-----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, CUEyrrzcqgHwBfF4b1y7b++TGwPhAZZyL9i9YQCE1EjGsjItxHCUld6F2c7ddopE KjgQop6lgGQnmxhfjfU3xA== 0001215811-07-000029.txt : 20070808 0001215811-07-000029.hdr.sgml : 20070808 20070808145120 ACCESSION NUMBER: 0001215811-07-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070808 DATE AS OF CHANGE: 20070808 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: 071035219 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_june2007-amac.txt UNITED STATES 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, 2007 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 Identification No.) incorporation or organization) 625 MADISON AVENUE, NEW YORK, NEW YORK 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 317-5700 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 [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large Accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of July 31, 2007, there were 8,406,028 outstanding common shares of the registrant's shares of beneficial interest, $0.10 par value. TABLE OF CONTENTS AMERICAN MORTGAGE ACCEPTANCE COMPANY FORM 10-Q PAGE PART I FINANCIAL INFORMATION Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures about Market Risk 27 Item 4. Controls and Procedures 27 PART II OTHER INFORMATION Item 1. Legal Proceedings 28 Item 1A. Risk Factors 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 3. Defaults Upon Senior Securities 28 Item 4. Submission of Matters to a Vote of Security Holders 28 Item 5. Other Information 28 Item 6. Exhibits 28 SIGNATURES 29 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except per share amounts)
ASSETS June 30, December 31, 2007 2006 ----------- ----------- (Unaudited) Cash and cash equivalents $ 6,833 $ 7,553 Restricted cash 2,223 14,951 Investments Mortgage loans receivable, net 727,675 545,898 Available for sale investments, at fair value: Debt securities 78,347 82,582 CMBS 103,559 -- CDO securities 9,822 -- Revenue bonds 4,888 4,967 Real estate owned - discontinued -- 48,692 Accounts receivable 9,733 7,670 Deferred charges and other assets, net 13,433 8,671 ----------- ----------- Total assets $ 956,513 $ 720,984 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: CDO notes payable $ 362,000 $ 362,000 Repurchase facilities 403,124 163,576 Line of credit - related party 57,600 15,000 Preferred shares of subsidiary (subject to mandatory repurchase) 25,000 25,000 Mortgages payable on real estate owned - discontinued -- 39,944 Accounts payable and accrued expenses 8,590 13,666 Due to Advisor and affiliates 1,441 1,670 Dividends payable 1,891 15,120 ----------- ----------- Total liabilities 859,646 635,976 ----------- ----------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest; $0.10 par value; 25,000 shares authorized; 8,817 issued and 8,402 outstanding in 2007 and 8,815 issued and 8,400 outstanding in 2006 882 881 Treasury shares of beneficial interest at par; 415 shares in 2007 and 2006 (42) (42) Additional paid-in capital 128,048 127,971 Accumulated deficit (35,316) (40,174) Accumulated other comprehensive income (loss) 3,295 (3,628) ----------- ----------- Total shareholders' equity 96,867 85,008 ----------- ----------- Total liabilities and shareholders' equity $ 956,513 $ 720,984 =========== ===========
See accompanying notes to condensed consolidated financial statements. 3 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Revenues: Interest income: Mortgage loans $ 12,712 $ 3,903 $ 22,928 $ 6,124 Debt securities 1,208 2,996 2,435 6,215 CMBS 862 -- 862 -- Revenue bonds 105 141 211 284 Temporary investments 89 52 259 135 CDO securities 183 -- 190 -- Participation income -- -- 699 -- Other revenues 153 157 229 162 ----------- ----------- ----------- ----------- Total revenues 15,312 7,249 27,813 12,920 ----------- ----------- ----------- ----------- Expenses: Interest 10,638 4,227 19,133 6,586 Interest - distributions to preferred shareholders of subsidiary (subject to mandatory repurchase) 554 556 1,123 1,074 General and administrative 687 490 1,421 978 Fees to Advisor 773 977 1,612 1,803 Amortization and other 201 15 401 30 ----------- ----------- ----------- ----------- Total expenses 12,853 6,265 23,690 10,471 ----------- ----------- ----------- ----------- Other income (loss) Gain on sale of ARCap 337 -- 337 -- Change in fair value of derivative instruments 681 1,879 650 2,023 Loss on repayment of debt securities -- (153) -- (153) Equity in earnings of ARCap -- 2,397 -- 3,076 ----------- ----------- ----------- ----------- Total other income 1,018 4,123 987 4,946 ----------- ----------- ----------- ----------- Income from continuing operations 3,477 5,107 5,110 7,395 Income (loss) from discontinued operations, including gain of sale -- 108 3,531 (11) ----------- ----------- ----------- ----------- Net income $ 3,477 $ 5,215 $ 8,641 $ 7,384 =========== =========== =========== =========== Per share amounts (basic and diluted): Net income from continuing operations $ 0.41 $ 0.62 $ 0.61 $ 0.89 Net income from discontinued operations -- 0.01 0.42 -- ----------- ----------- ----------- ----------- Net income $ 0.41 $ 0.63 $ 1.03 $ 0.89 =========== =========== =========== =========== Dividends per share $ 0.225 $ 0.400 $ 0.450 $ 0.800 =========== =========== =========== =========== Weighted average shares outstanding: Basic 8,403 8,304 8,402 8,304 =========== =========== =========== =========== Diluted 8,403 8,304 8,402 8,305 =========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended June 30, -------------------------- 2007 2006 ----------- ----------- Cash flows from operating activities: Net income $ 8,641 $ 7,384 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 336 900 Equity in earnings of ARCap -- (3,076) Distributions received from ARCap -- 1,716 Gain on sale of real state owned (3,611) -- Net loss on sale or repayment of assets -- 153 Change in fair value of derivative instruments (681) (2,023) Amortization and accretion 197 (144) Other non-cash (income) expense (512) 89 Changes in operating assets and liabilities: Accounts receivable (2,063) 159 Other assets (3) 223 Due to Advisor and affiliates (229) (1,070) Accounts payable and accrued expenses 3,200 921 ----------- ----------- Net cash provided by operating activities 5,275 5,232 ----------- ----------- Cash flows from investing activities: Funding and purchase of mortgage loans (238,873) (153,759) Principal repayments of mortgage loans 57,565 5,450 Investment in CMBS (106,830) -- Investment in CDO securities (10,062) -- Principal repayments or sale of debt securities 2,408 17,945 Decrease in restricted cash 12,728 -- Proceeds from sale of real estate owned 11,987 -- Principal repayment on real estate owned 35 -- Principal repayment of revenue bonds 95 90 ----------- ----------- Net cash used in investing activities (270,947) (130,274) ----------- -----------
continued 5 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended June 30, -------------------------- 2007 2006 ----------- ----------- Cash flows from financing activities: Proceeds from repurchase facilities $ 387,649 $ 135,012 Repayments of repurchase facilities (148,101) (32,216) Proceeds from line of credit - related party 171,815 67,542 Repayments of line of credit - related party (129,215) (40,500) Repayments of warehouse facility -- (4,070) Deferred financing costs (186) (1,604) Dividends paid to shareholders (17,010) (6,644) ----------- ----------- Net cash provided by financing activities 264,952 117,520 ----------- ----------- Net decrease in cash and cash equivalents (720) (7,522) Cash and cash equivalents at the beginning of the year 7,553 11,214 ----------- ----------- Cash and cash equivalents at the end of the period $ 6,833 $ 3,692 =========== ===========
