-----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, F7CnpGT7UzI2kqYzll5fV078+OgD57F7NE9cnhTUTbepP06ZCkD0XavnVngbnu+7 FkMT+CRBygFOe18IPCyPZQ== 0000882261-96-000015.txt : 19960814 0000882261-96-000015.hdr.sgml : 19960814 ACCESSION NUMBER: 0000882261-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH AMERICAN MORTGAGE CO CENTRAL INDEX KEY: 0000882261 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 680267088 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11017 FILM NUMBER: 96610907 BUSINESS ADDRESS: STREET 1: 3883 AIRWAY DR CITY: SANTA ROSA STATE: CA ZIP: 95403 BUSINESS PHONE: 7075235000 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11017 NORTH AMERICAN MORTGAGE COMPANY (Exact name of registrant as specified in its charter) Delaware 68-0267088 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3883 Airway Drive, Santa Rosa, California, 95403-1699 (Address of principal executive offices, zip code) (707) 523-5000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Common Stock, par value $.01 per share, (the "Common Stock") outstanding as of August 7, 1996, was 13,950,535. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. NORTH AMERICAN MORTGAGE COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, December 31, 1996 1995 ----------- ------------ (Unaudited) ASSETS Cash and cash equivalents ..................... $ 8,384 $ 12,273 Advances and other receivables ................ 89,197 76,628 Real estate loans held for sale to investors --- net of unearned discounts ............. 539,980 526,913 Purchased loan servicing ...................... 850 1,163 Originated loan servicing ..................... 84,746 56,353 Excess servicing fees ......................... 17,196 20,559 Other intangible assets ....................... 6,235 6,438 Property and equipment ........................ 36,691 36,339 Other assets .................................. 9,198 9,702 --------- --------- $ 792,477 $ 746,368 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Warehouse line of credit ...................... $ 196,229 $ 146,833 Notes payable ................................. 74,838 74,801 Commercial paper and other borrowings ......... 275,052 279,221 Subordinated debt ............................. 10,070 10,070 Accounts payable and other liabilities ........ 49,398 42,299 --------- --------- 605,587 553,224 STOCKHOLDERS' EQUITY Convertible preferred stock (1,000,000 shares authorized,748,179 shares issued and outstanding)................................. -- -- Common stock (50,000,000 shares authorized, 16,273,451 and 16,257,614 shares issued at June 30, 1996, and December 31, 1995, respectively) ............................... 163 163 Additional paid-in capital .................... 110,486 110,250 Retained earnings ............................. 116,288 101,909 Treasury stock, at cost - (2,282,916 and 1,140,516 shares at June 30, 1996 and December 31, 1995, respectively)................................ (40,047) (19,178) --------- --------- 186,890 193,144 ---------- --------- $ 792,477 $ 746,368 ========= ========= See accompanying notes to consolidated financial statements.
NORTH AMERICAN MORTGAGE COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 1996, and June 30, 1995 (Amounts in thousands, except per share data)
Three Months Ended June 30, 1996 1995 ------- ------- Income: Loan administration fees, net of excess servicing fee amortization ........................ $ 11,444 $ 9,910 Loan origination fees ................................ 21,065 16,831 Gain from sales of loans ............................. 27,128 20,132 Interest income, net of warehouse interest expense ... 7,126 6,377 Gain from sales of servicing ......................... 8,047 11,929 Other ................................................ 2,353 2,088 ------- ------- 77,163 67,267 Expenses: Personnel ........................................... 38,026 28,942 Other operating expenses ............................ 18,698 15,689 Interest expense .................................... 2,139 2,213 Depreciation and amortization of property and equipment ....................................... 1,850 1,805 Amortization of purchased loan servicing ............ 155 194 Amortization of originated loan servicing ........... 1,727 637 Provision for impairment of originated loan servicing 0 1,727 Amortization of other intangibles ................... 103 118 ------- ------- 62,698 51,325 Income before income taxes .......................... 14,465 15,942 Income tax expense .................................. 5,794 5,893 ------- ------- NET INCOME .............................................. $ 8,671 $10,049 ======= ======= NET INCOME PER SHARE .................................... $ 0.61 $ 0.67 ======= ======= WEIGHTED AVERAGE SHARES OUTSTANDING ..................... 14,292 15,008 ======= ======= See accompanying notes to consolidated financial statements.
NORTH AMERICAN MORTGAGE COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Six Months Ended June 30, 1996, and June 30, 1995 (Amounts in thousands, except per share data)
Six Months Ended June 30, 1996 1995 -------- -------- Income: Loan administration fees, net of excess servicing fee amortization ...................... $ 22,319 $ 21,251 Loan origination fees ............................... 40,879 27,975 Gain from sales of loans ............................ 48,971 30,977 Interest income, net of warehouse interest expense .. 13,620 12,384 Gain from sales of servicing ........................ 15,487 24,473 Other ............................................... 4,449 3,943 ------- ------- 145,725 121,003 Expenses: Personnel .......................................... 73,569 54,874 Other operating expenses ........................... 35,024 29,951 Interest expense ................................... 4,483 4,508 Depreciation and amortization of property and equipment ...................................... 3,746 3,683 Amortization of purchased loan servicing ........... 312 388 Amortization of originated loan servicing .......... 3,530 752 (Recovery)/provision for impairment of originated loan servicing........................... (2,052) 1,983 Amortization of other intangibles .................. 214 225 ------- ------- 118,826 96,364 Income before income taxes ......................... 26,899 24,639 Income tax expense ................................. 10,768 8,932 ------- ------- NET INCOME ............................................. $ 16,131 $ 15,707 ======= ======= NET INCOME PER SHARE .................................. $ 1.10 $ 1.05 ======= ======= WEIGHTED AVERAGE SHARES OUTSTANDING .................... 14,676 14,999 ======= ======= See accompanying notes to consolidated financial statements.
