-----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, Ptxt2pMkN4RSw6UyLVHzAQzbJZtRI6Rr7rAttq+Yq9M7vsMByS781aiVgIniQlm7 2vNMocBhyN6vOw2YRSFrJw== 0000878774-02-000003.txt : 20020814 0000878774-02-000003.hdr.sgml : 20020814 20020814181312 ACCESSION NUMBER: 0000878774-02-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MORTGAGE ACCEPTANCE CO CENTRAL INDEX KEY: 0000878774 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136972380 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14583 FILM NUMBER: 02738230 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MORTGAGE INVESTORS TRUST DATE OF NAME CHANGE: 19931013 10-Q 1 f10q_secondquarter-amac.txt SECOND QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 OR - ------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23972 AMERICAN MORTGAGE ACCEPTANCE COMPANY ------------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 13-6972380 - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - ---------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands)
============ =========== June 30, December 31, 2002 2001 ------------ ----------- ASSETS Investments in mortgage loans $ 20,061 $ 17,799 Investments in GNMA certificates- available for sale 79,990 50,060 Investment in ARCap 20,241 20,246 Cash and cash equivalents 11,116 1,018 Notes receivable 19,617 11,373 Accrued interest receivable 871 570 Other assets 443 916 ------------ ----------- Total assets $ 152,339 $ 101,982 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Repurchase facilities payable $ 61,451 $ 43,610 Accrued interest payable 44 22 Accounts payable and accrued expenses 506 1,348 Due to Advisor and affiliates 464 331 Distributions payable 2,386 1,392 ------------ ----------- Total liabilities 64,851 46,703 ------------ ----------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $.10 par value; 25,000,000 shares authorized; 6,738,826 issued and 6,363,630 outstanding and 4,213,826 issued and 3,838,630 outstanding in 2002 and 2001, respectively 674 421 Treasury shares of beneficial interest; 375,196 shares (38) (38) Additional paid-in capital 99,487 68,841 Distributions in excess of net income (14,601) (14,505) Accumulated other comprehensive income 1,966 560 ------------ ----------- Total shareholders' equity 87,488 55,279 ------------ ----------- Total liabilities and shareholders' equity $ 152,339 $ 101,982 ============ ===========
See accompanying notes to consolidated financial statements 2 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Dollars in the thousands except per share amounts) (Unaudited)
====================== ====================== Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2002 2001 2002 2001 ---------------------- ---------------------- Revenues: Interest income: Mortgage loans $ 609 $ 1,019 $ 1,010 $ 1,907 GNMA certificates 1,370 379 2,454 495 Notes receivable 627 61 1,114 107 Temporary investments 13 10 24 27 Equity in earnings of ARCap 608 592 1,200 1,184 Other income 76 25 136 30 ---------- ---------- ---------- ---------- Total revenues 3,303 2,086 5,938 3,750 ---------- ---------- ---------- ---------- Expenses: Interest 307 361 579 637 General and administrative 164 112 284 232 Fees to advisor 371 178 728 296 FNMA loan program 3 -- 358 -- Amortization -- 11 6 30 ---------- ---------- ---------- ---------- Total expenses 845 662 1,955 1,195 ---------- ---------- ---------- ---------- Net gain on repayments of GNMA certificates and mortgage loans -- -- 614 -- ---------- ---------- ---------- ---------- Net income $ 2,458 $ 1,424 $ 4,597 $ 2,555 ========== ========== ========== ========== Net income per share (basic and diluted) $ .39 $ .37 $ .81 $ .67 ========== ========== ========== ========== Weighted average shares outstanding (basic and diluted) 6,363,630 3,838,630 5,666,116 3,838,630 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements 3 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity (Dollars in thousands) (Unaudited)
Shares of Beneficial Treasury Shares of Interest Beneficial Interest --------------------- --------------------- Shares Amount Shares Amount --------- --------- -------- --------- Balance at January 1, 2002 4,213,826 $ 421 (375,196) $ (38) Comprehensive income: Net income -- -- -- -- Other comprehensive income: Unrealized holding gain arising during the period Less: reclassification adjustment for gain included in net income Total other comprehensive gain Comprehensive income Common share issuance 2,525,000 253 Distributions --------- --------- -------- --------- -- -- -- -- Balance at June 30, 2002 6,738,826 $ 674 (375,196) $ (38) ========= ========= ======== ========= Accumulated Additional Distributions Other Paid-in in Excess Comprehensive Comprehensive Capital of Net Income Income Income Total --------- ------------- ------------- ------------- --------- Balance at January 1, 2002 $ 68,841 $ (14,505) $ 560 $ 55,279 Comprehensive income: Net income -- 4,597 $ 4,597 -- 4,597 Other comprehensive income: Unrealized holding gain arising during the period 2,020 Less: reclassification adjustment for gain included in net income (614) ------------- Total other comprehensive gain 1,406 1,406 1,406 ------------- Comprehensive income $ 6,003 ============= Common share issuance 30,646 30,899 Distributions (4,693) -- (4,693) --------- ------------- ----------- --------- -- Balance at June 30, 2002 $ 99,487 $ (14,601) $ 1,966 $ 87,488 ========= ============= =========== =========
See accompanying notes to consolidated financial statements. 4 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
===================== Six Months Ended June 30, --------------------- 2002 2001 -------- -------- Cash flows from operating activities: Net income $ 4,597 $ 2,555 Adjustments to reconcile net income to net cash provided by operating activities: Net gain on repayments of GNMA Certificates and mortgage loans (614) -- Equity in earnings of ARCap, in excess of (less than) distributions received 5 (191) Amortization - deferred financing costs 6 30 Amortization - loan premium and origination costs (61) 3 Accretion of GNMA discount 6 (11) Accretion of deferred income -- (26) Changes in operating assets and liabilities: Accrued interest receivable (301) 166 Other assets 48 6 Due to Advisor and affiliates 133 (674) Accounts payable and accrued expenses (842) 17 Accrued interest payable 22 24 -------- -------- Net cash provided by operating activities 2,999 1,899 -------- -------- Cash flows from investing activities: Increase in investment in mortgage loans (2,224) (19,622) Periodic principal payments of mortgage loans 23 134 Funding of notes receivable (8,244) (1,424) Principal repayments of GNMA Certificates 197 166 Increase in investment in GNMA Certificates (28,113) -- Decrease (increase) in other assets 419 (83) -------- -------- Net cash used in investing activities (37,942) (20,829) -------- --------