See accompanying notes to condensed consolidated financial statements. 6 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) NOTE 1 - BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of American Mortgage Acceptance Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, we herein refer to American Mortgage Acceptance Company and its subsidiaries as "AMAC", "we", "us", "our", and "our Company". We are externally managed by Centerline/AMAC Manager Inc. (the "Advisor"), formerly known as CharterMac AMI Associates, Inc., which acts as our Advisor and is an indirect subsidiary of Centerline Holding Company ("Centerline"), formerly known as CharterMac, which owns approximately 2.4% of our common shares of beneficial interest at June 30, 2007 (see Notes 13 and 15). We operate in one business segment. The condensed consolidated financial statements 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 our financial position as of June 30, 2007, and the results of our operations and our cash flows for the period then ended. However, the operating results for interim periods may not be indicative of the results for the full year. Certain information and footnote disclosures normally included in annual consolidated 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 consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006. Our Annual Report on Form 10-K for the year ended December 31, 2006, contains a summary of our significant accounting policies. There have been no material changes to these items since December 31, 2006. The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of 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. We have reclassified certain prior year amounts to conform to the current year presentation, in particular the reclassification of operating results for our real estate owned portfolio to discontinued operations (see Notes 4 and 12). NEW ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement No. 157, FAIR VALUE MEASUREMENTS, which established a framework for calculating the fair value of assets and liabilities as required by numerous other accounting pronouncements and expands disclosure requirements of the fair values of certain assets and liabilities. The statement is effective as of the beginning of our 2008 fiscal year. We are currently evaluating the impact, if any, that the adoption of this statement will have on our consolidated financial statements. In February 2007, the FASB issued Statement No. 159, THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES. This statement was issued with the intent to provide an alternative measurement treatment for certain financial assets and liabilities. The alternative measurement would permit fair value to be used for both initial and subsequent measurement, with changes in fair value recognized in earnings as those changes occur. This "Fair Value Option" would be available on a contract by contract basis. The effective date for this statement is the beginning of our 2008 fiscal year. We are currently assessing the impact, if any, that the adoption would have on our consolidated financial statements should we elect to adopt it. If we were to do so, we would not apply its provisions until Statement No. 157 (described above) is adopted. In June 2007, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 07-1, CLARIFICATION OF THE SCOPE OF THE 7 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) AUDIT AND ACCOUNTING GUIDE INVESTMENT COMPANIES AND ACCOUNTING FOR PARENT COMPANIES AND EQUITY METHOD INVESTORS FOR INVESTMENTS IN INVESTMENT COMPANIES. This SOP provides guidance for determining whether an entity is within the scope of the AICPA AUDIT AND ACCOUNTING GUIDE INVESTMENT COMPANIES (the "Guide"). Entities that are within the scope of the Guide are required, among other things, to carry their investments at fair value, with changes in fair value included in earnings. The provisions of this SOP are effective on January 1, 2008. We are currently evaluating this new guidance and have not determined whether we will be required to apply the provisions of the Guide in presenting our financial statements. NOTE 2 - MORTGAGE LOANS We partially or fully funded 19 first mortgage, bridge and mezzanine loans and subordinated notes, totaling approximately $244.9 million through June 30, 2007, including two to a related party (see Note 13). The loans bear interest at a weighted average interest rate of 7.98%. During February 2007, one of our mortgage loans was repaid, resulting in a one-time payment received, pursuant to a participating arrangement, of approximately $699,000. These fees are recorded as participation income in our condensed consolidated statements of income. During April 2007, we purchased an $84.0 million participation interest in a mezzanine loan. Approximately $55.3 million was repaid during the second quarter of 2007. At June 30, 2007, approximately $673.5 million of our first mortgage, bridge and mezzanine loans and subordinated notes were partially or fully pledged as collateral under our repurchase facilities. NOTE 3 -AVAILABLE FOR SALE INVESTMENTS We carry all of our Available for Sale investments at their estimated fair values. We record the change in their fair values as a component of comprehensive income within shareholders' equity. If the fair value of an investment is lower than our cost, and we determine that the decline in fair value is other-than-temporary, we record an impairment charge in our condensed consolidated statement of income. At June 30, 2007, we had the following investments classified as available for sale: o Debt Securities o Commercial Mortgage-Backed Securities ("CMBS") o Collateralized Debt Obligation ("CDO") Securities o Revenue Bonds During March 2007, we purchased a $10.1 million investment in CDO securities (class J, K, L, M, N, O and preferred shares), issued by Nomura CRE CDO 2007-2, LTD ("Nomura"). These securities bear interest at a weighted average interest rate of 9.00% and mature in May 2042. During the second quarter of 2007, we purchased $115.3 million of CMBS, at discounts aggregating $8.5 million, for a net cost of approximately $106.8 million. These securities, which bear interest at a weighted average interest rate of 5.93%, mature on dates ranging from June 2022 through April 2049. CMBS investments we hold were comprised of the following as of June 30, 2007: 8 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited)
Unrealized Percentage of (Dollars in thousands) Face Amount Accreted Cost Fair Value losses Fair Value - ------------------------- --------------- --------------- --------------- --------------- --------------- Security rating: BBB+ $ 4,750 $ 4,776 $ 4,740 $ (36) 4.6% BBB 69,556 64,615 62,360 (2,255) 60.2 BBB- 40,995 37,470 36,459 (1,011) 35.2 --------------- --------------- --------------- --------------- --------------- $ 115,301 $ 106,861 $ 103,559 $ (3,302) 100.0% =============== =============== =============== =============== ===============
Information regarding our available for sale investments is as follows:
(In thousands) Debt CDO Revenue June 30, 2007 Securities CMBS Securities Bonds Total - ------------------------- --------------- --------------- --------------- --------------- --------------- Amortized cost $ 81,027 $ 106,861 $ 10,062 $ 4,753 $ 202,703 Unrealized gains 273 -- -- 135 408 Unrealized losses (2,953) (3,302) (240) -- (6,495) --------------- --------------- --------------- --------------- --------------- Net unrealized (loss) gain (2,680) (3,302) (240) 135 (6,087) --------------- --------------- --------------- --------------- --------------- Fair value $ 78,347 $ 103,559 $ 9,822 $ 4,888 $ 196,616 =============== =============== =============== =============== =============== December 31, 2006 - ------------------------- Amortized cost $ 83,496 $ -- $ -- $ 4,846 $ 88,342 Unrealized gains 359 -- -- 121 480 Unrealized losses (1,273) -- -- -- (1,273) --------------- --------------- --------------- --------------- --------------- Net unrealized (loss) gain (914) -- -- 121 (793) --------------- --------------- --------------- --------------- --------------- Fair value $ 82,582 $ -- $ -- $ 4,967 $ 87,549 =============== =============== =============== =============== ===============
The fair value and gross unrealized losses of our available for sale investments aggregated by length of time that these individual debt securities have been in a continuous unrealized loss position at June 30, 2007, and December 31, 2006, is summarized in the table below:
June 30, 2007 December 31, 2006 --------------------------------------------- --------------------------------------------- Less than 12 Months Less than 12 Months (dollars in thousands) 12 Months or More Total 12 Months or More Total ------------- ------------- ------------- ------------- ------------- ------------- Number of securities: Debt securities 2 12 14 3 9 12 CMBS 6 -- 6 -- -- -- CDO securities 1 -- 1 -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- Total 9 12 21 3 9 12 Fair value $ 128,497 $ 44,959 $ 173,456 $ 35,799 $ 37,579 $ 73,378 Gross unrealized losses $ 3,888 $ 2,607 $ 6,495 $ 246 $ 1,027 $ 1,273
9 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) The unrealized losses shown above are as a result of increases in interest rates and interest rate spreads subsequent to the acquisition of the investments. All of the available for sale investments are performing according to their terms. Furthermore, we have the intent and ability to hold these investments to maturity, or at least until interest rates change such that the fair value is no longer less than book value. Accordingly, we have concluded that these declines in value are temporary. At June 30, 2007, approximately $187.5 million of our debt securities, CMBS and CDO securities were pledged as collateral under our repurchase facilities. NOTE 4 - REAL ESTATE OWNED During March 2007, we sold our economic interest in the Concord portfolio to an affiliated party (see Note 13), resulting in proceeds of approximately $12.0 million and a gain of approximately $3.6 million. As a result of the sale, we have reclassified property operations for the current period and all comparable prior periods as discontinued operations (see Note 12). NOTE 5 - DEFERRED CHARGES AND OTHER ASSETS, NET Deferred charges and other assets consisted of the following:
June 30, December 31, (In thousands) 2007 2006 ------------ ------------ Deferred financing charges, net of accumulated amortization of $552 in 2007 and $151 in 2006 $ 7,255 $ 7,467 Interest rate derivatives (see Note 9) 6,114 1,143 Other Assets 64 61 ------------ ------------ Total $ 13,433 $ 8,671 ============ ============
NOTE 6 - REPURCHASE FACILITIES Our repurchase facilities consisted of financing collateralized by:
June 30, December 31, (In thousands) 2007 2006 ------------ ------------ Debt securities $ 75,604 $ 79,427 Other investment classes (1) 327,520 84,149 ------------ ------------ Total $ 403,124 $ 163,576 ============ ============
(1) This facility includes mortgage loans, CMBS, bridge notes, mezzanine loans, subordinated notes and CDO securities pledged as collateral. As of June 30, 2007, the debt securities repurchase facilities (with RBC Capital Markets Corporation and UBS Financial Services Inc.) had a weighted average interest rate of 5.37% as compared to 5.41% at December 31, 2006. These borrowings are subject to 30-day settlement terms. Our other repurchase facilities with Citigroup Global Markets, Inc. ("Citigroup"), Bear Stearns International Limited ("Bear Stearns") and Liquid Funding, LTD ("Liquid Funding") had weighted average interest rates of 6.01% at June 30, 2007, as compared to 6.13% at December 31, 2006. Our repurchase facility with Citigroup expires upon the completion of a second planned CDO securitization, or December 2007, whichever comes first. 10 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) NOTE 7 - LINE OF CREDIT - RELATED PARTY During April 2007, we amended our revolving credit facility with Centerline to increase our borrowing capacity from $50.0 million to $80.0 million. The maturity date of the facility was also extended to June 2008 with a one-year optional extension. In the opinion of our Advisor, the terms of this facility are consistent with those of transactions with independent third parties. At June 30, 2007, and December 31, 2006, we had approximately $57.6 million and $15.0 million, respectively, in borrowings outstanding, bearing interest at a weighted average interest rate of 8.32% and 8.35%, respectively. NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following:
June 30, December 31, (In thousands) 2007 2006 ------------ ------------ Accrued interest payable $ 6,414 $ 3,078 Interest rate derivatives (see Note 9) 496 8,673 Refundable deposits (1) 265 1,161 Other 1,415 754 ------------ ------------ $ 8,590 $ 13,666 ============ ============
(1) Includes refundable deposits collected during the due diligence period of a loan transaction which are payable to other parties. NOTE 9 - DERIVATIVE INSTRUMENTS Our derivative instruments comprise cash flow hedges of debt and free-standing derivatives related to investments. While we carry derivative instruments in both categories at their estimated fair values on our condensed consolidated balance sheet, the changes in those fair values are recorded differently. To the extent that the cash flow hedges are effectively hedging the associated debt, we record changes in their fair values as a component of other comprehensive income within shareholders' equity. If a cash flow swap is ineffective, we include a portion of the change in its fair value in our condensed consolidated statement of income. With respect to the free-standing derivatives, we always include the change in their fair value in our condensed consolidated statement of income. CASH FLOW HEDGES OF DEBT Our borrowings under repurchase facilities, CDO notes payable, related party line of credit and our preferred shares of a subsidiary (subject to mandatory repurchase) incur interest at variable rates, exposing us to interest rate risk. We have established a policy for risk management outlining our objectives and strategies for use of derivative instruments to potentially mitigate such risks. Effective March 30, 2007, we entered into a three-year interest rate swap to reduce our exposure to possible increases in the variable interest rate on our subsidiary's preferred shares (subject to mandatory repurchase). Under the swap agreement, we are required to pay Bear Stearns a fixed rate of 4.97% on a notional amount of $25.0 million and will receive a floating rate equivalent to 3-month LIBOR. As of June 30, 2007, including the above mentioned swap, we had 45 interest rate swaps with an aggregate notional amount of $618.3 million, which will expire on dates ranging from March 2008 through February 2022 and are designated as cash flow hedges, with the hedged item being the interest payments on our variable-rate repurchase facilities, CDO notes payable, and our subsidiary's preferred shares (subject to mandatory repurchase). These swaps are recorded at fair value, with changes in fair value recorded in comprehensive income to the 11 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) extent the hedges are effective in achieving offsetting cash flows. Amounts in accumulated other comprehensive income will be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. Since we are hedging the interest payments on our variable-rate debt, the forecasted transactions are the interest payments. At inception and on an ongoing basis, we assess whether the swaps are effective in offsetting changes in the variable cash flows of the hedged item. We measure ineffectiveness of our cash flow hedges on a quarterly basis and record any ineffectiveness in interest expense on the condensed consolidated statements of income. With the exception of one, all of our swaps have been effective, and we expect they will continue to be effective in the future. We have recorded ineffectiveness of approximately $124,000 related to the one ineffective swap. This swap includes an embedded financing component, which has caused and will continue to cause some ineffectiveness, within the limits allowed by SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, to maintain hedge accounting. We estimate that approximately $682,000 of the net unrealized gains included in accumulated other comprehensive loss will be reclassified as an offset to interest expense within the next 12 months. FREE-STANDING DERIVATIVES RELATED TO INVESTMENTS We have three interest rate swaps with an aggregate notional amount of approximately $20.1 million, which expire on dates ranging from February 2017 through July 2017, that are hedging changes in the fair value of certain investments. We did not elect to apply hedge accounting to these swaps. We are required to maintain a minimum balance of collateral with Bank of America in connection with these interest rate swaps. From time to time, as market rates fluctuate, we may be called upon to post additional cash collateral with Bank of America. These payments are held as deposits with Bank of America and will be used to settle the swap at termination date if market rates fall below the fixed rates on the swaps. At June 30, 2007, we had approximately $150,000 of deposits held by Bank of America. FINANCIAL STATEMENT IMPACT Interest rate swaps for which we were in a net liability position are recorded in accounts payable and accrued expenses (see Note 8) and those for which we are in a net asset position are recorded in deferred charges and other assets (see Note 5). The amounts recorded were as follows:
June 30, December 31, (In thousands) 2007 2006 ------------ ------------ Net asset position $ 6,114 $ 1,143 Net liability position $ 496 $ 8,673
Net income included the following related to our free-standing derivatives and interest rate hedges:
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- (In thousands) 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Interest income $ (583) $ (127) $ (838) $ (202) Interest expense 5 61 5 66 Other income (681) (1,879) (650) (2,023) ----------- ----------- ----------- ----------- Net $ (1,259) $ (1,945) $ (1,483) $ (2,159) =========== =========== =========== ===========
12 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) NOTE 10 - COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) for the six months ended June 30, 2007 and 2006, was as follows:
Six Months Ended June 30, ------------------------ (In thousands) 2007 2006 ---------- ---------- Net income $ 8,641 $ 7,384 Net unrealized gain on derivative instruments 12,217 205 Net unrealized holding loss on investments (5,294) (10,293) Comprehensive income of equity investments -- 240 ---------- ---------- Comprehensive income (loss) 15,564 $ (2,464) ========== ==========
NOTE 11 - EARNINGS PER SHARE Diluted net income from continuing operations per share is calculated using the weighted average number of shares outstanding during the period plus the additional dilutive effect of common share equivalents. The dilutive effect of outstanding share options is calculated using the treasury stock method.