NORTH AMERICAN MORTGAGE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1996, and 1995 (Dollars in thousands)
Six Months Ended June 30, 1996 1995 -------- -------- OPERATING ACTIVITIES: Net income ........................................ $ 16,131 $ 15,707 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................. 7,161 9,138 Excess servicing fee income .................... (17,579) (21,225) Gain from sales of servicing rights ............ (15,487) (24,473) Cash proceeds from sales of servicing rights ... 72,865 40,190 Net increase in real estate loans held for sale, net of unearned discounts ...................... (13,067) (54,915) Increase in advances and other receivables ........ (12,569) (5,482) Increase in accounts payable and other liabilities 7,099 2,191 (Decrease) increase in other assets ............... 504 (1,922) --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ........................... 45,058 (40,791) INVESTING ACTIVITIES: Acquisition of assets of branches including purchase accounting adjustments ................ (11) (26) Purchase of servicing rights ...................... -- (80) Acquisition of originated servicing rights ........ (67,717) (36,800) Purchase of property and equipment ................ (4,098) (848) Retirement of property and equipment .............. -- 718 -------- -------- NET CASH USED IN INVESTING ACTIVITIES ......... (71,826) (37,036) FINANCING ACTIVITIES: Increases in (principal payments on) long-term debt 37 (10,527) Increase (decrease) in warehouse lines of credit, commercial paper, repurchase agreements, and other borrowings ............................... 45,227 (11,493) Purchases of Treasury Stock ....................... (20,869) -- Dividends ......................................... (1,752) (1,800) Stock issuance under Incentive Stock Option Plan 236 1,108 -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ................................... 22,879 (22,712) -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS ........ (3,889) (100,539) Cash and cash equivalents at beginning of year .... 12,273 102,045 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 8,384 $ 1,506 ======== ======== Supplemental disclosure of cash flow information Cash paid during the period for: Interest ...................................... $ 13,652 $ 8,811 ======== ======== Income Taxes .................................. $ 2,128 $ 800 ======== ======== See accompanying notes to consolidated financial statements.
NORTH AMERICAN MORTGAGE COMPANY Notes to Consolidated Financial Statements (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited financial statements of North American Mortgage Company (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three month periods ended June 30, 1996, are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included on Form 10-K for the year ended December 31, 1995. Note 2 - Net Income Per Share Information Net income per common share is computed based on the weighted average number of shares outstanding during the period. The potential dilutive effect of common stock equivalents has not been included because that amount is not considered to be material. The weighted average number of shares outstanding for net income per share was 14,292,000 and 15,008,000 for the three months ended June 30, 1996, and 1995, respectively, and 14,676,000 and 14,999,000 for the six months ended June 30, 1996, and 1995, respectively. Note 3 - Capitalized Servicing Rights Purchased loan servicing, excess servicing fees and originated loan servicing, net of accumulated amortization and impairment were as follows:
Purchased Loan Excess Servicing Originated Loan Servicing, Net Fees, Net Servicing, Net -------------- --------- -------------- (Dollars in thousands) Balance at December 31, 1995.. $ 1,163 $ 20,559 $ 56,353 Additions..................... --- 17,579 67,717 Scheduled Amortization........ (313) (1,410) (3,530) Recovery of Impairment of Originated Loan Servicing.... --- --- 2,052 Basis on Servicing Sales...... --- (19,532) (37,846) -------- -------- -------- Balance at June 30, 1996..... $ 850 $ 17,196 $ 84,746(1)(2) ==== ======= =======
- --------------- (1) Includes $7,388 of originated loan servicing rights which are related to loans held for sale to investors. No revenues have been recognized on this $7,388 of servicing rights, as the underlying loans have not yet been sold. (2) At June 30, 1996, the originated loan servicing impairment allowance was approximately $500,000. Note 4 - FAS No. 125 In June 1996, the Financial Accounting Standards Board issued Statement Number 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (FAS No. 125), which will become effective on January 1, 1997. This statement will make the accounting for Originated Mortgage Servicing Rights and Excess Servicing Rights consistent. The Company is currently studying the effect of this statement, but does not expect the adoption of the statement to have a material effect on future reported earnings. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Quarter Ended June 30, 1996, Compared with Quarter Ended June 30, 1995 RESULTS OF OPERATIONS General Market Conditions - During the second quarter of 1996, U. S. origination levels increased by 45% over the same period last year, due to a higher level of new and existing home purchases and refinancings (see table below). Although the overall level of refinance activity was higher than last year, refinancings steadily declined, from January through July of 1996, primarily as a result of the rise in interest rates which began in February 1996. By early August 1996, however, interest rates had begun to decline. For example, on August 3, 1996, the 30-year fixed mortgage rate was approximately 8% as compared with a rate of approximately 8.25% on June 30, 1996. To the extent interest rates remain at existing levels or move lower, demand for refinancings may increase.