continued 5 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
===================== Six Months Ended June 30, --------------------- 2002 2001 -------- -------- Cash flows from financing activities: Proceeds from repurchase facilities payable 17,841 32,443 Distribution paid to shareholders (3,699) (2,783) Increase in deferred loan costs -- (42) Issuance of common shares 30,899 -- -------- -------- Net cash provided by financing activities 45,041 29,618 -------- -------- Net increase in cash and cash equivalents 10,098 10,688 Cash and cash equivalents at the beginning of the period 1,018 1,632 -------- -------- Cash and cash equivalents at the end of the period $ 11,116 $ 12,320 ======== ======== Supplemental information: Interest paid $ 557 $ 613 ======== ======== Consolidation of former unconsolidated subsidiary: Increase in investment in mortgage loans $ 8,353 Decrease in notes receivable (7,264) Decrease in investment in unconsolidated subsidiary (1,089) -------- $ -- -------- Conversion of FHA mortgage loans to GNMA certificates: Investment in GNMA certificates $(34,515) Decrease in investment in mortgage loans 34,515 -------- $ -- --------
See accompanying notes to consolidated financial statements. 6 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) Note 1 - General American Mortgage Acceptance Company (formerly American Mortgage Investors Trust) (the "Company") was formed on June 11, 1991 as a Massachusetts business trust. The Company elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The Company's business plan focuses on government insured and uninsured mortgages secured by multifamily properties, which may take the form of government insured first mortgages and uninsured mezzanine loans, construction loans and bridge loans. Additionally, the Company has indirectly invested in subordinate commercial mortgage-backed securities and may invest in other real estate assets, including non-multifamily mortgages. Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest (the "Shares") commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". In February 2002, the Company sold to the public 2.5 million common shares at a price of $13.50 per share. The net proceeds from this offering, approximately $31 million net of underwriter's discount and expenses, has been used to make additional investments. The Company is governed by a board of trustees comprised of three independent trustees and two trustees who are affiliated with Related Capital Company ("Related"). The Company has engaged Related AMI Associates, Inc. (the "Advisor"), an affiliate of Related, to manage its day-to-day affairs. The Advisor has subcontracted with Related to provide the services contemplated. Through the Advisor, Related offers the Company a core group of experienced staff and executive management providing the Company with services on both a full and part-time basis. These services include, among other things, acquisition, financial, accounting, capital markets, asset monitoring, portfolio management, investor relations and public relations services. The Company believes that it benefits significantly from its relationship with Related, because Related provides the Company with resources that are not generally available to smaller-capitalized, self-managed companies. The consolidated financial statements include the accounts of the Company and two wholly-owned subsidiaries which it controls: AMAC Repo Seller and AMAC/FM Corporation. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, the "Company" as hereinafter used, refers to American Mortgage Acceptance Company and its subsidiaries. The consolidated financial statements of the Company have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 2002 and the results of its operations and its cash flows for the three and six months ended June 30, 2002 and 2001. However, the operating results for the interim periods may not be indicative of the results for the full year. 7 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2001. The preparation of the consolidated financial statements in conformity with GAAP requires the Advisor to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141, "Business Combinations (SFAS 141) and Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). These statements establish new standards for accounting and reporting for business combinations and for goodwill and intangible assets resulting from business combinations. SFAS 141 applies to all business combinations initiated after June 30, 2001; the Company implemented SFAS 142 on January 1, 2002. Implementation of these statements did not have a material impact on the Company's consolidated financial statements. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires the fair value of a liability or an asset retirement obligation to be recorded in the period in which it is incurred. SFAS No. 143 is not effective until January 1, 2003. Management does not believe the implementation of SFAS No. 143 will have a material impact on the Company's consolidated financial statements. In August 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets" (effective January 1, 2002). SFAS No. 144 supercedes existing accounting literature dealing with impairment and disposal of long-lived assets, including discontinued operations. It addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of, and expands current reporting for discontinued operations to include disposals of a "component" of an entity that has been disposed of or is classified as held for sale. The Company implemented SFAS No. 144 on January 1, 2002. Implementation of SFAS No. 144 did not have a material impact on the Company's consolidated financial statements. In April 2002, the FASB issued Statement No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections". SFAS No. 145 among other things, rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and accordingly, the reporting of gains and losses from the early extinguishments of debt as extraordinary items will only be required if they meet the specific criteria for extraordinary items included in Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations". The rescission of SFAS no. 4 is effective January 1, 2003. Management does not believe the implementation of SFAS 145 will have a material impact on the Company's consolidated financial statements. In July 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is not effective until January 1, 2003. The Company does not anticipate the adoption of this statement will have a material effect on the Company's consolidated financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. 8 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) Note 2 - Investments in Mortgage Loans Information relating to investments in mortgage loans as of June 30, 2002 is as follows:
Final Periodic Maturity Call Interest Payment Prior Description Date Date Rate (B) Terms Liens ----------- -------- -------- -------- --------- --------- First Mortgage Loans (E): Stony Brook II East Haven, CT (L) 125 Units 6/37 12/06 7.625 (F) -- Sunset Gardens Eagle Pass, TX 60 Units 9/03 TBD 11.50% (H) -- Northbrooke Harris County, TX 240 Units 8/43 TBD 7.45% (K) -- Subtotal First Mortgage Loans Stabilized Properties Stony Brook II East Haven, CT 125 Units 6/37 12/06 15.33% (H) 8,308,969 Plaza at San Jacinto Houston, TX (I) 132 Units 1/43 6/11 11.00% (H) 6,638,300 Subtotal Stabilized Mezzanine Loans Properties in Construction The Hollows Greenville, NC 184 Units 1/42 TBD 10.00% (H) 8,481,092 Elmhurst Village Oveido, FL 313 Units 1/42 TBD 10.00% (H) 21,716,633(J) The Reserve at Autmn Creek Friendswood, TX 212 Units 1/42 TBD 10.00% (H) 15,538,670(J) Club at Brazos (I) Rosenberg, TX 200 Units 5/43 TBD 10.00% (H) 14,363,800 Northbrooke Harris County, TX 240 Units 8/43 TBD 11.50% (H) -- Subtotal Construction Mezzanine Loans Subtotal Mezzanine Loans Total Mortgage Loans Interest Income Earned Applicable Outstanding To the Six Months Face Amount of Carrying Amount Ended Mortgages (C) of Mortgages (D) June 30, 2002 --------------- ---------------- ----------------- First Mortgage Loans (E): Stony Brook II East Haven, CT (L) $8,308,969 $8,308,969 $ 317,141 Sunset Gardens Eagle Pass, TX 892,902 869,393 30,320 Northbrooke Harris County, TX -- -- 15,458 ------------------------------------------------- ------------------------------------------------- Subtotal First Mortgage Loans 9,201,871 9,178,362 362,919 ------------------------------------------------- Stabilized Properties Stony Brook II East Haven, CT 763,909 663,166 45,365 Plaza at San Jacinto Houston, TX (I) 1,250,000 1,221,384 72,577 ------------------------------------------------- Subtotal Stabilized Mezzanine Loans 2,013,909 1,884,550 117,942 ------------------------------------------------- Properties in Construction The Hollows Greenville, NC 1,549,200 1,389,786 82,239 Elmhurst Village Oveido, FL 2,874,000 2,438,461 158,637 The Reserve at Autmn Creek Friendswood, TX 1,987,000 1,924,502 97,791 Club at Brazos (I) Rosenberg, TX 1,962,000 1,883,770 99,032 Northbrooke Harris County, TX 1,500,000 1,361,976 91,436 ------------------------------------------------- Subtotal Construction Mezzanine Loans 9,872,200 8,998,495 529,135 ------------------------------------------------- Subtotal Mezzanine Loans 11,886,109 10,883,045 647,077 ------------------------------------------------- Total Mortgage Loans $21,087,980 $20,061,407 $1,009,996 =================================================
9 (A) Loans are subject to mandatory prepayment at the option of the Company 10 years after construction completion, with one year's notice. Loans with a call date of "TBD" are still under construction. (B) Interest on the mezzanine loans is based on a fixed percentage of the unpaid principal balance of the related first mortgage loan (prior liens). The amount shown is the approximate effective rate earned on the balance of the mezzanine loan. The mezzanine loans also provide for payments of additional interest based on a percentage of cash flow remaining after debt service (generally 50%) and participation in sale or refinancing proceeds (generally 25%) and certain provisions that cap the Company's total yield, including additional interest and participations, over the term of the loan. (C) No principal amounts of mortgage loans are subject to delinquent interest as of June 30, 2002. (D) Carrying amounts of the mezzanine loans include unamortized origination costs and fees and loan discounts. (E) Interest and principal payments on first mortgage loans are insured by the U.S. Department of Housing and Urban Development. (F) Requires monthly payments of principal and interest based on a 40 year amortization period. Loan is subject to 5-year lockout against prepayments, as well as a prepayment penalty structure during the second 5-year term of the loan. (G) The principal balance of the mezzanine loans is secured by the partnership interests of the entity that owns the underlying property and a third mortgage deed of trust. Interest payments on the mezzanine loans are secured by a second mortgage deed of trust and are guaranteed for the first thirty six months after construction completion by an entity related to the general partner of the entity that owns the underlying property. (H) Interest only payments are due monthly, with loan balance due at maturity. (I) The funding of this mezzanine loan is based on property level operational achievements. The Company does not hold the first mortgage loan relating to this mezzanine loan. (J) The first mortgage loans related to those properties were converted into GNMA Certificates and are held by the Company. (K) The Northbrooke first mortgage loan was converted from an FHA mortgage loan to an GNMA Certificate on May 24, 2002. (L) This first mortgage loan is pledged to secure the Company's obligation under a first loss protection agreement with Fannie Mae - See Notes 9 and 10. 10 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) Note 3 - Investments in GNMA Certificates-Available for Sale Information relating to investments in GNMA certificates as of June 30, 2002 is as follows:
Interest Income Earned Date Applicable Purchase/ Amortized Unrealized to the Final Stated Principal Cost at Gain(Loss) Balance at Six Months Certificate Payment Interest at June at June at June at June Ended June Name Number Due Rate 30, 2002 30, 2002 30, 2002 30, 2002 30, 2002 - ---- ----------- -------- -------- ------------- ----------- ---------- ----------- ---------- Western Manor (1) 0355540 7/27/94 7.125% $ 2,474,818 $ 2,475,688 $ 66,053 $ 2,541,741 $ 98,090 3/15/29 Copper Commons (1) 0382486 7/28/94 8.500% 2,098,148 2,167,036 (19,128) 2,147,908 89,685 8/15/29 SunCoast Capital Group, G002412 6/23/97 7.000% 719,414 719,939 23,031 742,970 27,928 Ltd. (1) 4/20/27 Hollows Apts. (2) 511909 5/29/01 -- -- -- -- 196,859 Elmhurst Village (1) 549391 6/28/01 7.745% 21,716,633 21,716,633 593,191 22,309,824 819,281 1/1/42 Reserve at Autumn Creek (1) 448747 6/28/01 7.745% 15,538,670 5,538,670 1,550,185 17,088,855 588,046 1/1/42 Casitas at Montecito 519289 3/11/02 7.300% 5,700,686 6,090,720 (390,034) 5,700,686 116,233 10/15/42 Village at Marshfield (1) 519281 3/11/02 7.475% 19,906,384 21,552,222 258,031 21,810,253 418,763 1/15/42 Cantera Crossing 532662 3/28/02 6.500% 3,906,058 3,859,084 46,974 3,906,058 57,595 6/1/29 Fillmore Park 536739 3/28/02 6.700% 876,053 886,270 (10,217) 876,053 11,168 10/15/42 Northbrooke 548972 5/24/02 7.080% 2,865,484 3,017,381 (151,899) 2,865,482 30,745 8/1/43 ----------------------------------------------------------------- Total $75,802,348 $78,023,643 $1,966,187 $79,989,830 $2,454,393 =================================================================
(1) These GNMA Certificates are pledged as collateral for borrowings under the repurchase facility - See Note 5. (2) This GNMA Certificate was sold March 25, 2002. 11 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) The amortized cost, unrealized gain and fair value for the investment in GNMA Certificates at June 30, 2002 and December 31, 2001 were as follows: (Dollars in thousands)
June 30, December 31, 2002 2001 ----------- ------------- Amortized cost $78,024 $49,500 Unrealized gain 1,966 560 ------- ------- Fair Value $79,990 $50,060 ======= =======
For the six months ended June 30, 2002, there were gross unrealized gains and losses of $2,537,465 and $571,278, respectively. For the year ended December 31, 2001, there were gross unrealized gains and losses of $579,252 and $18,865, respectively. On March 25, 2002, the Company sold the Hollows GNMA Certificate for approximately $9.6 million. The amortized cost at the date of the sale was approximately $9.0 million, resulting in a gain of approximately $614,000. The Company recorded the sale on the trade date of March 25, 2002. The settlement date was in April 2002. 12 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) NOTE 4 - Notes Receivable The Company's notes receivable are collateralized by equity interest in the owner of the related property and consists of the following as of June 30, 2002:
Remaining Number of Outstanding Committed Apartment Carrying Principal Balance to Interest Property Location Units Amount Balance Fund Rate Maturity - ------------------------------------------------------------------------------------------------------------------------------------ Alexandrine Detroit, MI 30 $ 377,320 $ 378,000 $ -- 12.50% August 2002 Coronado Terrace San Diego, CA 312 566,730 581,360(1) 1,418,640 11.00% December 2002 Plaza Manor National City, CA 372 1,491,646 1,499,010 990 11.00% September 2002 Rancho Verde San Jose, CA 700 4,497,780 4,499,999 -- 11.00% August 2002 Concorde at Palm Houston, TX 360 3,821,138 3,850,000 -- 12.00% December 2003 Parwood Long Beach, CA 528 1,963,641 2,000,000(1) 2,600,000 11.00% January 2004 Concord at Little York Houston, TX 276 3,463,945 3,500,000 -- 12.00% February 2004 Concord at Gulfgate Houston, TX 288 3,435,221 3,500,000 -- 12.00% May 2004 ------------------------------------------------------------ Total 2,866 $19,617,421 $19,808,369 $4,019,630 ============================================================
(1) Funded on an as needed basis. 13 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) The Company's notes receivable pay interest only until maturity when the principal is due. As of June 30, 2002, there were no past due amounts owed the Company on any note. NOTE 5 - Repurchase Facilities During 2001, the Company was party to a $40 million repurchase facility with Nomura Asset Capital Corporation, which enabled the Company to borrow up to 80% (90% with a qualified hedge) of the fair market value of FHA loans owned by the Company. The interest rate under this repurchase facility was LIBOR plus 1.25%. As of December 31, 2001 there was no outstanding balance under this agreement. The agreement was not renewed upon its expiration in February 2002. Effective February 15, 2000, the Company also entered into a repurchase facility with Nomura Securities International Inc. (the "Nomura Securities Repurchase Facility"). This facility enables the Company to borrow up to 95% of the fair market value of GNMA Certificates and other qualified mortgage securities owned by the Company. Borrowings bear interest at LIBOR plus 0.50%. As of June 30, 2002 and December 31, 2001, the amounts outstanding under this facility were $61,451,000 and $43,610,000 and interest rates were 1.89% and 2.58%, respectively. Deferred costs relating to the Nomura Securities Repurchase Facility have been fully amortized. All amounts outstanding at June 30, 2002, had 30 day settlement terms and are collateralized by certain GNMA Certificates as indicated in Note 3. NOTE 6 - Related Party Transactions The costs incurred to related parties for the three and six months ended June 30, 2002 and 2001 were as follows, all of which are paid to the Advisor: (Dollars in Thousands)
Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- 2002 2001 2002 2001 ------------------------------------------------- Expense reimbursement $ 143 $ 111 $ 318 $ 172 Asset management fees 228 67 410 124 ---------- ----------- ---------- ---------- $ 371 $ 178 $ 728 $ 296 ========== ========== ========== =========