(In thousands, except per share amounts) Three Months Ended June 30, 2007: Income Shares Per Share ----------- ----------- ----------- Basic EPS (from continuing operations) $ 3,477 8,403 $ 0.41 Effect of dilutive securities -- -- -- ----------- ----------- ----------- Diluted EPS (from continuing operations) $ 3,477 8,403 $ 0.41 =========== =========== =========== Three Months Ended June 30, 2006: Basic EPS (from continuing operations) $ 5,107 8,304 $ 0.62 Effect of dilutive securities -- -- -- ----------- ----------- ----------- Diluted EPS (from continuing operations) $ 5,107 8,304 $ 0.62 =========== =========== =========== Six Months Ended June 30, 2007: Basic EPS (from continuing operations) $ 5,110 8,402 $ 0.61 Effect of dilutive securities -- -- -- ----------- ----------- ----------- Diluted EPS (from continuing operations) $ 5,110 8,402 $ 0.61 =========== =========== =========== Six Months Ended June 30, 2006: Basic EPS (from continuing operations) $ 7,395 8,304 $ 0.89 Effect of dilutive securities -- 1 -- ----------- ----------- ----------- Diluted EPS (from continuing operations) $ 7,395 8,305 $ 0.89 =========== =========== ===========
13 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) NOTE 12 - DISCONTINUED OPERATIONS Income (loss) from discontinued operations included the following related to the Concord portfolio (which we sold from our real estate owned portfolio in March 2007) and the Reserve at Autumn Creek (which we sold from our real estate owned portfolio in October 2006):
Three months ended Six months ended June 30, June 30, --------------------------- --------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ Revenues $ -- $ 2,338 $ 1,815 $ 4,731 ============ ============ ============ ============ Gain on sale of real estate owned $ -- $ -- $ 3,611 $ -- ============ ============ ============ ============ Net income (loss) $ -- $ 108 $ 3,531 $ (11) ============ ============ ============ ============
NOTE 13 - RELATED PARTY TRANSACTIONS Fees to Advisor - --------------- Under our amended Advisory Services Agreement with our Advisor (the "Advisory Agreement"), which was amended in March 2007, we pay certain fees, in addition to reimbursements of certain administrative and other costs that our Advisor incurs on our behalf for its ongoing management and operations of our Company: Fees/Compensation Annual Amount I. Asset management fees Our Advisor receives an asset management fee equal to 1.75% per year for the first $300.0 million of our equity balance (as defined in the Advisory Agreement) and 1.50% per year of our adjusted equity balance in excess of $300.0 million. II. Loan origination fees Our Advisor is entitled to receive, with respect to each investment originated by us, the origination points, if any, paid by borrowers. In connection with the acquisition of investments for us, our Advisor may also act as an advisor to third parties which participate with us in such investments and may receive origination points, if any, from such third parties or their borrowers. In the event our Advisor is not entitled to an origination fee from a borrower for a loan the Advisor originated for investment by us, we will pay an origination fee or a referral fee consistent with industry practice, amount and terms. III.Annual incentive management Our Advisor is entitled to receive incentive fees compensation for each fiscal year in an amount equal to the product of: (A) 25% of the dollar amount by which (1) Adjusted Funds from Operations ("AFFO") before this incentive management fee per share (based on the weighted average number of shares outstanding), excluding non-cash gains or losses due to the recording of fair value hedges exceeds (2) the weighted average per share value of (x) $20 and (y) the prices per share of any secondary offerings by the Company multiplied by the greater of: 14 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) (a) 9.00%; and (b) the Ten-Year U.S. Treasury Rate plus 2% per annum multiplied by (B) the weighted average number of shares outstanding during such year. AFFO means net income (computed in accordance with GAAP) including realized gains (or losses) from debt restructuring and sales of non-real estate assets, plus depreciation and amortization on real property, and after adjustments for unconsolidated partnerships and joint ventures. A minimum of 10% and a maximum of 50% of the annual incentive management fee is to be paid in common shares, at the discretion of our Board of Trustees. IV. Shared services expenses Our Advisor is reimbursed by us for (i) the actual costs to the Advisor of goods, materials and services used for and by us obtained from unaffiliated parties, (ii) the costs of certain personnel employed by the Advisor and directly involved in the organization and business of our Company and for legal, accounting, transfer agent, reinvestment and redemption plan administration, data processing, duplication and investor communications services performed by employees or officers of the Advisor. Prior to the March 2007 amendment to the Advisory Agreement, the following fees were paid to the Advisor differently than they are currently paid. o ASSET MANAGEMENT FEES - We paid asset management fees equal to 1.75% of our total equity balance, adjusted by certain costs and one-time events. o INCENTIVE MANAGEMENT FEES - We paid incentive management fees based on a calculation that used an AFFO and specified yield - based threshold. Payment of this fee was made in cash only. Other fees as described above are consistent with the Advisory Agreement prior to the March 2007 amendment. Other Related Party Transactions - -------------------------------- We pay Centerline Servicing Inc ("CSI"), an affiliate of Centerline, a fee for servicing and special servicing our mortgage loans and other investments equal to the Advisor's actual costs of performing such services but not less than 0.08% per year of the principal balance of the related mortgage loan or other investment. During 2006, we entered into a co-investment agreement with Centerline Real Estate Special Situations Mortgage Fund LLC ("CRESS"), whereby we and CRESS will participate in investment opportunities that are originated by affiliates and which meet the investment criteria of both companies. A portion of our 2007 investments were made pursuant to this agreement and we will continue to pursue investment opportunities with CRESS throughout 2007. During April 2007, we amended our loan agreement with Centerline to increase our borrowing capacity to $80.0 million and extend the maturity date of the facility to June 2008 (see Note 7). During 2007, we partially or fully funded 19 first mortgage, bridge and mezzanine loans and subordinated notes, totaling approximately $244.9 million (see Note 2), originated by Centerline Mortgage Capital Inc. ("CMC"), formerly known as CharterMac Mortgage Capital Corporation, an affiliate of our Advisor. CMC received approximately $924,000 in loan origination fees related to these originations, all of which were paid by the borrowers. 15 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) During 2007, we funded two mezzanine loans aggregating $50.7 million to properties developed by a company partly owned by the chairman of Centerline. Those transactions were approved by the independent members of our Board of Trustees and, in the opinion of management, the terms of these mezzanine transactions were consistent with those transactions with independent third parties. During March 2007 Centerline entered into a 10b5-1 Plan whereby it may purchase up to 9.8% of our common shares of beneficial interest in open market purchases based on pre-determined parameters. Through June 30, 2007, it has purchased approximately 199,000 common shares under this plan, amounting to approximately 2.4% of our outstanding common shares at June 30, 2007. Centerline has also purchased 280,000 of our 7.25% Series A Cumulative Convertible Preferred Shares ("Preferred Shares") that we issued in July 2007 (see Note 15). During March 2007, we sold our economic interest in the Concord properties to CRESS (see Note 4). The following summarizes all costs paid or payable to our Advisor or its affiliates:
Three months ended Six months ended (In thousands) June 30, June 30, --------------------------- --------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ Fees to Advisor: Shared services expenses $ 338 $ 497 $ 793 $ 699 Asset management fees 435 480 819 916 Incentive management fee -- -- -- 188(1) ------------ ------------ ------------ ------------ Total fees to Advisor $ 773 $ 977 $ 1,612 $ 1,803 ============ ============ ============ ============ Other Fees: Servicing fees $ 145 $ -- $ 274 $ -- Interest paid on related party line of credit(2) 805 745 902 745 ------------ ------------ ------------ ------------ Total other fees $ 950 $ 745 $ 1,176 $ 745 ============ ============ ============ ============
