operating loss carryforwards available to AFEH arising from the acquisition of Eureka, AFEH does not expect to pay any regular income taxes in 1995. AFEH's alternative minimum taxes totaled $215,000 and $400,000 for the quarter and nine months ended September 30, 1995. Alternative minimum taxes paid by AFEH are recorded as prepaid expenses in other assets as they result in tax credits with an indefinite life and will be used to offset future tax liabilities. INTEREST RATE RISK At September 30, 1995, Eureka had a positive one-year interest rate repricing gap of approximately three percent and a negative three-year interest rate repricing gap of approximately one percent. At September 30, 1994, Eureka had a negative one-year interest rate repricing gap of approximately four percent and a negative three-year interest rate repricing gap of approximately five percent. The interest rate repricing gap reported at September 30, 1995 assumes higher prepayment levels on mortgage loans as compared to the interest rate repricing gap reported at September 30, 1994. Additionally, the interest rate repricing gap reported at September 30, 1995 has been impacted by maturing fixed rate loans and a larger percentage of adjustable rate loans repricing under one year, compared to the interest rate repricing gap reported at September 30, 1994. 10 America First Financial Fund 1987-A Limited Partnership and Subsidiary LIQUIDITY Regulations require a savings institution to maintain a liquidity ratio of at least five percent of cash and specified securities to net withdrawable accounts and borrowings due in one year. For the month of September 1995, Eureka's liquidity ratio was 5.41% compared to 5.03% for the month of December 1994. Resources committed at September 30, 1995 consisted of approximately $24.0 million in loan and MBS funding commitments. Management believes that existing liquidity and other capital resources are adequate to fund existing and anticipated commitments existing at September 30, 1995. CAPITAL REQUIREMENTS Regulations require that savings institutions meet three separate capital tests: a risk-based capital standard, a core capital standard and a tangible capital standard. At September 30, 1995, Eureka maintained regulatory capital as follows:
(000's) --------------------------------------------------------------------------- Tangible Core Risk-Based Capital Capital Capital ---------------------- ------------------------ ----------------------- % of % % Risk-Based Amount of Assets Amount of Assets Amount Assets --------- ---------- ----------- ---------- --------- ----------- GAAP capital $146,814 $146,814 $146,814 Non-allowable assets: Intangible assets (4,681) (4,681) (4,681) Non-includable Subsidiaries (2,802) (2,802) (2,802) Net unrealized loss on securities available for sale 397 397 397 Allowance for loan losses - - 3,732 -------- -------- -------- Computed regulatory capital 139,728 5.91% 139,728 5.91% 143,460 14.43% Minimum capital requirement 35,458 1.50% 70,916 3.00% 79,544 8.00% -------- ---- -------- ---- -------- ---- Excess regulatory capital $104,270 4.41% $ 68,812 2.91% $ 63,916 6.43% ======== ==== ======== ==== ======== =====
DEPOSIT INSURANCE AND OTHER MATTERS Eureka's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to the maximum amount provided by law through the Savings Association Insurance Fund ("SAIF"). During the quarter and nine months ended September 30, 1995, Eureka paid deposit insurance premiums to the SAIF of $956,000 and $2.9 million, respectively, based on an annual assessment rate of .23% of covered deposits. Effective for the period beginning July 1, 1995, the FDIC has reduced the lowest annual assessment rate for Bank Insurance Fund ("BIF") insured institutions from .23% of covered deposits to .04% of covered deposits. This reduction could provide institutions whose deposits are exclusively or primarily BIF-insured (such as most commercial banks) competitive advantages over institutions with deposits that are primarily SAIF-insured (such as Eureka). Legislation has been introduced in the Congress which would recapitalize the SAIF through a one-time special deposit assessment on SAIF-insured institutions, and impose an incremental deposit insurance charge on BIF-insured commercial banks which would be to pay the interest on Financing Corporation bonds issued as part of the 1989 savings association rescue package adopted under the Financial Institutions Reform, Recovery and Enforcement Act. Specifically, both the House of Representatives and the Senate have enacted provisions which would impose a one-time special deposit insurance assessment of approximately 85 basis points on SAIF-insured institutions, payable at the beginning of January 1996. Both versions of the legislation would provide for a merger of the BIF and SAIF funds by not sooner than January 1, 1998. The legislation currently is in House-Senate conference to reconcile outstanding differences between the House and Senate 11 America First Financial Fund 1987-A Limited Partnership and Subsidiary versions. If legislation of the sort described above is adopted, Eureka, as a SAIF-insured institution, would be subject to any special deposit insurance assessments levied on SAIF-insured institutions. In addition, Congress currently is considering broader legislative measures