In December 2001, Charter Mac Corporation ("CM Corp") purchased 80% of PW Funding Inc. ("PWF"). CM Corp is a wholly-owned subsidiary of Charter Municipal Mortgage Acceptance Company ("Charter Mac"), a publicly traded entity, which is managed by an affiliate of Related. The Company has begun to use PWF as its servicing agent for mortgages. Typically, the servicing agent retains a small percentage of the interest paid on mortgage loans as their fee for servicing the loan. The Company's notes receivable (see Note 4), the guarantee on Creekside Apartments and standby bridge loan commitments described in Note 8 are to limited partnerships where the general partner may be an affiliate of the Advisor with a 1% interest in the limited partnership, and the 99% limited partner is a limited partnership in which an affiliate of the Advisor owns a 1% general partnership interest and one or more Fortune 500 companies own a 99% limited partnership interest. 14 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) Note 7 - Earnings Per Share Basic net income per share in the amount $.39 and $.37 and $.81 and $.67 for the three and six months ended June 30, 2002 and 2001, respectively, equals net income for the periods ($2,458,410 and $1,424,029 and $4,597,434 and $2,555,177, respectively), divided by the weighted average number of shares outstanding which was 6,363,630 and 3,838,630 and 5,666,116 and 3,838,630, respectively. Because the Company had no dilutive securities outstanding during the six months ended June 30, 2002 or 2001, diluted net income per share is the same as basic net income per share. Note 8 - Commitments and Contingencies The Company completed a loan program with Fannie Mae which has agreed to fully fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Under the loan program, the Company intended to originate and contract for individual loans of up to $6 million dollars each over a two-year period in conjunction with American Property Financing, an unaffiliated third party, which would underwrite and service the loans for Fannie Mae. The Company guarantees a first loss position of up to $21.25 million, depending on the aggregate principal amount of the loans the Company originates under this program and would receive guaranty, loan origination and other fees. The Company also guarantees construction loans for which it has issued a forward commitment to originate a loan under the Fannie Mae program, with respect to which it guarantees repayment of 100% of such construction loans. As of June 30, 2002, the Company had originated loans totaling approximately $2.2 million under the Fannie Mae program and has made forward commitments for an additional approximate $6.8 million. The Company's maximum guaranty at June 30, 2002 is $9.0 million. The Company has not acquired an interest in any of the loans the Company originated on Fannie Mae's behalf. Subsequent to creating this program, the level of loan origination competition has increased, reducing the Company's projected financing value and profitability. As a result, the Company decided in the first quarter of 2002 to discontinue this program. The Company has reached an agreement in principle to terminate this program and transfer its rights and obligations to a third party. There can be no assurance, however, that this agreement will happen. Accordingly, during the first quarter of 2002, the Company wrote off the balance of unamortized deferred costs relating to this program. This write-off totaled approximately $358,000 and is included in FNMA loan program expenses in the Consolidated Statement of Income. In May of 2002, AMAC guaranteed a construction loan of approximately $7.5 million for Creekside Apartments, a proposed 144-unit affordable multifamily apartment complex located in Colorado Springs, Colorado, in exchange for a 0.375% fee, which will be received at construction completion. The construction loan guarantee will provide credit support for the period beginning with construction completion until property stabilization. It is anticipated that construction will be completed in February 2003 and that the property will reach stabilization in October 2003. The fee, when received at completion of construction, will be deferred and amortized over the guarantee period. 15 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) In February of 2002, AMAC issued a standby bridge loan commitment of $400,000 for the rehabilitation of Valley View and Summertree Apartments, two apartment complexes featuring 240 total units and located in North Little, Arkansas. The loan, if funded, will bear interest at 12%. Funding, should it be needed, is not anticipated to occur until later in 2002. AMAC received a fee of 2.5% for issuing the commitment. The first mortgage is held by Charter Municipal Mortgage Acceptance Company ("Charter Mac"), an affiliate of the Advisor. In June of 2002, AMAC issued a standby bridge loan commitment of $1.4 million for the construction of Willow Creek Apartments, a 104-unit multi-family apartment complex located in North Port, Florida. The loan, if funded, will bear interest at a rate of 12%. Funding, should it be needed, is not anticipated to occur until December 2003, at the earliest. AMAC received a fee of 3.57% for issuing the commitment. The first mortgage is held by Charter Mac, an affiliate of the Advisor. In June of 2002, AMAC issued a standby bridge loan commitment of $400,000 for the rehabilitation of McMullen Square Apartments, a 100-unit complex featuring 18 two-story buildings and two one-story buildings, located in San Antonio, Texas. The loan, if funded, will bear interest at a rate of 12%. Funding, should it be needed, is not anticipated to occur until February 2003. AMAC received a fee of 2.5% for issuing the commitment. Fees received for a commitment to originate a loan are deferred and, if the commitment is exercised, recognized over the life of the loan as an adjustment of yield or, if the commitment expires unexercised, recognized in other income upon expiration of the commitment. If, however, based on the Company's experience with similar arrangements, management believes that the likelihood that the commitment will be exercised is remote, the commitment fee is recognized over the commitment period on a straight-line basis in other income. Note 9 - Investment in Unconsolidated Subsidiary and Note Receivable As discussed in Note 8, the Company has entered into an agreement with Fannie Mae whereby the Company would provide first loss protection on certain loans funded by Fannie Mae pursuant to a Master Financing and Loss Sharing Agreement. Through a consolidated subsidiary, AMAC/FM Corporation ("AMAC/FM"), and pursuant to a Guaranty and Security Agreement with Fannie Mae, the payment of the Company's obligations under this program is guaranteed and secured by AMAC/FM's pledge and grant to Fannie Mae of a security interest on certain assets of AMAC/FM. 16 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) AMAC/FM was capitalized by a contribution by the Company to AMAC/FM of the mortgage loan secured by Stony Brook Village II Apartments with a principal amount of $8,404,092. This contribution was recorded by AMAC/FM as a $7,264,092 loan from the Company via a subordinated promissory note, with a stated interest rate of 7.75% and a $1,140,000 capital contribution through the issuance of AMAC/FM non-voting common stock. During 2000, the Company accounted for its $1,140,000 investment