(1) Accrual was based on the proportion of actual earnings as compared to our estimates of full-year results at June 30, 2006. Later in 2006, when it was determined that certain financial thresholds would not be achieved, the accrual was reversed and no incentive fees were paid. (2) Represents interest predominantly on the line of credit with Centerline (see Note 7). NOTE 14 - COMMITMENTS AND CONTINGENCIES (a) Guarantees Prior to 2000, we entered into a loan program with Fannie Mae, under which we agreed to guarantee a first-loss position on certain loans, which could have potentially resulted in an aggregate exposure of $7.5 million. In June and October of 2000, we originated two loans totaling $3.3 million under the program. In September 2003, we transferred and assigned all of our obligations with respect to these two loans to CMC, a subsidiary of Centerline, both of which are affiliates of the Advisor. Pursuant to the agreement with CMC, Centerline guaranteed CMC's obligations, and we agreed to indemnify both CMC and Centerline for any losses incurred in exchange for retaining all fees which we were otherwise entitled to receive from Fannie Mae under the program. The maximum exposure at June 30, 2007, was $3.1 million, although we expect that we will not be called upon to fund these guarantees. In the first quarter of 2003, we discontinued our loan program with Fannie Mae and will issue no further guarantees pursuant to such program. 16 AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2007 (Unaudited) For these guarantees, we monitor the status of the underlying properties and evaluate our exposure under the guarantees. To date, we have concluded that no accrual for probable losses is required under SFAS No. 5, ACCOUNTING FOR CONTINGENCIES. (b) Future Funding Commitments We are committed to additionally fund the following first mortgage and mezzanine loans at June 30, 2007:
(In thousands) MAXIMUM AMOUNT OF COMMITMENT ------------------------------------------ LESS THAN ISSUE DATE PROJECT LOCATION TOTAL 1 YEAR 1-3 YEARS - ---------- ------------------------ ---------------- ------------------------------------------ Apr-05 Atlantic Hearthstone Hillsborough, NJ $ 729 $ 729 $ -- Nov-06 12 Atlantic Station Hotel Atlanta, GA 1,000 1,000 -- Feb-07 Aberdeen Apartments Houston, TX 976 976 -- Jun-07 122 Greenwich Ave. New York, NY 6,454 6,454 -- ------------ ------------ ------------ TOTAL FUTURE FUNDING COMMITMENTS $ 9,159 $ 9,159 $ -- ============ ============ ============
NOTE 15 - SUBSEQUENT EVENTS During July 2007, we issued 680,000 Preferred Shares at a price of $25.00 per share. Of this total, Centerline purchased 280,000 shares, which amounts to 41.2% of the total issuance. These shares, which pay annual dividends of $1.8125, can be converted into common shares at an initial rate of 2.2701 common shares per preferred share. This offering generated $16.0 million in proceeds, net of offering costs, and will be used for investment activity. In addition to the common shares owned at June 30, 2007 and the purchase of the Preferred Shares mentioned above, Centerline has made subsequent purchases of our common shares, amounting to an ownership percentage of over 10%, assuming all of the Preferred Shares were converted to common shares. On July 12, 2007, Daryl J. Carter resigned as President. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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 and Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of us and our management (which includes our Advisor) and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, which are outlined in detail under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2006, include, but are not limited to, the following: o Risks of investing in non-investment grade commercial real estate investments; o Competition in acquiring desirable investments; o Interest rate fluctuations; o Risks associated with investments in real estate generally and the properties which secure many of our investments; o General economic conditions and economic conditions in the real estate markets specifically, particularly as they affect the value of our assets and the credit status of our borrowers; o Dependence on our Advisor for all services necessary for our operations; o Conflicts which may arise among us and other entities affiliated with our Advisor that have similar investment policies to ours; o Risks associated with the repurchase agreements we utilize to finance our investments and our ability to raise capital; o Risks associated with the failure to qualify as a Real Estate Investment Trust ("REIT"); and o Risks associated with Collateral Debt Obligation ("CDO") securitization transactions, which include, but are not limited to: o The inability to acquire eligible investments for a CDO issuance; o Interest rate fluctuations on variable-rate swaps entered into to hedge fixed-rate loans; o The inability to find suitable replacement investments within reinvestment periods; and o The negative impact on our cash flow that may result from the use of CDO financings with over-collateralization and interest coverage requirements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report. Factors Affecting Comparability - ------------------------------- During 2007, we sold our economic interest in the Concord portfolio, resulting in a gain of approximately $3.6 million. This amount is recorded in discontinued operations along with rental income, property operations, mortgage interest and depreciation for the period up to the sale. Property operations from prior comparable periods have been reclassified to conform to current period presentation. 18 Investment Activity - ------------------- During the three months ended June 30, 2007 and 2006, we partially or fully funded the following investments, not reflecting any discounts or premiums:
Three months ended Three months ended (In thousands) June 30, 2007 June 30, 2006 ----------------------------- ----------------------------- Weighted Weighted Average Average Amount Interest Rate Amount Interest Rate ------------- ------------- ------------- ------------- Mortgage loans: First mortgage loans $ 8,200 5.89% $ 151,200 6.28% Bridge loans -- -- -- -- Mezzanine loans 110,131 8.25 5,500 9.05 Subordinated notes 23,380 8.47 -- -- CMBS 115,301 5.93 -- -- CDO securities -- -- -- -- ------------- ------------- ------------- ------------- Total $ 257,012 7.15% $ 156,700 6.37% ============= ============= ============= =============
During the six months ended June 30, 2007 and 2006, we partially or fully funded the following investments, not reflecting any discounts or premiums:
Six months ended Six months ended (In thousands) June 30, 2007 June 30, 2006 ----------------------------- ----------------------------- Weighted Weighted Average Average Amount Interest Rate Amount Interest Rate ------------- ------------- ------------- ------------- Mortgage loans: First mortgage loans $ 42,900 5.75% $ 151,200 6.28% Bridge loans 19,660 6.51 -- -- Mezzanine loans 155,824 8.73 5,500 9.05 Subordinated notes 26,490 8.30 -- -- CMBS 115,301 5.93 -- -- CDO securities 10,083 9.00 -- -- ------------- ------------- ------------- ------------- Total $ 370,258 7.36% $ 156,700 6.37% ============= ============= ============= =============
During the three months ended March 31, 2006, we had no origination activity. Results of Operations - --------------------- The following is a summary of our operations for the periods ended June 30, 2007 and 2006:
(In thousands) Three months ended June 30, Six months ended June 30, ----------------------------------------- ------------------- 2007 2006 Change 2007 2006 Change -------- -------- -------- -------- -------- -------- Total revenues $ 15,312 $ 7,249 111.2% $ 27,813 $ 12,920 115.3% Total expenses 12,853 6,265 105.2 23,690 10,471 126.2 Total other income 1,018 4,123 (75.3) 987 4,946 (80.0) Income (loss) from discontinued operations, including gain on sale -- 108 (100.0) 3,531 (11) N/A -------- -------- -------- -------- -------- -------- Net income $ 3,477 $ 5,215 (33.3)% $ 8,641 $ 7,384 17.0% ======== ======== ======== ======== ======== ========
19 The growth in our annual revenues during the three and six month periods ended June 30, 2007, as compared to the same periods in 2006, resulted primarily from increases in investment volume, as well as participation income received in connection with a paydown of one of our mortgage loans. Expenses also increased for these periods due to: o financing costs (particularly due to higher debt balances and slight increases in interest rates); o amortization costs due to a higher balance of deferred costs resulting from our 2006 CDO securitization; and o general and administrative costs (particularly legal costs due to a higher amount of specially serviced assets in our portfolio, CDO administrative costs as a result of our 2006 CDO securitization and loan servicing costs which we no longer pay through quarterly expense reimbursement to our Advisor). Other income (loss) decreased during 2007 primarily as a result of the sale of our investment in ARCap during 2006 and the resulting absence of equity income. The balance in 2007 relates to the change in the fair value of free-standing derivatives, as well as an additional gain recognized from the sale of our investment in ARCap resulting from the release of escrow funds upon the expiration of certain holdback requirements. Income from discontinued operations includes operations from real estate owned that was sold during 2007 and 2006. The increase for the six months ended June 30, 2007, as compared to 2006, is due to the recognition of a gain on sale of a portfolio of properties. REVENUES
