-----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, VAKmnwbw8ixf8Lu5tJHRwrScMslNS6g4AuC9MGQVpUdIYx/6OFVVVx9iG7tnGSg+ zE3Iz5GmCR+fRT3kr7SYLg== 0000950146-99-000663.txt : 19990403 0000950146-99-000663.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950146-99-000663 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP CENTRAL INDEX KEY: 0000802106 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 133320910 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-25751 FILM NUMBER: 99584961 BUSINESS ADDRESS: STREET 1: ELEVEN MADISON AVENUE STREET 2: TWO INTERNATIONAL PL 5TH FL CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2123252000 MAIL ADDRESS: STREET 1: 11000 BROKEN LAND PARKWAY STREET 2: 2 INTERNATIONAL PLACE CITY: COLUMBIA STATE: MD ZIP: 21044 FORMER COMPANY: FORMER CONFORMED NAME: CS FIRST BOSTON MORTGAGE SECURITIES CORP /DE/ DATE OF NAME CHANGE: 19951115 FORMER COMPANY: FORMER CONFORMED NAME: CS FIRST BOSTON MORTGAGE SECURITIES CORP /DE/ DATE OF NAME CHANGE: 19931118 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BOSTON MORTGAGE SECURITIES CORP /DE/ DATE OF NAME CHANGE: 19920703 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ---------------------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Fiscal Year Ended December 31, 1998 Commission File Numbers 33-11623, 33-15833, 33-16145, 33-21329, 33-25751, 33-29239, 33-33807, 33-51771, 33-53115, 33-25751, 33-61167 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. ---------------------------------------------------------------------- (Exact name of registrant as specified in its registration statements) Delaware 13-3320910 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.) 11 Madison Avenue, New York, New York 10010 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 212-325-1811
Securities registered pursuant to section 12(b) of the Act: None. Securities registered pursuant to section 12(g) of the Act:
Title of Number of shares outstanding each class As of December 31, 1998 ---------- ----------------------- Common Stock 1,000 par value $1.00 per share
As of March 26, 1999 none of the Registrant's Common Stock was held by non-affiliates. Number of shares outstanding of the Registrant's Common Stock as of March 26, 1999 - 1,000 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 --- --- CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. INDEX
Page Number PART I Item 1. Business 3 Item 2. Properties 7 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 8 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 7a. Quantitative and Qualitative Disclosures About Market Risk 9 Item 8. Financial Statements and Supplementary Data 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 17 PART III Item 10. Directors and Executive Officers of the Registrant 17 Item 11. Executive Compensation 17 Item 12. Security Ownership of Certain Beneficial Owners and Management 17 Item 13. Certain Relationships and Related Transactions 17 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17 SIGNATURES 19 INDEX TO EXHIBITS 20 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 21
Page 2 PART I Item 1. Business Credit Suisse First Boston Mortgage Securities Corp. (the "Company"), is a wholly owned subsidiary of Credit Suisse First Boston Management Corporation ("FBSC"), which is a wholly owned subsidiary of Credit Suisse First Boston, Inc., a privately owned holding company. The Company was incorporated in the State of Delaware on December 31, 1985. The Company was organized to form trusts to issue and sell Collateralized Mortgage Obligations ("CMOs") backed by mortgage-backed certificates (the "Certificates") issued and guaranteed as to the payment of principal and interest by the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and/or mortgage loans and participations therein; to issue Strips of Participation Securities ("Splits") backed by Certificates; to issue Conduit Mortgage Pass-Through Certificates ("Conduits") representing undivided fractional interests in a trust formed by the Company, where the trust property consists of a pool of mortgage loans; to issue Commercial/Multifamily Mortgage Pass-Through Certificates ("Multifamily") and to issue Home Equity Loan Pass-Through Certificates ("Home Equity"). Shelf registrations filed for the Company since inception are as follows (dollars in thousands):