1-4 Family U.S. Mortgage Originations* Second Quarter 1996 1995 ---------- --------- (Dollars in billions) New and existing home purchases............. $ 141 $ 120 Refinancings................................ 64 21 --- --- Total $ 205 $ 141 === ===
- --------------- * Sources: Department of Housing and Urban Development (HUD), Mortgage Bankers Association (MBA), Federal National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC) (1996 market data based on current estimates). Summary of Results - Net income for the second quarter of 1996 was $8.7 million or $0.61 per share, a $1.4 million decrease from the $10.0 million, or $0.67 per share, earned during the second quarter of 1995. The decrease in earnings occurred, even though loan originations increased to $2.5 billion in the second quarter of 1996 compared with $1.7 billion in the second quarter of 1996, for three principal reasons: (i) higher discounts given to borrowers to meet escalating price competition, (ii) lower hedge gains due to higher bond market volatility during the current quarter, and (iii) lower gains from sales of servicing due to a higher Originated Mortgage Servicing Rights (OMSR) basis associated with servicing sales in 1996. From an operational standpoint, the Company's direct production unit costs (origination fees less origination expenses) were 6% lower in the current quarter compared with last year, while direct servicing expenses increased slightly from $69 per loan to $71 per loan. The Company's $2.5 billion in loan originations during the second quarter of 1996 were 47% higher than the same quarter last year. This increase in origination volume is reflective of the 45% increase in total U. S. mortgage originations for the same period. Refinancings represented 32% of total originations in the second quarter of 1996 compared with 23% in the second quarter of 1995. The following table sets forth certain information regarding the servicing portfolio of the Company for the periods indicated:
Quarters Ended June 30, 1996 1995 ---- ---- (Dollars in millions, except Average Loan Size) Servicing Portfolio: Beginning Portfolio................ $ 13,603 $ 14,488 Add: Loans Originated.................... 2,487 1,697 Deduct: Sales of Servicing Rights........... (1,759) (1,286) Run-off (1)......................... (495) ( 337) -------- -------- Ending Portfolio..................... $ 13,836 $ 14,562 ====== ====== Average Loan Size of Ending Portfolio $ 98,000 $ 96,000 Weighted Average Interest Rate....... 7.72% 7.08%
Revenues - Revenues for the second quarter of 1996 were $77.2 million, a $9.9 million or 15%, increase from $67.3 million in the second quarter of 1995. Loan administration fees were $11.4 million in the second quarter of 1996, a 15% increase, as compared with $9.9 million in the second quarter of 1995. This increase primarily resulted from a decline in amortization and impairment of excess servicing fees to $641,000 during the second quarter of 1996 compared with $1.6 million during the second quarter of 1995. This resulted from changes in mortgage prepayment expectations driven by the general rising rate environment during the first six months of 1996. Loan origination fees were $21.1 million during the second quarter of 1996, a 25% increase, as compared with $16.8 million during the second quarter of 1995. This increase resulted primarily from a 47% increase in loan originations, partially offset by a decrease in average origination fees collected on each loan. The decrease in the average origination fees collected resulted from a higher percentage of wholesale and telemarketing production in the second quarter of 1996 (63% as compared with 57%), on which the Company receives lower average origination fees than it receives on retail loans. The gain from sales of loans was $27.1 million during the second quarter of 1996, as compared with $20.1 million during the second quarter of 1995. Gain on sales of loans is impacted by three factors: hedging activity, price subsidies and the recognition of gains related to OMSR under FAS 122. - --------------- (1) Run-off refers to regular dollar amount of the amortization of loans, prepayments and foreclosures. Second quarter of 1996 annualized run-off rate was 15% compared with 9% during the second quarter of 1995. A summary of the marketing results for the second quarter of 1996 and 1995 follows:
Three Months Ended June 30, 1996 1995 ---------- ---------- (Dollars in thousands) Hedging Gains ................................... $ 2,077 $ 6,639 Pricing Subsidies................................ (8,808) (4,918) OMSR - FAS No. 122............................... 33,859 18,411 ------ ------- $ 27,128 $ 20,132 ====== ======
Second quarter hedging results continued to be negatively impacted by the upward turn in interest rates and increased bond market volatility. During the second quarter of 1996, the Company's hedging gains decreased to $2.1 million or 8 basis points on loans originated during the quarter compared with $6.6 million, or 39 basis points on loans originated during the second quarter of 1995. Included in the second quarter 1996 hedging gains was the benefit of approximately $2 million of net pair off gains recorded in April which related to March 1996 coverage. To the extent that interest rates increase or the bond market remains volatile, the Company's future marketing results could be negatively impacted. Pricing subsidies increased to $8.8 million in the second quarter of 1996, or an average subsidy of 35 basis points on loans produced, compared with $4.9 million in the second quarter of 1995, or 29 basis points. This increase reflects the continuing price competition for mortgage loans, particularly for those loans sourced through wholesale brokers. OMSR gains increased to $33.9 million during the second quarter of 1996, an increase of $15.4 million, or 84%, compared with the second quarter of 1995. This increase principally relates to a 58% increase in loans sold during the second quarter of 1996, as well as changes in product mix and market values that resulted in a higher capitalization rate. Interest income, net of warehouse interest expense, increased to $7.1 million during the second quarter of 1996, as compared with $6.4 million during the second quarter of 1995, a 12% increase. This increase resulted from a 72% increase in the average balance of loans held for sale, partially offset by the Company's decreased use of its working capital to reduce warehouse borrowing costs. Gain from sales of servicing was $8.0 million during the second quarter of 1996, as compared with $11.9 million during the second quarter of 1995, a 33% decrease. Gain on sales of servicing rights is affected by the volume of servicing rights sold, the proceeds received and the amount of OMSR and excess servicing basis associated with each sale. The following table summarizes the items for the second quarter of 1996 and 1995:
1996 1995 ----------- ---------- (Dollars in millions) Principal Sold ..................... $ 1,759 $ 1,286 ===== ===== Proceeds*........................... $ 29.9 $ 26.9 OMSR and Excess Basis............... (21.9) (15.0) ------ ------ Net Gain on Servicing Sales......... $ 8.0 $ 11.9 ======= =====