Three Months Ended Change % of % of ---------------------------- from 2007 2006 June 30, June 30, Prior Total Total (In thousands) 2007 2006 Period Revenues Revenues ------------ ------------ ------------ ------------ ------------ Interest income: Mortgage loans $ 12,712 $ 3,903 225.7% 83.0% 53.9% Debt securities 1,208 2,996 (59.7) 7.9 41.3 CMBS 862 -- 100.0 5.6 -- Revenue bonds 105 141 (25.5) 0.7 1.9 Temporary investments 89 52 71.2 0.6 0.7 CDO securities 183 -- 100.0 1.2 -- Other revenues 153 157 (2.5) 1.0 2.2 ------------ ------------ ------------ ------------ ------------ Total revenues $ 15,312 $ 7,249 111.2% 100.0% 100.0% ============ ============ ============ ============ ============
Six Months Ended Change % of % of ---------------------------- from 2007 2006 June 30, June 30, Prior Total Total (In thousands) 2007 2006 Period Revenues Revenues ------------ ------------ ------------ ------------ ------------ Interest income: Mortgage loans $ 22,928 $ 6,124 274.4% 82.4% 47.4% Debt securities 2,435 6,215 (60.8) 8.8 48.1 CMBS 862 -- 100.0 3.1 -- Revenue bonds 211 284 (25.7) 0.8 2.2 Temporary investments 259 135 91.9 0.9 1.0 CDO securities 190 -- 100.0 0.7 -- Participation income 699 -- 100.0 2.5 -- Other revenues 229 162 41.4 0.8 1.3 ------------ ------------ ------------ ------------ ------------ Total revenues $ 27,813 $ 12,920 115.3% 100.0% 100.0% ============ ============ ============ ============ ============
20 At June 30, we had the following investments (exclusive of Real Estate Owned and temporary investments):
(In thousands) 2007 2006 -------------------------------------------- -------------------------------------------- Weighted Weighted Carrying % of Average Carrying % of Average Amount Total Interest Rate Amount Total Interest Rate ------------ ------------ ------------ ------------ ------------ ------------ Mortgage loans $ 727,675 78.7% 6.28% $ 213,487 51.5% 8.79% Debt securities 78,347 8.5 6.49 194,286 46.9 6.17 CMBS 103,559 11.2 5.93 -- -- -- CDO securities 9,822 1.1 9.00 -- -- -- Revenue bonds 4,888 0.5 8.70 6,489 1.6 8.68 ------------ ------------ ------------ ------------ ------------ ------------ $ 924,291 100.0% 6.30% $ 414,262 100.0% 7.54% ============ ============ ============ ============ ============ ============
Interest income from mortgage loans increased significantly for the 2007 periods as compared to 2006, primarily due to the funding of 77 first mortgage loans, bridge notes, mezzanine loans, and subordinated notes throughout 2006 and 2007 and the partial funding of several existing mezzanine loans during 2006. The decrease in the weighted average interest rates on mortgage loans as of June 30, 2007, as compared to June 30, 2006, was primarily due to the funding of a greater amount of higher credit quality loans, as opposed to riskier, higher coupon loans as we had funded in the past. Interest income from debt securities decreased for the three and six months ended June 30, 2007, primarily due to the sale of 20 FNMA certificates in November 2006, as well as the payoff of three GNMA certificates during 2006. The increase in the weighted average interest rate on debt securities during 2007 is due to the lower yields of the FNMA certificates sold relative to the yields of those retained. Interest income from CMBS increased for the 2007 periods, as compared to 2006, due to the purchase of nine CMBS investments during the second quarter of 2007. There were no investments in CMBS in prior periods. Interest income from revenue bonds for the three and six months ended June 30, 2007, was lower than the comparable prior year period, primarily due to the payoff of two revenue bonds during 2006. Interest income from temporary investments increased for the 2007 periods, as compared to 2006, primarily due to the investment of excess cash on hand resulting from the payoff of several mortgage loans and debt securities, as well as interest earned on restricted cash balances held with custodians. Interest income from CDO securities increased for the three and six months ended June 30, 2007, as compared to 2006, due to an investment made during the first quarter of 2007 purchasing various classes of Nomura CDO securities. There were no investments in CDO securities made in prior periods. Participation income for the six months ended June 30, 2007 represents a one time payment received pursuant to a participating arrangement for a mortgage loan that was repaid in the first quarter of 2007. There was no such income received during 2006 or the second quarter of 2007. 21 EXPENSES
Three Months Ended Change % of % of --------------------------- from 2007 2006 June 30, June 30, Prior Total Total (In thousands) 2007 2006 Period Revenues Revenues ------------ ------------ ------------ ------------ ------------ Interest $ 10,638 $ 4,227 151.7% 69.5% 58.3% Interest-subsidiary preferred shares 554 556 (0.4) 3.6 7.7 General and administrative 687 490 40.2 4.5 6.8 Fees to Advisor 773 977 (20.9) 5.0 13.5 Amortization and other 201 15 1,240.0 1.3 0.2 ------------ ------------ ------------ ------------ ------------ Total expenses $ 12,853 $ 6,265 105.2% 83.9% 86.4% ============ ============ ============ ============ ============
Six Months Ended Change % of % of --------------------------- from 2007 2006 June 30, June 30, Prior Total Total (In thousands) 2007 2006 Period Revenues Revenues ------------ ------------ ------------ ------------ ------------ Interest $ 19,133 $ 6,586 190.5% 68.8% 51.0% Interest-subsidiary preferred shares 1,123 1,074 4.6 4.0 8.3 General and administrative 1,421 978 45.3 5.1 7.6 Fees to Advisor 1,612 1,803 (10.6) 5.8 14.0 Amortization and other 401 30 1,236.7 1.4 0.2 ------------ ------------ ------------ ------------ ------------ Total expenses $ 23,690 $ 10,471 126.2% 85.1% 81.0% ============ ============ ============ ============ ============
Interest expense increased for the three and six months ended June 30, 2007, as compared to 2006, primarily due to the increased borrowings made through 2007 and 2006 to fund origination activity and the slight increase in market interest rates during 2006 and 2007. Excluding mortgages on real estate owned (in the 2006 period), we had total debt as follows:
Three months ended Six months ended June 30, June 30, -------------------------- -------------------------- (dollars in thousands) 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Average outstanding $ 814,735 $ 339,032 $ 726,950 $ 286,462 Weighted average interest rate (including effect of interest rate swaps) 5.49% 5.64% 5.57% 5.11% Average notional amount of interest rate swaps $ 607,572 $ 148,607 $ 582,723 $ 91,803 Weighted average rate of interest rate swaps 5.18% 4.96% 5.18% 4.72%
General and administrative expenses increased for the three and six months ended June 30, 2007, as compared to 2006, due to higher legal fees resulting from a larger amount of watched assets as our portfolio has grown, recurring CDO administrative costs incurred during the 2007 period as a result of our 2006 CDO securitization and increased servicing costs. During 2006, our servicing costs were paid through quarterly expense reimbursements made to our Advisor. These increases were partially offset by decreased insurance costs, decreased stock option costs (all of which were fully amortized in April 2006) and excise tax accrual (as no excise taxes are anticipated for 2007). Fees to Advisor decreased for the 2007 periods, as compared to 2006, due to lower shared services costs because servicing costs are now billed separately by our Advisor's servicing affiliate, as well as by the absence of an accrual of incentive management fees in the 2007 period, as we do not anticipate current year earnings to reach incentive fee payment hurdles. Amortization and other costs increased for the 2007 periods, as compared to the same periods in 2006, due to higher deferred financing costs as a result of our 2006 CDO securitization. 22 OTHER INCOME Other income decreased for the three and six months ended June 30, 2007, as compared to 2006, primarily due to the sale of our investment in ARCap in 2006, which had earned equity income in the 2006 period. Funds from Operations - --------------------- Funds from operations ("FFO"), represents net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of property, excluding depreciation and amortization related to real property and including funds from operations for unconsolidated joint ventures calculated on the same basis. FFO is calculated in accordance with the National Association of Real Estate Investment Trusts ("NAREIT") definition. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity. Our management considers FFO a supplemental measure of operating performance, and, along with cash flows from operating activities, financing activities, and investing activities, it provides investors with an indication of our ability to incur and service debt, make capital expenditures, and fund other cash needs. The following table reconciles net income to FFO for the three months ended June 30, 2007 and 2006:
(In thousands) Three months ended Six months ended June 30, June 30, --------------------------- --------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ Net income $ 3,477 $ 5,215 $ 8,641 $ 7,384 Add back: Depreciation of real property(1) -- 450 336 900 Less: Gain on sale of real property(1) -- -- (3,611) -- ------------ ------------ ------------ ------------ FFO 3,477 $ 5,665 $ 5,366 $ 8,284 ============ ============ ============ ============ Cash flows from: Operating activities $ 3,646 $ 3,578 $ 5,275 $ 5,232 ============ ============ ============ ============ Investing activities $ (186,619) $ (130,507) $ (270,947) $ (130,274) ============ ============ ============ ============ Financing activities $ 175,298 $ 129,943 $ 264,952 $ 117,520 ============ ============ ============ ============ Weighted average shares outstanding: Basic 8,403 8,304 8,402 8,304 ============ ============ ============ ============ Diluted 8,403 8,304 8,402 8,305 ============ ============ ============ ============