in AMAC/FM under the equity method of accounting, because all of AMAC/FM's voting common shares were held by the Advisor and, therefore, the Company did not control AMAC/FM. During January 2001, all of the voting common stock of AMAC/FM, previously owned by the Advisor, was purchased by the Company, the effect of which is to make AMAC/FM a wholly-owned, consolidated subsidiary of the Company. This change was implemented as a result of the REIT Modernization Act of 1999, which allows REITs to directly own taxable REIT subsidiaries, beginning after the year 2000. Note 10 - Shareholders' Equity On February 25, 2002, the Company completed issuance of 2,525,000 common shares, raising net proceeds of approximately $31 million. The common shares were offered through Friedman, Billings, Ramsey and RBC Capital Markets. The proceeds were used to invest primarily in GNMA Certificates. Note 11 - Subsequent Events On July 26, 2002, the Company funded the first advance of $7.7 million to Ellington Plaza. The Company purchased this GNMA Construction Loan certificate in May, 2002. The stated interest rate is 7.085% and the certificate matures in July, 2042. In July of 2002, the Company granted a standby bridge loan commitment to a third party in the amount of approximately $1.7 million. The purpose of the bridge loan, which is not expected to be funded until February 2003, is to fund the final construction draws on the rehabilitation of a 160-unit affordable multifamily apartment complex located in Laredo, TX, known as Clark's Crossing Apartments. The bridge loan carries an interest rate of 12%. In conjunction with the bridge loan, the Company has also guaranteed a construction loan of approximately $4.8 million, providing credit support for the period beginning with construction completion until the property reaches stabilization, for which the Company will receive a fee. Rehabilitation is expected to be completed in April 2003 and stabilization achieved in September 2003. The Company will receive a bridge loan origination fee of 2% and a construction loan guarantee fee of 0.625%. In August of 2002, the Company issued a standby permanent loan commitment of up to approximately $4.3 million, for the rehabilitation of Highland Park Apartments, a 200-unit garden style apartment complex located in Topeka, Kansas, for which the Company will receive a loan standby commitment fee. If funded, which could occur in December 2003, the Company would receive interest of 9.5%. The Company will receive a loan standby commitment fee of 2.00% and, if funded, a loan origination fee of 1.00%. On July 31, 2002, the Rancho Verde bridge loan was repaid in full. 17 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 2002 (Unaudited) In August 2002, a distribution of $2,386,361, ($0.375 per share) which was declared in June 2002, was paid to shareholders for the quarter ended June 30, 2002. On August 8, 2002, the Company announced that effective September 3, 2002, Stuart Rothstein will become the Chief Financial Officer and Executive Vice President of the Company. Mr. Rothstein joins the Company with approximately 11 years of professional experience, including seven years of direct experience with Spieker Properties, a San Francisco-based office REIT. On September 3, 2002, Alan Hirmes will step down from the position of interim Chief Financial Officer, but will continue in his position of Executive Vice President and Director of the Company. 18 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources - ------------------------------- Effective April 26, 1999, upon authorization by the Board of Trustees, the Company's name was changed from American Mortgage Investors Trust to American Mortgage Acceptance Company. The Company's shares of beneficial interest commenced trading on the American Stock Exchange on July 1, 1999 under the symbol "AMC". As of June 30, 2002, there were 6,363,630 shares outstanding. The Company's business plan focuses on government insured and uninsured mortgages secured by multifamily properties, which may take the form of government insured first mortgages and uninsured mezzanine loans, construction loans and bridge loans. Additionally, the Company has indirectly invested in subordinate commercial mortgage-backed securities and may invest in other real estate assets, including non-multifamily mortgages. As of June 30, 2002, the Company's mortgage investments consisted of two mortgage loans and seven mezzanine loans originated by or on behalf of the Company, eleven GNMA mortgage-backed securities and pass-through certificates (including Ellington Plaza which did not receive its initial advance until July 2002) eight bridge loans and a preferred equity investment in ARCap Investors, L.L.C. ("ARCap"). In February of 2002, the Company completed an offering of 2,525,000 common shares at $13.50 per share, raising net proceeds of approximately $31 million. These proceeds were used primarily to invest in GNMA Certificates. The Company anticipates using these GNMA Certificates as collateral for future financing which will be used to make additional investments. During the six months ended June 30, 2002, cash and cash equivalents increased approximately $10 million primarily due to net proceeds from the common share offering, approximately $31 million, proceeds from repurchase facilities payable, approximately $17.8 million and cash provided by operating activities, approximately $3 million, offset by investments in mortgage loans, approximately $2.2 million, investments in GNMA Certificates, approximately $28.1 million, increase in notes receivable, approximately $8.2 million and distributions to shareholders, approximately $4.7 million. The yield on the GNMA Certificates will depend, in part, upon the rate and timing of principal prepayments on the underlying mortgages. Generally, as market interest rates decrease, mortgage prepayment rates increase and the market value of interest rate sensitive obligations like the GNMA Certificates increases. As market interest rates increase, mortgage prepayment rates tend to decrease and the market value of interest rate sensitive obligations like the GNMAs tends to decrease. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. The Company's GNMAs are collateralized by mortgage loans on multifamily properties. The yield on the mortgage loans will depend, in part, on when, and if, the Company disposes of the mortgage loans prior to maturity or the obligor fully repays the outstanding debt. The effect of prepayments on yield is greater the earlier a prepayment of principal is received. Due to the uncertainty of future economic and other factors that affect interest rates and mortgage prepayments, it is not possible to predict the effects of future events upon the yield to maturity or the market value of the mortgage loans upon any sale or other disposition or whether the Company, if it chose to, would be able to reinvest proceeds from prepayments at favorable rates relative to the current mortgage loan rates. 19 The yield on the mezzanine loans is based on a fixed percentage of the associated first mortgage loan, plus a percentage of the available cash flow produced by the underlying multifamily property, and a participation in sale or refinancing proceeds. The yield will vary based on the operating results of the underlying property, its requirements for capital improvements, and the ability of the property owners to successfully sell or refinance the underlying property. The yield on the bridge loans will depend, in part, on when, and if, the Company disposes of the loans prior to maturity or the obligor repays the outstanding debt. These loans are typically of shorter term, about 12 months, and higher risk. However, the Company's bridge loans are collateralized by the equity interests of the property owner. Although the loans bear a fixed rate of interest, the shorter term somewhat reduces the Company's interest rate risk. The Company's equity in the earnings of ARCap will generally be equal to the Company's preferred equity dividend rate of 12%, unless ARCap does not have earnings and cash flows adequate to meet this dividend requirement. ARCap's investment portfolio consists of subordinated commercial mortgage backed securities, whose yields depend, among other things, on the rate and timing of principal payments, the pass through rate, interest rate fluctuations and defaults on the underlying mortgages. The Company's investment in ARCap is illiquid and its carrying amount is not necessarily representative of the amount the Company would receive upon a sale of this investment. The Company finances the acquisition of its assets primarily through borrowing at short-term rates using demand repurchase agreements. Under the Company's declaration of trust, the Company may incur permanent indebtedness of up to 50% of total market value calculated at the time the debt is incurred. Permanent indebtedness and working capital indebtedness may not exceed 100% of the Company's total market value. In February of 2002, the Company sold 2.5 million common shares at a price of $13.50 per share, raising net proceeds of approximately $31 million. If market conditions warrant, the Company may seek to raise additional funds for investment through further common offerings in the future, although the timing and amount of such offerings cannot be determined at this time. Effective February 15, 2000, the Company entered into a repurchase facility with Nomura Securities International Inc. This agreement enables the Company to borrow up to 95% of the fair market value of qualified mortgage securities owned by the Company which are pledged as collateral for the borrowings. Borrowings bear interest at LIBOR plus 0.50%. As of June 30, 2002 and December 31, 2001, the amount outstanding under this facility was $61,451,000 and $43,610,000 and interest rates were 1.89% and 2.58%, respectively. All borrowings under this facility have 30-day settlement terms. The Company has not experienced any problems when renewing its borrowing and management believes it will be able to continue to renew its borrowings when due. If the Company were unable to renew such borrowings with Nomura, it would have to either find replacement financing or sell assets at prices which may be below market value. In order to qualify as a REIT under the Code, the Company must, among other things, distribute at least 90% of its taxable income. The Company believes that it is in compliance with the REIT-related provisions of the Code. The Company expects that cash generated from the Company's investments will meet its needs for short-term liquidity, and will be sufficient to pay all of the Company's expenses and to make distributions to its shareholders in amounts sufficient to retain the Company's REIT status in the foreseeable future. 20 The Company completed a loan program with Fannie Mae which has agreed to fully fund the origination of $250 million of Delegated Underwriter and Servicer loans for apartment properties that qualify for low income housing tax credits under Section 42 of the Internal Revenue Code. Under the loan program, the Company will originate and contract for individual loans of up to $6 million dollars each over a two-year period and will work with American Property Financing, an unaffiliated third party, which will underwrite and service the loans for Fannie Mae. The Company guarantees a first loss position of up to $21.25 million, depending on the aggregate principal amount of the loans the Company originates under this program and will receive guaranty, loan origination and other fees. The Company also guarantees construction loans for which it has issued a forward commitment to originate a loan under the Fannie Mae program, with respect to which it guarantees repayment of 100% of such construction loans. As of June 30, 2002, the Company had originated loans totaling approximately $2.2 million under the Fannie Mae program and has made forward commitments for an additional approximate $6.8 million. The Company's maximum guaranty at June 30, 2002 is $9.0 million. Since the Company entered into the Fannie Mae loan program, the level of loan origination competition has increased, reducing the projected financing volume and profitability. As a result, the Company decided in the first quarter of 2002 to discontinue this program. The Company has reached an agreement in principle to terminate this program and transfer its rights and obligations to a third party. There can be no assurance, however, that this agreement will happen. In August 2002, a distribution of $2,386,361 ($0.375 per share), which was declared in June 2002, was paid to the shareholders for the quarter ended June 30, 2002. Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Results of Operations - --------------------- The net income for the three and six months ended June 30, 2002 and 2001 was $2,458,410 and $1,424,029 and $4,597,434 and $2,555,177, respectively. The total of the annual operating expenses of the Company may not exceed the greater of (i) 2% of the Average Invested Assets of the Company or (ii) 25% of the Company's net income, unless such excess is approved by the Independent Trustees. On an annualized basis, there was no such excess for the six months ended June 30, 2002 and 2001. Interest income from mortgage loans decreased approximately $410,000 and $897,000 for the three and six months ended June 30, 2002 as compared to 2001 primarily due to the conversion of Hollows, Elmhurst Village and Autumn Creek mortgages to GNMA Certificates and the sale of the Columbiana mortgage during 2001. Interest income from GNMA certificates increased approximately $991,000 and $1,960,000 for the three and six months ended June 30, 2002 as compared to 2001, primarily due to the conversion of three mortgage loans to GNMA certificates in 2001 and the purchase of an additional five GNMA Certificates in 2002, offset by the loss of interest income from the Hollows GNMA Certificate which was sold in March of 2002. Interest income from notes receivable increased approximately $566,000 and $1,007,000 for the three and six months ended June 30, 2002 as compared to 2001 due to the addition of eight notes receivable during 2001 and 2002. During the six months ended June 30, 2002, the Company recognized approximately $358,000 in FNMA loan program expenses associated with the write-off of the unamortized deferred costs related to the FNMA loan program. 21 Fees to advisor increased approximately $193,000 and $432,000 for the three and six months ended June 30, 2002 as compared to 2001 primarily due to an increase in the Company's assets and an increase in the reimbursements of certain administrative and other costs incurred by the Advisor on behalf of the Company. Amortization decreased approximately $11,000 and $24,000 for the three and six months ended June 30, 2002 due to the deferred costs relating to the Nomura repurchase facility being fully amortized during 2001. A gain on the repayment of GNMAs and mortgage loans in the amount of approximately $614,000 was recorded for the six months ended June 30, 2002, relating to the sale of the Hollows GNMA on March 25, 2002. Distributions - ------------- Of the total distributions of $4,693,177 and $2,783,007 for the six months ended June 30, 2002 and 2001, respectively, $95,743 ($.02 per share or 2.04%) and $227,830 ($.06 per share or 8.19%), respectively, represented a return of capital determined in accordance with generally accepted accounting principles. As of June 30, 2002, the aggregate amount of the distributions made since the commencement of the initial public offering representing a return of capital, in accordance with generally accepted accounting principles, totaled $14,592,422. The portion of the distributions which constituted a return of capital was significant during the initial acquisition stage in order to maintain level distributions to shareholders. Forward-Looking Statements - -------------------------- Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Inflation - --------- Inflation did not have a material effect on the Company's results for the periods presented. Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------- Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which the investments of the Company is exposed is interest rate risk, which is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company. 22 The Company's borrowings under repurchase agreements bear interest at rates that fluctuate with LIBOR. Based on the $61.5 million of borrowings outstanding under these facilities at June 30, 2002, a 1% change in LIBOR would impact the Company's net income by approximately $615,000. Cash flows and income from the Company's other financial instruments, consisting primarily of mortgage loans, a preferred equity interest, GNMA certificates, and cash and cash equivalents, would not be significantly affected by changes in interest rates, because most of these instruments bear interest at fixed rates, and are not subject to financing or hedged. Cash and cash equivalents and the mortgage loans are carried at amortized cost, and so their carrying values are not impacted by changes in interest rates. The GNMA investments are adjusted to market value through comprehensive income in shareholders' equity, but changes in their value have not historically been significant to shareholders' equity. The preferred equity interest is carried on the equity method; although changes in interest rates would not directly impact the carrying value of this asset, they might adversely affect the ability of the underlying entity to meet its preferred distribution requirements. 23 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material pending legal proceedings. Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders A proxy and proxy statement soliciting the vote of the Company's shareholders for the Company's annual meeting of shareholders was sent to shareholders on or about April 30, 2002. Such meeting was held on June 11, 2002. Stuart Boesky, Peter Allen, Arthur Fisch, Alan Hirmes and Scott Mannes were re-elected trustees for a one-year term. The five individuals elected, and the number of votes cast for and abstaining, with respect to each of them, is as follows: For Abstain --------- ------- Alan P. Hirmes 5,913,798 147,295 Stuart J. Boesky 5,913,978 147,115 Peter T. Allen 6,021,063 40,030 Arthur P. Fisch 6,021,063 40,030 Scott M. Mannes 6,020,243 40,850 Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K Exhibits 99.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Form 8-K - None. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN MORTGAGE ACCEPTANCE COMPANY (Registrant) Date: August 14, 2002 By: /s/ Stuart J. Boesky -------------------- Stuart J. Boesky Trustee, Chairman of the Board, President and Chief Executive Officer Date: August 14, 2002 By: /s/ Alan Hirmes --------------- Alan Hirmes Chief Financial Officer Exhibit 99.1 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Mortgage Acceptance Company (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stuart J. Boesky, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Stuart J. Boesky Stuart J. Boesky Chief Executive Officer August 14, 2002 Exhibit 99.2 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Mortgage Acceptance Company (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan Hirmes, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Alan Hirmes Alan Hirmes Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----