- --------------- * Represents 170 basis points on the principal balance sold in 1996 vs. 209 basis points in 1995. The comparatively lower proceeds in basis points for the second quarter of 1996 relate to differences in the type of servicing sold (i.e., government vs. conventional) and the level of excess servicing fees, which resulted in a lower average servicing fee in the second quarter of 1996 compared with 1995. The increased basis on servicing sold resulted from a higher percentage of servicing sold with OMSR basis during the second quarter of 1996 as compared with 1995. Expenses - Expenses for the second quarter of 1996 were $62.7 million, a 22% increase, as compared with $51.3 million during the second quarter of 1995. Personnel costs were $38.0 million for the second quarter of 1996, a 31% increase, as compared with $28.9 million for the second quarter of 1995. This increase in personnel expenses from 1995 principally occurred in the residential loan production area. The increase reflects the additional personnel expenses that were required to originate a 47% higher loan origination volume. The percentage increase in personnel expenses was less than the percentage increase in origination volume in the second quarter of 1996 due to a more efficient use of production personnel. Other operating expenses increased 19% to $18.7 million for the second quarter of 1996 from $15.7 million for the second quarter of 1995. This increase reflects the additional operating expenses that were required to originate a 47% higher origination volume. The percentage increase in other operating expenses during the second quarter of 1996 was less than the percentage increase in loan origination volume due to better absorption of fixed overhead. Amortization of originated loan servicing increased to $1.7 million in the second quarter of 1996, as compared with $637,000 during the second quarter of 1995. This increase related to the increase in the Originated Loan Servicing asset, which was $84.7 million at June 30, 1996 and $29.3 million at June 30, 1995. There was no provision for impairment of originated loan servicing during the second quarter of 1996, as compared with a $1.7 million provision during the second quarter of 1995. This reduction in impairment expense was due to the recent upturn in interest rates which resulted in slower than expected mortgage prepayment speeds. Six Months Ended June 30, 1996, Compared with Six Months Ended June 30, 1995 Summary - Net income for the first six months of 1996 was $16.1 million, or $1.10 per share, a $424,000 increase from the $15.7 million, or $1.05 per share, earned during the first six months of 1995. The 3% increase in earnings relative to the 75% increase in originations is primarily attributable to the following factors: (i) higher discounts given to borrowers to meet escalating price competition, (ii) lower hedge gains due to higher bond market volatility during the six months, and (iii) lower gains from sales of servicing due to a higher OMSR basis associated with servicing sales in 1996. The aggregate principal amount of loan originations for the first six months of 1996 was $4.9 billion, a 75% increase, as compared with $2.8 billion for the first six months of 1995. This increase in production volume is reflective of the 64% increase in the total U. S. mortgage originations for the same period and an increased market share in the purchase segment by the Company to 1.10%* for the first six months of 1996 as compared with 0.97%* for the first six months of 1995. The following table summarizes the activity in the Company's servicing portfolio for the first six months of 1996:
Six Months Ended June 30, 1996 1995 ---- ---- (Dollars in millions, except Average Loan Size) Servicing Portfolio: Beginning Portfolio .......... $ 14,109 $ 14,836 Add: Loans Originated ............. 4,942 2,824 Deduct: Sales of Servicing Rights .... (4,141) (2,517) Run-off (1) .................. (1,074) (581) -------- -------- Ending Portfolio ............. $ 13,836 $ 14,562 ======== ========
- --------------- * Sources: HUD, MBA, FNMA, and FHLMC (1996 market data based on current estimates). (1) Run-off refers to regular dollar amount of the amortization of loans, prepayments and foreclosures. For the first six months of 1996, the annualized run-off rate was 15% compared with 8% for the first six months of 1995. Revenues - Revenues for the six months ended June 30, 1996, were $145.7 million, a $24.7 million, or 20% increase, as compared with $121.0 million in the first six months of 1995. Loan administration fees were $22.3 million during the first six months of 1996, a 5% increase, as compared with $21.3 million in the first six months of 1995. This increase occurred in spite of a 1% decline in the average size of the Company-owned servicing portfolio, because of a $1.5 million charge for the impairment of excess servicing rights during the first six months of 1995, which did not recur during the first six months of 1996, due to increasing interest rates during the later period. Loan origination fees were $40.9 million during the first six months of 1996, a 46% increase, as compared with $28.0 million in the first six months of 1995. This increase resulted primarily from a 75% increase in loan originations, partially offset by a decrease in the average origination fees collected on each loan. The decrease in the average origination fees collected resulted from a higher percentage of wholesale and telemarketing production in the first six months of 1996 (65% as compared with 58%), on which the Company receives lower average origination fees than it receives on retail loans. The gain from sales of loans was $49.0 million for the first six months of 1996, as compared with $31.0 million during the first six months of 1995. Gain on sales of loans is impacted by three factors: hedging activity, price subsidies and the recognition of gains related to OMSR under FAS 122. A summary of the marketing results for the first six months of 1996 and 1995 follows:
Six Months Ended June 30, 1996 1995 ---------- ---------- (Dollars in thousands) Hedging Gains (Losses) ................... $ (346) $ 9,838 Pricing Subsidies......................... (17,702) (8,159) OMSR - FAS No. 122........................ 67,019 29,298 ------ ------ $ 48,971 $ 30,977 ====== ======
During the first six months of 1996, hedging results were negatively impacted by the upward turn in interest rates and increased bond market volatility. To the extent that interest rates continue to increase or the bond market remains volatile, the Company's future marketing results may be negatively affected. Pricing subsidies increased to $17.7 million during the first six months of 1996, or an average subsidy of 36 basis points on loans produced, compared with $8.2 million in the first six months of 1995, or 29 basis points. This increase reflects the continuing price competition within the industry, particularly for loans sourced through wholesale brokers. OMSR gains increased to $67.0 million during the first six months of 1996, an increase of $37.7 million, or 129%, compared with the first six months of 1995. This increase was due to a 78% increase in loans sold during the first six months of 1996, and the fact that nearly 20% of loans sold during the first six months of 1995 were originated in 1994, prior to the implementation of FAS No. 122, and accordingly did not reflect the additional gain for the capitalization of the OMSRs. Interest income, net of warehouse interest expense, increased by 10% to $13.6 million during the first six months of 1996, as compared with $12.4 million during the first six months of 1995. This increase resulted from a 54% increase in the average balance of loans held for sale, partially offset by a decrease in working capital used by the Company to reduce its warehouse borrowing costs. This reduction in working capital available to finance loans held for sale relates primarily to the repayment of $35.3 million in debt since late March 1995 and $20.9 million used to repurchase Company stock during the first six months of 1996. Gain from sales of servicing was $15.5 million during the first six months of 1996, as compared with $24.5 million during the first six months of 1995, a 37% decrease. In the first six months of 1996, the Company sold $4.1 billion of servicing rights at an average price of 176 basis points for total proceeds of $72.9 million. This compares with $2.5 billion sold in the first six months of 1995 at an