(1) Related to properties sold during 2007 and 2006 and included in discontinued operations in our condensed consolidated statements of income. Since not all companies calculate FFO in a similar fashion, our calculation presented above may not be comparable to similarly titled measures reported by other companies. Liquidity and Capital Resources - ------------------------------- SOURCES OF FUNDS We expect that cash generated from our investments, as well as our borrowing capacity, will meet our needs for short-term liquidity and will be sufficient to pay all expenses and distributions to our shareholders in amounts sufficient to retain our REIT status in the foreseeable future. In order to qualify as a REIT under the Internal Revenue Code, as amended ("the Code"), we must, among other things, distribute at least 90% of our taxable income. We believe that we are in compliance with the REIT-related provisions of the Code. 23 As of June 30, 2007, our credit facilities consisted of: o repurchase facilities; and o a related party line of credit. Repurchase Facilities - --------------------- Under our repurchase agreements we pledge additional assets as collateral to our repurchase agreement counterparties (i.e., lenders) when the estimated fair value of the existing pledged collateral under such agreements declines and such lenders demand additional collateral (i.e., a margin call). Margin calls result from a decline in the value of our investments collateralizing our repurchase agreements, generally due to changes in the estimated fair value of such investments. This could result from principal reduction of such investments due to scheduled amortization payments or unscheduled principal prepayments on the mortgages underlying our investments, changes in market interest rates and other market factors. To cover a margin call, we may pledge additional securities or cash. Through June 30, 2007, we paid approximately $450,000 due to margin calls on our repurchase facility with Liquid Funding. We believe we have adequate financial resources to meet our obligations, including margin calls, as they come due and to fund dividends we declare as well as to actively pursue our investment strategies. However, should market interest rates and/or prepayment speeds on our investments suddenly increase, margin calls on our repurchase agreements could result, causing an adverse change in our liquidity position. At June 30, 2007, we had the following repurchase facilities in place: DEBT SECURITIES As a vehicle to leverage our investments in debt securities, we have repurchase agreements with two counterparties, RBC Capital Markets and UBS Financial Services. These facilities offer advance rates between 94% and 97% of collateral value and borrowing rates between LIBOR minus 0.03% and LIBOR plus 0.10%. The borrowings are subject to 30-day settlement terms. As of June 30, 2007, the amount outstanding under these repurchase facilities was $75.6 million, with a weighted average interest rate of 4.62% including the effects of interest rate hedges in place on these facilities. OTHER INVESTMENT CLASSES During 2006, we began financing our investment growth by utilizing CDO securitizations. Prior to a securitization, we finance investments through a repurchase facility, which is repaid from the proceeds received when the CDO securitization is complete. During December 2006, we executed a repurchase agreement with Citigroup for the purpose of funding investment activity. Advance rates on the borrowings from this facility, ranging from 80% to 90% of collateral value, are determined on an asset-by-asset basis. Interest on the borrowings, which ranges from LIBOR plus 0.40% to LIBOR plus 1.25%, is also determined on an asset-by-asset basis. The repurchase facility expires upon completion of a second planned CDO securitization, or December 2007, whichever comes first. At June 30, 2007, we had approximately $266.6 million of borrowings outstanding under this facility at a weighted average interest rate of 5.31%, including the effects of interest rate hedges. In the event we do not complete the anticipated CDO securitization, we believe that we can extend the existing facility or refinance it with another lending institution. During the second quarter of 2007, we executed repurchase agreements with Bear Stearns and Liquid Funding for the purpose of providing financing for our investments in CMBS and CDO securities. Advance rates on the borrowings from the Bear Stearns facility range from 58-80% of the collateral value and interest on the borrowings ranged from 30-day LIBOR plus 0.55% to 30-day LIBOR plus 0.85%. The borrowings are subject to 30-day settlement terms. Advance rates on the borrowings from Liquid Funding facility are at 73% of the collateral value and interest on these borrowings is at 30-day LIBOR plus 0.50%. The borrowings are subject to 30-day settlement terms. At June 30, 2007, we had approximately $60.9 million of borrowings outstanding under these facilities at a weighted average interest rate of 5.94%, including the effects of interest rate hedges. 24 Related Party Line of Credit - ---------------------------- We finance our remaining investing activity primarily through borrowings from a credit facility we maintain with Centerline, which was amended in April 2007 to increase our borrowing capacity and extend the maturity date of the facility to June 2008. This $80.0 million facility offers borrowing rates of LIBOR plus 3.00%. As of June 30, 2007, the amount outstanding was $57.6 million with a weighted average interest rate of 8.32%. We had approximately $22.4 million available to borrow on this line at June 30, 2007. Other Financing - --------------- As noted above, in 2006, we began financing our investment growth by utilizing CDO securitizations. At June 30, 2007, we had outstanding CDO securitization certificates totaling $362.0 million at a weighted average rate of 5.42%, including the effects of interest rate hedges. We have capacity to raise approximately $170.0 million of additional funds by issuing either common or preferred shares pursuant to a shelf registration statement filed with the SEC. Of this amount, we issued $17.0 million of preferred securities in July 2007 (see Note 15 to our condensed consolidated financial statements). If market conditions warrant, we may seek to raise additional funds for investment through further offerings, although the timing and amount of such offerings cannot be determined at this time. SUMMARY OF CASH FLOWS During the six months ended June 30, 2007, as compared to the six months ended June 30, 2006, the net change in cash and cash equivalents increased by approximately $6.8 million. Operating cash flows were consistent with the prior year period. While net income excluding the gain on sale of our real estate owned was lower than in 2006, this decrease was offset by lower payments to our Advisor. An increase in net cash used in investing activities (approximately $140.7 million) was due to investments made in mortgage loans, CMBS and CDO securities during 2007 as compared to lower origination activity in the 2006 period, partially offset by proceeds received from the sale of real estate owned and a higher amount of principal repayments made on our mortgage loans. The increase in net cash provided by financing activities (approximately $147.4 million) can be attributed to the higher level of investing activity during the 2007 period, offset by partial repayments of the repurchase facilities and our related party line of credit. LIQUIDITY REQUIREMENTS AFTER JUNE 30, 2007 During July 2007, we partially or fully funded approximately $25.3 million of first mortgage loans, mezzanine loans and CMBS. Financing for these acquisitions was made through our related party line of credit or repurchase facilities. During July and August 2007, we paid approximately $2.7 million due to margin calls on our repurchase facility with Liquid Funding. During August 2007, dividends of approximately $1.9 million ($0.225 per share), which were declared in June 2007, will be paid to common shareholders. OTHER MATTERS We are 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. 25 Dividends - --------- The following table outlines our total dividends and return of capital amounts, determined in accordance with GAAP, for the six months ended June 30:
(In thousands) 2007 2006 ------------ ------------ Total dividends $ 3,782 $ 6,644 ============ ============
None of the dividends constituted a return of capital. Commitments, Contingencies and Off-Balance Sheet Arrangements - ------------------------------------------------------------- See Note 14 to our condensed consolidated financial statements for a summary of our guarantees and commitments and contingencies. We have no unconsolidated subsidiaries, special purpose off-balance sheet financing entities, or other off-balance sheet arrangements. CONTRACTUAL OBLIGATIONS In conducting business, we enter into various contractual obligations. Details of these obligations, including expected settlement periods as of June 30, 2007, are contained below.