which would effectively combine the federal thrift and national bank charters by eliminating the federal thrift charter, and abolishing the Office of Thrift Supervision as a separate regulatory agency by combining it with the Office of the Controller of the Currency. Such legislation broadly would require federally-chartered savings institutions to convert to national banks, or obtain state bank or thrift charters, and require thrift holding companies to convert to bank holding companies regulated by the Federal Reserve Board, all possibly by January 1, 1998. In addition, the legislation also would provide for the elimination of the special thrift bad debt reserve deduction under the Internal Revenue Code, although thrift institutions affected by this measure possibly would be given a statutory "fresh start" which would not require the recapture of all previous reserve deductions. While Eureka cannot predict whether, when or in what form any such legislation will be enacted, Eureka, as a federally-chartered savings bank, would be required to give up its federal savings bank charter and convert to either a national bank or a state bank or savings association. Also, if this legislation is adopted, Eureka may be precluded or restricted from taking statutory bad debt reserve deductions under the Internal Revenue Code and/or subject to recapture of such deductions previously taken. Further, AFEH and the Partnership would be subject to regulation as bank holding companies under federal law, and subject to federal restrictions on nonbanking activities currently applicable to bank holding companies. The financial impact on Eureka, AFEH or the Partnership of such measures enacted cannot be determined at this time. 12 America First Financial Fund 1987-A Limited Partnership and Subsidiary PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- There are no material pending legal proceedings to which the Partnership or AFEH is a party or to which any property of the Partnership or AFEH is subject. Eureka, however, is a party to various lawsuits arising in the normal course of its business. Management does not believe that any of the legal proceedings to which Eureka is a party will have a material impact on the financial condition of the Partnership. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 4(a) Amended and Restated Limited Partnership Agreement dated June 30, 1987 (incorporated herein by reference to Form 10-K dated December 31, 1987 filed pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 by America First Financial Fund 1987-A Limited Partnership (Commission File No. 0-16918)). 4(b) Form of Certificate of Beneficial Unit Certificate (incorporated by reference to Amendment No. 3 to Registration Statement on Form S-11 filed March 31, 1987 with the Securities and Exchange Commission by America First Financial Fund 1987-A Limited Partnership (Commission File No. 33-10286)). 10 Long-term incentive compensation plan of EurekaBank (as amended and restated effective January 1, 1991) (incorporated herein by reference to Form 10-Q dated August 13, 1991 filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by America First Financial Fund 1987-A Limited Partnership (Commission File No. 0-16918)). 28.1 Letter to BUC Holders, revised as of April 1, 1992 (incorporated herein by reference to Form 10-Q dated May 15, 1992, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by America First Financial Fund 1987-A Limited Partnership (Commission File No. 33-10286)). 28.2 America First Financial Fund 1987-A Distribution Reinvestment Plan Summary, revised as of April 1, 1992 (incorporated herein by reference to Form 10-Q dated May 15, 1992, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by America First Financial Fund 1987-A Limited Partnership (Commission File No. 33-10286)). 28.3 First Amended Distribution Reinvestment Plan Agreement, dated as of April 1, 1992 (incorporated herein by reference to Form 10-Q dated May 15, 1992, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by America First Financial Fund 1987-A Limited Partnership (Commission File No. 33-10286)). 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP By America First Capital Associates Limited Partnership Five, General Partner of the Registrant By AFCA-5 Management Corporation, General Partner of America First Capital Associates Limited Partnership Five Date: November 8, 1995 By /s/ George H. Krauss ----------------------------------------------- George H. Krauss Chairman of the Board of Directors and Secretary (Principal Executive Officer) Date: November 8, 1995 By /s/ J. Paul Bagley ----------------------------------------------- J. Paul Bagley Director, President and Treasurer (Principal Financial Officer) 14 EX-27 2 ARTICLE 9 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILING. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 20,443,791 2,860,572 37,500,000 0 53,183,120 760,383,709 762,496,744 1,453,441,032 6,734,728 2,379,365,420 1,694,690,762 474,864,000 21,937,411 19,900,000 0 15,059,048 0 152,914,199 2,379,365,420 77,897,183 43,314,538 0 121,211,721 55,811,432 80,081,880 41,129,841 586,806 0 35,665,345 12,089,201 12,089,201 0 0 12,089,201 1.861 0 2.33 8,137,000 0 5,496,000 0 7,820,406 1,688,392 520,237 6,734,728 6,734,728 0 0
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