average price of 160 basis points for total proceeds of $40.2 million. The related gain on sales of servicing decreased, however, due to a higher level of OMSR and excess servicing basis associated with sales ($57.4 million for the first six months of 1996, as compared with $15.7 million for the first six months of 1995). Expenses - Expenses for the first six months of 1996 were $118.8 million, a 23% increase, as compared with $96.4 million during the first six months of 1995. Personnel expenses were $73.6 million for the first six months of 1996, a 34% increase, as compared with $54.9 million for the first six months of 1995. This increase in personnel expenses from 1995 primarily occurred in the residential loan production area. The increase reflects the additional personnel expenses that were required to produce a 75% higher loan origination volume. The percentage increase in personnel expenses was less than the percentage increase in origination volume in the first six months of 1996 due to a more efficient use of production personnel. Other operating expenses increased 17% to $35.0 million for the first six months of 1996, as compared with $30.0 million for the first six months of 1995. This increase reflects additional operating expenses that were required to originate a 75% higher origination volume. The percentage increase in other operating expenses during the first six months of 1996 was less than the percentage increase in loan production volume due to better absorption of fixed overhead. Amortization of originated loan servicing increased to $3.5 million during the first six months of 1996, as compared with $752,000 during the first six months of 1995. This increase related to the implementation of FAS No. 122 and the increase in the Originated Loan Servicing asset, which was $56.4 million at December 31, 1995, but which had no book value prior to 1995. Provision for (recovery of) impairment of originated loan servicing was a $2.1 million recovery in the first six months of 1996, as compared with a $2.0 million impairment provision during the first six months of 1995. This recovery was caused by increasing interest rates during the first six months of 1996, which slowed expected mortgage prepayment rates on loans the Company services and, as a result, increased the expected life and value of the servicing asset. LIQUIDITY AND CAPITAL RESOURCES The Company's primary financing requirements are the financing of its warehouse loan fundings and the ongoing net cost of the Company's loan originations. The Company's future cash flow requirements will depend primarily on the level of its loan originations and the cash flow generated by, or required by, its operations. The Company expects that loan origination volume will be financed through warehouse borrowings, borrowings under a commercial paper program, through the use of "gestation" facilities and with corporate funds. The Company finances its warehouse loan funding requirements primarily through a bank warehouse line of credit and through its commercial paper program. This financing requirement begins at the time of loan closing and extends for an average of approximately 30 days until the loan is sold into the secondary market. On January 23, 1996, the Company entered into a new warehouse line of credit facility totaling $1.21 billion. This line of credit expires on January 23, 1999. Effective August 7, 1996, the commitment amount for the warehouse line of credit facility was reduced, at the Company's request, to $1.0 billion. The Company also has a commercial paper borrowing program. Borrowings under this $500 million program replace, at a reduced interest rate, borrowings under the Company's warehouse line of credit. The warehouse line of credit acts as the liquidity backup facility for the commercial paper borrowings. In addition to the warehouse line of credit and commercial paper borrowings, the Company makes use of gestation facilities provided by an investment bank, FNMA and FHLMC. During the fourth quarter of 1993, the Company sold a combined $100 million of two, three, five, and seven year medium term notes. The proceeds from the sale of these notes are being used for general corporate purposes, which include the replacement of indebtedness, financing loan origination volume and the expansion of loan origination capacity. At June 30, 1996, $75 million of medium term notes were outstanding, of which $25.0 million will mature in the fourth quarter of 1996. The Company intends to issue $25.0 million of medium term notes in the near future. The Company has paid quarterly common stock dividends since the initial public offering on July 15, 1992. During the second quarter of 1996, the Company paid dividends of $.06 per share totaling $845,312 for 14,088,535 shares outstanding on May 20, 1996. This compares with dividends paid in the second quarter of 1995 of $.06 per share totaling $899,659 for 14,994,311 shares outstanding on May 15, 1995. On February 7, 1996, the Board of Directors authorized the repurchase of up to 1.5 million shares of common stock. During the first and second quarters of 1996, the Company repurchased 329,900 and 812,500 shares with an aggregate cost of $6.8 million and $14.1 million, respectively. As of June 30, 1996, the Company held 2,282,916 shares in treasury stock which were acquired at an aggregate cost of $40.0 million, of which 1,140,516 shares were acquired under a prior Board authorization. The Company's net cost of its owned servicing rights is financed through cash flow from its operations, including the sale of servicing rights. During the first six months of 1996 and 1995, the Company generated $17.6 million and $21.2 million, respectively, of excess servicing fees as a result of loan sale transactions. In general, the Company creates excess servicing because the secondary market price offered for servicing assets was lower than the economic value or the amount the Company could receive by accumulating the assets and selling them as part of a bulk sale at a later date. During the Company's holding period of the excess servicing fee asset, the Company is at risk that the asset will decline in value and a write down will be required, primarily due to faster prepayment speeds or such expectations resulting from lower interest rates, which would encourage borrowers to refinance the mortgage loans being serviced. The carrying amount of excess servicing rights was $17.2 million and $20.6 million at June 30, 1996, and December 31, 1995, respectively. During the first six months of 1996 and 1995, the Company purchased property and equipment totaling $4.1 million and $848 thousand, respectively. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company is a defendant in certain litigation arising in the normal course of its business. Although the ultimate outcome of all pending litigation cannot be precisely determined at this time, the Company believes that any liability resulting from the aggregate amount of damages for outstanding lawsuits and claims will not have a material adverse effect on its financial position. Item 2. Changes in Securities. On July 18, 1996, the Board of Directors amended the Company's By-Laws to provide that the business conducted at an annual meeting be limited to matters properly brought before the meeting. To be properly brought before the meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) proposed by or at the direction of the Chairman of the Board or (c) proposed by any stockholder of the Company who is entitled to vote at the meeting, who complied with certain notice provisions of and who is a stockholder of record at the time such notice is delivered to the Secretary of the Company. Such stockholder's notice must set forth (a) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner and (ii) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner. To be timely, a stockholder's notice must be delivered not less than sixty days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than twenty days, or delayed by more than seventy days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. In addition, the Board amended the By-Laws to provide that the business transacted upon at any special meeting of stockholders be limited to the purposes stated in the notice of meeting. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. a. The Company held its Annual Meeting of Stockholders on May 6, 1996. b. Not applicable. c. i. The following individuals were elected to the Board of Directors of the Company: Votes For Votes Withheld John F. Farrell, Jr. 13,700,275 47,649 Terrance G. Hodel 13,697,870 50,054 William L. Brown 13,699,775 48,149 William F. Connell 13,699,775 48,149 Magna L. Dodge 13,698,975 48,949 William O. Murphy 13,698,775 49,149 Robert J. Murray 13,698,775 49,149 James B. Nicholson 13,699,775 48,149 ii. Other matters voted upon at the meeting and the number of votes cast for, against and to abstain with respect to each such matter appear below. There were no broker non-votes. Votes Votes Votes to For Against Abstain --- ------- ------- A. Proposal to amend the 13,264,682 406,665 76,557 Stock Purchase Plan B. Ratification of the 13,703,403 18,529 25,992 appointment of Ernst & Young, LLP as independent public accountants for the fiscal year ending December 31, 1996 d. Not applicable. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. a. Exhibits 3.7 Amended and Restated By-Laws of the Company 10.44 Master Commitment Amendment dated May 31, 1996 between Federal Home Loan Mortgage Corporation and the Company 10.45 Master Commitment Amendment dated July 23, 1996 between Federal Home Loan Mortgage Corporation and the Company 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule b. Reports on Form 8-K None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTH AMERICAN MORTGAGE COMPANY Date: August 12, 1996 By: /s/ MARTIN S. HUGHES ----------------------------------- (Martin S. Hughes) Executive Vice President, Chief Financial Officer and Principal Financial Officer EX-3.(II) 2 BY-LAWS INDEX TO EXHIBITS Exhibit Number Description Page Number - ------ ----------- ----------- 3.7 Amended and Restated By-Laws of the Company 10.44 Master Commitment Amendment dated May 31, 1996 between Federal Home Loan Mortgage Corporation and the Company 10.45 Master Commitment Amendment dated July 23, 1996 between Federal Home Loan Mortgage Corporation and the Company 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule EXHIBIT 3.7 AMENDED AND RESTATED BY-LAWS NORTH AMERICAN MORTGAGE COMPANY ARTICLE I OFFICES SECTION 1. The registered office shall be located in Wilmington, Delaware. (Adopted 3/31/92). SECTION 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. (Adopted 3/31/92). ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. The annual meeting of the stockholders of the Corporation, commencing with the year 1991 shall be held at such place, within or without the State of Delaware, at such time and on such day as may be determined by the Board of Directors and as such shall be designated in the notice of said meeting, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. If for any reason the annual meeting shall not be held during the period designated herein, the Board of Directors shall cause the annual meeting to be held as soon thereafter as may be convenient. (Adopted 3/31/92). SECTION 2. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be held at any place, within or without the State of Delaware, and may be called by resolution of the Board of Directors. (Adopted 3/31/92). Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of meeting. (Adopted 7/18/96). SECTION 3. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the stock holders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If a quorum is present or represented, the affirmative vote of a majority of the shares of stock present or represented at the meeting shall be the act of the stockholders unless the vote of a greater number of shares of stock is required by law or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. (Adopted 3/31/92). SECTION 4. Any action required to be taken at a meeting of the stockholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the stockholders entitled to vote with respect to the subject matter thereof. (Adopted 3/31/92). SECTION 5. At an annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before the meeting business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) proposed by or at the direction of the Chairman of the Board or (c) proposed by any stockholder of the Corporation who is entitled to vote at the meeting, who complied with the notice provisions of this Section 5 and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and, such business must be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than twenty days, or delayed by more than seventy days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (Adopted 7/18/96). ARTICLE III DIRECTORS SECTION 1. The number of directors which shall constitute the whole board shall initially be seven. Thereafter, the number of directors which shall constitute the board shall be such as from time to time shall be fixed by the Board of Directors, but in no case shall such number be greater than nine or less than two, provided that no decrease in the number of directorships shall shorten the term of any incumbent director. Any change in the number of directorships must be authorized by a majority of the whole board, as constituted immediately prior to such change. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until the next annual meeting of stockholders and until his successor is elected and qualified or until his earlier death or resignation. Directors need not be stockholders. (Adopted 7/27/93). SECTION 2. Vacancies and newly created directorships resulting from any increase in the number of directorships may be filled by a majority of the directors then in office, though less than a quorum, or elected by a sole stockholder, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified. A vacancy created by the removal of a director by the stockholders may be filled by the stockholders. (Adopted 3/31/92). SECTION 3. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be announced at the annual meeting of stockholders and no other notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held atsuch time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. (Adopted 3/31/92). SECTION 4. Regular meetings of the Board of Directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. (Adopted 3/31/92). SECTION 5. Special meetings of the Board of Directors may be called by the President on two days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors. (Adopted 3/31/92). SECTION 6. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction in any business because the meeting is now lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. (Adopted 3/31/92). SECTION 7. At all meetings of the board a majority of the total number of directors then constituting the whole board but in no event less than two directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. (Adopted 3/31/92). SECTION 8. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. (Adopted 3/31/92). SECTION 9. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. (Adopted 3/31/92). SECTION 10. Subject to any exclusive rights of holders of any class or series of stock having a preference over the common stock, par value $0.01 per share, of the Corporation as to dividends or upon liquidation to elect directors upon the happening of certain events, only persons who are nominated at any meeting of stockholders of the Corporation in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation entitled to vote for the election of directors generally at the meeting who complies with the notice procedures set forth in this Section 10. Such nominations by a stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the date of the meeting; provided, however, that in the event that less than 75 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such persons's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (x) the name and address, as they appear on the Corporation's books, of such stockholder and (y) the class and number of shares of the Corporation's stock that are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 10. The officer of the Corporation or other person presiding at the meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with such provisions and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. In addition to any other requirements relating to amendments to these By-Laws, no proposal to amend or repeal this Section 10 shall be brought before any meeting of the stockholders of the Corporation unless written notice is given of (i) such proposed repeal or the substance of such proposed amendment, (ii) the name and address of the stockholder who intends to propose such repeal or amendment, and (iii) a representation that the stockholder is a holder of record of stock of the Corporation specified in such notice, is or will be entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make the proposal. Such notice shall be given in the manner and at the time specified above in this Section 10. (New section adopted 6/14/94). ARTICLE IV NOTICES SECTION 1. Whenever, under the provisions of statute or Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram and by facsimile transmission. Notices to be given to shareholders in connection with any annual or special meeting or shareholders shall be given to all shareholders of record as determined at least 30 days prior to such meeting. (Adopted 3/31/92). SECTION 2. Whenever notice is required to be given under the provisions of statute or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. (Adopted 3/31/92). ARTICLE V OFFICERS SECTION 1. The officers of the Corporation may include a chairman of the board (who shall also be the chief executive officer), a president, one or more executive vice presidents, one or more senior vice presidents, one or more vice presidents, a secretary, a treasurer, a controller, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers and one or more assistant controllers. The Board of Directors shall have the power to choose all or any of such officers. In addition, each of the chief executive officer and the president, acting alone, may from time to time appoint one or more senior vice presidents, vice presidents, assistant vice presidents, assistant secretaries, assistant controllers and assistant treasurers. Two or more offices may be held by the same person except the offices of president and secretary or the offices of president and vice president. (Adopted 10/19/92). SECTION 2. The Board of Directors shall elect officers of the Corporation at its first meeting after each annual meeting of stockholders. (Adopted 3/31/92). SECTION 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. (Adopted 3/31/92). SECTION 4. All salaries and bonuses of officers of the Corporation at the rank of executive vice president or above shall be subject to approval by the Board of Directors. (Adopted 10/19/92). SECTION 5. Each officer of the Corporation shall hold office until the first meeting of the Board of Directors next following the annual meeting of stockholders next following the election or appointment of such officer. The Board of Directors may remove any officer at any time. The chief executive officer or the president may each, acting alone, remove at any time any person from any office other than the office of president or chief executive officer. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors or by an officer having the power make an appointment to such vacant office. (Adopted 10/19/92). CHAIRMAN OF THE BOARD SECTION 6. The chairman of the Board of Directors, if there be a chairman, shall be chosen from among the directors and shall be the chief executive officer of the Corporation, shall preside at all meetings of the stockholders and the Board of Directors. The chief executive officer shall be vested with general supervisory power and authority over the business affairs of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. Any vice-chairman or vice- chairmen, shall be chosen from among the directors and shall have such powers and duties as may from time to time be assigned by the Board of Directors. (Adopted 10/25/93). PRESIDENT SECTION 7. The president shall be the chief operating officer of the Corporation, unless there is no chairman of the Board of Directors, in which case the president shall be the chief executive officer of the corporation as well as the chief operating officer. In the absence of the chairman of the board, or if there be no chairman, the president shall preside at all meetings of the stockholder and the Board of Directors; the president shall have general and active management of the business of the corporation, subject to the direction of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect, and shall perform all duties incident to the office of a president of a corporation, and such other duties as from time to time may be assigned by the Board of Directors. (Adopted 3/31/92). EXECUTIVE VICE PRESIDENTS SECTION 8. Any executive vice-presidents elected shall have such duties as the Board of Directors or Chief Executive Officer, or President may from time to time prescribe, and shall, except as the Board of Directors may otherwise direct, perform such duties under the general supervision of the President. (New section adopted 10/19/92). SENIOR VICE-PRESIDENTS SECTION 9. Any senior vice-presidents elected shall have such duties as the Board of Directors or president may from time to time prescribe, and shall, except as the Board of Directors may otherwise direct, perform such duties under the general supervision of the president. (Adopted 3/31/92. Section renumbered 10/19/92). VICE-PRESIDENTS SECTION 10. Any vice-presidents elected shall have such duties as the Board of Directors or president may from time to time prescribe, and shall, except as the Board of Directors may otherwise direct, perform such duties under the general supervision of the president. (Adopted 3/31/92. Section renumbered 10/19/92). SECRETARY SECTION 11. The secretary shall take minutes of the proceedings of the stockholders and the Board of Directors and record the same in a suitable book for preservation. The secretary shall give notice of all regular and duly called special meetings of the stockholders and the Board of Directors. The secretary shall have charge of and keep the seal of the Corporation, and shall affix the seal, attested by his signature, to such instruments as may require the same. Unless the Board of Directors shall have appointed a transfer agent, the secretary shall have charge of the certificate books, transfer books, and stock ledgers, and shall prepare voting lists prior to all meetings of stockholders. The secretary shall have charge of such other books and papers as the Board of Directors may direct and shall perform such other duties as may be prescribed from time to time by the Board of Directors or the president. (Adopted 3/31/92. Section renumbered 10/19/92). ASSISTANT SECRETARY SECTION 12. The assistant secretary, if there shall be one, or, if there shall be more than one, the assistant secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors or the officer to whom such assistant secretary reports may from time to time prescribe. (Adopted 3/31/92. Section renumbered 10/19/92). TREASURER SECTION 13. The treasurer shall have custody of the funds, securities and other assets of the Corporation. The treasurer shall keep a full and accurate record of all receipts and disbursements of the corporation, and shall deposit or cause to be deposited in the name of the corporation all monies or other valuable effects in such banks, trust companies, or other depositories as may from time to time be selected by the Board of Directors. The treasurer shall have power to make and endorse notes and pay out monies on check without countersignature and shall perform such other duties as may be prescribed from time to time by the Board of Directors or the president. (Adopted 3/31/92. Section renumbered 10/19/92). ASSISTANT TREASURER SECTION 14. The assistant treasurer, if there shall be one, or, if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors or the officer to whom such assistant treasurer reports may from time to time prescribe. (Adopted 3/31/92. Section renumbered 10/19/92). ARTICLE VI CERTIFICATES FOR SHARES LOST CERTIFICATES SECTION 1. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed. When authorizing each such issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate to protect the Corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost, stolen or destroyed. (Adopted 3/31/92). TRANSFER OF SHARES SECTION 2. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate canceled and the transaction recorded upon the books of the Corporation. (Adopted 3/31/92). REGISTERED STOCKHOLDERS SECTION 3. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (Adopted 3/31/92). SIGNING AUTHORITY SECTION 4. All contracts, agreements, assignments, transfers, deeds, stock powers or other instruments of the Corporation may be executed and delivered by (i) the Chief Executive Officer or President, or (ii) by such other officers or agent or agents, of the Corporation as shall be thereunto authorized from time to time by the Chief Executive Officer or President or the Board of Directors, or (iii) by power of attorney executed by any person pursuant to authority granted by the Chief Executive Officer or President or Board of Directors; and the secretary or any assistant secretary or the treasurer or any assistant treasurer may affix the seal of the Corporation thereto and attest the same. (Adopted 7/27/93). ARTICLE VII GENERAL PROVISIONS CHECKS SECTION 1. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. (Adopted 3/31/92). FISCAL YEAR SECTION 2. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. (Adopted 3/31/92). SEAL SECTION 3. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words Corporation Seal, Delaware. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. (Adopted 3/31/92). INDEMNIFICATION SECTION 4. The Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment). (Adopted 3/31/92). ARTICLE VIII AMENDMENTS SECTION 1. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted (a) at any regular or special meeting of stockholders at which a quorum is present or represented subject to Section 10 of Article III of these By-Laws, by the affirmative vote of a majority of the stock entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting, or (b) by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board. The stockholders shall have authority to change or repeal any By-Laws adopted by the directors, subject to Section 10 of Article III of these By-Laws. (Adopted 6/14/94). EX-10 3 MASTER COMMITMENT AMENDMENT Exhibit 10.44 MASTER COMMITMENT AMENDMENT RE: Master Commitment Contract #M96031884 (Mandatory) Master Agreement #MA92092300 Seller/Servicer #184202 This Master Commitment Amendment dated as of May 31, 1996 amends and supplements the above referenced Master Commitment, dated as of March 18, 1996, as amended as of May 6, 1996 (collectively the "Master Commitment"), under which Federal Home Loan Mortgage Corporation ("Freddie Mac") agreed to purchase mortgages having a maximum aggregate unpaid principal balance of $525 million from North American Mortgage Company ("Seller"). The amended and supplemental terms are as follows: Paragraph 1 titled "Contract Commitment Amount" of the Master Commitment shall be and is hereby deleted in its entirety and a new paragraph 1 is substituted in lieu thereof which shall read as follows: 1. Contract Commitment Amount: $800 million Except as modified herein, all of the terms and conditions of the Master Commitment remain in full force and effect. IN WITNESS WHEREOF, Seller and Freddie Mac have caused this instrument to be executed by their duly authorized representatives as of the date first set forth above. FEDERAL NATIONAL MORTGAGE CORPORATION By: /s/ Beverly Twigg Kennedy ------------------------- Name: Beverly Twigg Kennedy Title: Vice President, Sales NORTH AMERICAN MORTGAGE COMPANY By: /s/ Michael G. Conway --------------------- (Signature of Authorized Officer) Print Name: Michael G. Conway Print Title: Executive Vice President Date: July 24, 1996 EX-10 4 MASTER COMMITMENT AMENDMENT Exhibit 10.45 MASTER COMMITMENT AMENDMENT RE: Master Commitment Contract #M96031884 (Mandatory) Master Agreement #MA92092300 Seller/Servicer #184202 This Master Commitment Amendment dated as of July 23, 1996 amends and supplements the above referenced Master Commitment, dated as of March 18, 1996, as amended as of May 6, 1996 and May 31, 1996 (collectively the "Master Commitment"), under which Federal Home Loan Mortgage Corporation ("Freddie Mac") agreed to purchase mortgages having a maximum aggregate unpaid principal balance of $800 million from North American Mortgage Company ("Seller"). The amended and supplemental terms are as follows: Paragraph 1 titled "Contract Commitment Amount" of the Master Commitment shall be and is hereby deleted in its entirety and a new paragraph 1 is substituted in lieu thereof which shall read as follows: 1. Contract Commitment Amount: $1 billion Except as modified herein, all of the terms and conditions of the Master Commitment remain in full force and effect. IN WITNESS WHEREOF, Seller and Freddie Mac have caused this instrument to be executed by their duly authorized representatives as of the date first set forth above. FEDERAL NATIONAL MORTGAGE CORPORATION By: /s/ Beverly Twigg Kennedy ------------------------- Name: Beverly Twigg Kennedy Title: Vice President, Sales NORTH AMERICAN MORTGAGE COMPANY By: /s/ Michael G. Conway --------------------- (Signature of Authorized Officer) Print Name: Michael G. Conway Print Title: Executive Vice President Date: July 24, 1996 EX-11 5 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Exhibit 11 Computation of Earnings Per Share Quarter Ended June 30, 1996 Primary Earnings Per Share
Quarterly Year-to-Date Shares EPS Shares EPS ------ --- ------ --- Average Shares Outstanding 14,292,219 $ 0.61 14,675,542 $ 1.10 CSE Incremental Shares 138,551 221,935 ------- ------- Total Average Shares Outstanding 14,430,770 $ 0.60 14,897,477 $ 1.08 ========== ========== Dilution 0.96% 1.49% Net Income $ 8,671,000 $ 16,131,000 =========== ============ Fully Diluted Earnings Per Share Quarterly Year-to-Date Shares EPS Shares EPS ------ --- ------ --- Average Shares Outstanding 14,292,219 $ 0.61 14,675,542 $ 1.10 CSE Incremental Shares 138,553 226,474 ------- ------- Total Average Shares Outstanding 14,430,772 $ 0.60 14,902,016 $ 1.08 ========== ========== Dilution 0.96% 1.52% Net Income $ 8,671,000 $ 16,131,000 =========== ============
EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets and Consolidated Statements of Operations found on pages 2 through 5 of the Company's Form 10-Q for the year-to-date, and is qualified in its entirety by reference to such financial statements. 0000882261 Financial Data Schedule 1,000 0 6-MOS DEC-31-1996 JAN-1-1996 JUN-30-1996 1 8,384 0 89,197 0 0 0 36,691 1,850 792,477 0 0 0 0 163 0 792,477 0 77,163 0 0 0 0 2,139 14,465 5,794 0 0 0 0 16,131 1.10 0
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