Payments Due by Period (In thousands) ------------------------------------------------------------------- Less than More than Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years ----------- ----------- ----------- ----------- ----------- Debt: CDO notes payable (1)(2) $ 362,000 $ -- $ -- $ -- $ 362,000 Repurchase facilities: Debt securities (1)(2) 75,604 75,604 -- -- -- Other investment classes(1)(2)(3) 327,520 327,520 -- -- -- Preferred shares of subsidiary (subject to mandatory repurchase)(1)(2) 25,000 -- -- -- 25,000 Line of credit - related party (1)(2) 57,600 57,600 -- -- -- Funding Commitments: Future funding loan commitments 9,159 9,159 -- -- -- ----------- ----------- ----------- ----------- ----------- Total $ 856,883 $ 469,883 $ -- $ -- $ 387,000 =========== =========== =========== =========== ===========
(1) The amounts included in each category reflect the current expiration, reset or renewal date of each facility or security certificate. Management has the ability and intent to renew, refinance or remarket the borrowings beyond their current due dates. (2) Includes principal amounts only. At June 30, 2007, the weighted average interest rate on our debt was 6.06%. (3) Approximately $266.6 million of this debt is related to a repurchase facility that will be repaid upon the closing of our second CDO securitization currently anticipated to take place during the second half of 2007. Recently Issued Accounting Standards - ------------------------------------ See NEW ACCOUNTING PRONOUNCEMENTS in Note 1 to the condensed consolidated financial statements. Inflation - --------- Inflation did not have a material effect on our results for the periods presented. 26 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk is the exposure to loss resulting from changes in interest rates and equity prices. The primary market risk to which we are 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 our control. INTEREST RATE RISK Interest rate fluctuations can adversely affect our income in many ways and present a variety of risks, including the risk of mismatch between asset yields and borrowing rates. Our operating results depend in large part on differences between the income from our assets (net of credit losses) and our borrowing costs. Although we have originated variable-rate loans, most of our assets generate fixed returns and have terms in excess of five years. We fund the origination and acquisition of a significant portion of our assets with borrowings that have variable interest rates that reset relatively rapidly, such as weekly, monthly, or quarterly. In most cases, the income from assets will respond more slowly to interest rate fluctuations than the cost of borrowings, creating a mismatch between asset yields and borrowing rates. Consequently, changes in interest rates, particularly short-term interest rates, may influence our net income. Our borrowings under our related party line of credit, repurchase facilities and our subsidiary's preferred securities subject to mandatory redemption bear interest at rates that fluctuate with LIBOR. Various financial vehicles exist which would allow our management to mitigate the impact of interest rate fluctuations on our cash flows and earnings. We enter into certain hedging transactions to protect our positions from interest rate fluctuations and other changes in market conditions. These transactions include interest rate swaps and fair value hedges. Interest rate swaps are entered into in order to hedge against increases in floating rates on our repurchase facilities. Fair value hedges are entered into for some of our investments to hedge our risk that interest rates may affect the fair value of these investments, prior to securitization. Based on the $847.7 million of borrowings outstanding at June 30, 2007, of which $176.5 million remains unhedged, a 1% change in LIBOR would impact our annual net income and cash flows by approximately $1.8 million. However, as the interest income from some of our loans is also based on LIBOR, a 1% change in LIBOR would impact our annual net income and cash flows from such loans by approximately $1.3 million. The net effect of a 1% change in LIBOR would therefore result in a change of our annual net income by approximately $421,000. In addition, a change in LIBOR could also impede the collections of interest on our variable-rate loans, as there might not be sufficient cash flow at the properties securing such loans to pay the increased debt service. Because the value of our debt securities fluctuates with changes in interest rates, rate fluctuations will also affect the market value of our net assets. If we complete a second CDO transaction, substantially all of our debt will be fixed through interest rate swaps on the CDO debt. ITEM 4. CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this quarterly report. Based on such evaluation, such officers have concluded that our disclosure controls and procedures as of the end of the period covered by this quarterly report were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. (b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 27 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. We are not party to any pending material legal proceedings. ITEM 1A. RISK FACTORS. There have been no material changes to the risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The company held its annual meeting of shareholders on June 12, 2007. The shareholders elected Jeff T. Blau, James L. Duggins, George P. Jahn, Harry Levine, Scott M. Mannes, Stanley R. Perla, and Marc D. Schnitzer as trustees for one-year terms which will expire in 2008. Common shares of beneficial interest were voted as follows: Trustee nominee For Abstain/withheld ----------------- --------- ----------------- Jeff T. Blau 6,320,626 1,251,932 James L. Duggins 7,342,458 230,100 George P. Jahn 7,369,139 203,419 Harry Levine 7,369,755 202,803 Scott M. Mannes 7,362,941 209,617 Stanley R. Perla 7,372,912 199,646 Marc D. Schnitzer 7,332,612 239,946 There were no votes "against" any of the nominees. The shareholders were also asked to ratify the appointment of Deloitte & Touche LLP as the independent registered public accountants of American Mortgage Acceptance Company. The ratification was identified as proposal 2 in the proxy statement for the annual meeting and approved by the shareholders. Common Shares of beneficial interests were voted on as follows: For 7,389,057 Against 139,971 Abstain 43,530 ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS. 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* * Filed herewith. 28 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 8, 2007 By: /s/ James L. Duggins -------------------- James L. Duggins Chief Executive Officer (Principal Executive Officer) Date: August 8, 2007 By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 29 Exhibit 31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. I, James L. Duggins, hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2007, of American Mortgage Acceptance Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 8, 2007 By: /s/ James L. Duggins -------------------- James L. Duggins Chief Executive Officer (Principal Executive Officer) 30 Exhibit 31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. I, Robert L. Levy, hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2007, of American Mortgage Acceptance Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 8, 2007 By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 31 Exhibit 32.1 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, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), James L. Duggins, as Chief Executive Officer of the Company, and Robert L. Levy, as Chief Financial Officer of the Company each hereby certifies, 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 results of operations of the Company. By: /s/ James L. Duggins By: /s/ Robert L. Levy -------------------- ------------------ James L. Duggins Robert L. Levy Chief Executive Officer Chief Financial Officer August 8, 2007 August 8, 2007 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----