Commission Date of Shelf Type of File # Filing Amount Issue --------- ------- ------ ------- 33-3119 02/12/86 1,000,000 CMO 33-4884 04/15/86 2,000,000 CMO 33-8856 09/18/86 1,000,000 Split 33-10305 11/19/86 250,000 Conduit 33-10311 11/20/86 2,000,000 CMO 33-11750 02/04/87 2,000,000 CMO 33-11924 02/12/87 2,000,000 CMO 33-12461 (A) 03/06/87 1,000,000 Conduit 33-12541 03/10/87 2,000,000 Split 33-37221 10/16/90 500,000 Conduit 33-47579 04/26/92 1,700,000 Conduit 33-59342 05/05/93 500,000 Commercial/Multifamily 33-65950 07/13/93 500,000 Home Equity 33-82354 08/11/94 500,000 Commercial/Multifamily 33-98604 11/08/95 1,000,000 Commercial/Multifamily 33-99612 11/17/95 3,000,000 Conduit 33-99612 (B) 11/29/95 1,740,000 Conduit 33-11623 09/09/96 800,000 Conduit 33-15833 11/08/96 800,000 Conduit 33-16145 11/14/96 300,000 Conduit 33-21329 02/07/97 1,000 Conduit 33-21329 (C) 02/27/97 1,000,000 Conduit 33-25751 04/24/97 250,000 Commercial/Multifamily 33-25751 (D) 05/15/97 1,500,000 Commercial/Multifamily 33-29239 06/13/97 1,000 Conduit 33-29239 (E) 07/22/97 1,000,000 Conduit 33-33807 08/15/97 1,000 Conduit 33-33807 (F) 09/15/97 700,000 Conduit
Page 3 Item 1. Business (continued)
Commission Date of Shelf Type of File # Filing Amount Issue --------- ------- ------ ------- 33-51771 05/04/98 3,000,000 Commercial/Multifamily 33-53115 05/20/98 500,000 Conduit 33-25751 (G) 05/29/98 8,000,000 Commercial/Multifamily 33-33807 (H) 08/10/98 500,000 Conduit 33-61167 08/11/98 1,000,000 Conduit 33-33807 (I) 10/09/98 500,000 Conduit
(A) Represents amendment No. 1 effectively increasing the shelf amount from $250,000 to $1,000,000 as filed on Form S-11 #33-10305. (B) Represents amendment No. 1 effectively decreasing the shelf amount from $3,000,000 to $1,740,000 as filed on Form S-11 #33-99612. (C) Represents amendment No. 1 effectively increasing the shelf amount from $1,000 to $1,000,000 as filed on Form S-11 #33-21329. (D) Represents amendment No. 1 effectively increasing the shelf amount from $250,000 to $1,500,000 as filed on form S-11 #33-25751. (E) Represents amendment No. 1 effectively increasing the shelf amount from $1,000 to $1,000,000 as filed on form S-11 #33-29239. (F) Represents amendment No.1 effectively increasing the shelf from $1,000 to $700,000 as filed on form S-11 #33-33807. (G) Represents amendment No.2 effectively increasing the shelf amount from $1,077,742 to $8,000,000 as filed on form S-11 #33-25751. (H) Represents amendment No.1 effectively increasing the shelf amount from $149,285 to $500,000 as filed on form S-11 #33-33807. (I) Represents amendment No.2 effectively increasing the shelf amount from $149,285 to $500,000 as filed on form S-11 #33-33807. The Company established the following Trusts which have issued Collateralized Mortgage Obligations since inception (dollars in thousands):
Pricing Type of Principal Trust Series Date Collateral Amount ----- ------ ---- ---------- ------ I A 04/07/86 FNMA $ 140,000 I B 04/07/86 FHLMC 249,000 II A 06/04/86 FHLMC 500,000 III A 06/25/86 FNMA 162,000 IV A 10/21/86 FNMA 161,800 IV B 10/21/86 FHLMC 396,265 V A 10/30/86 FHLMC 500,000 VI A 12/02/86 FNMA 185,000 VII A 12/03/86 FHLMC 240,000 VII B 12/04/86 GNMA 300,000 VIII A 12/05/86 FNMA 500,000
Page 4 Item 1. Business (continued)
Pricing Type of Principal Trust Series Date Collateral Amount ----- ------ ---- ---------- ------ IX A 01/07/87 FNMA 350,000 X A 01/15/87 FNMA 300,000 XI A 02/26/87 GNMA 1,000,000 12 A 03/25/87 FHLMC 250,000 13 A 03/31/87 FHLMC 250,000 14 A 04/20/87 FNMA 200,000 15 A 05/12/87 FHLMC/FNMA 250,000 16 A 05/27/87 GNMA 150,000 17 A 06/16/87 FHLMC/FNMA 270,000 18 A 06/30/88 GNMA 500,100 19 A 09/28/88 FHLMC 203,615 20 A 08/29/90 GNMA 154,500 21 A 04/30/91 GNMA 69,514 ---------- $7,281,794 ==========
The Company has sold, through private placements, the beneficial interests in Owner Trusts since inception: Percent of beneficial interest sold during the year ended:
Trust 1986 1987 ----- ----- ---- I 100.000% II 98.000 III 98.000 IV 98.000% V 100.000 VI 98.000 VII 100.000 VIII 98.000 IX 98.635 X 100.000 XI 100.000
Trust 1987 1988 1990 1991 ----- ---- ---- ---- ---- 12 100.000% 13 99.800 14 99.800 15 99.800 16 100.000 17 100.000 18 100.000% 19 100.000 20 100.000% 21 100.000%
There were no beneficial interests in Owner Trusts sold by the Company since 1991. Page 5 Item 1. Business (continued) The Company, as Seller, has also issued the following Splits since inception (dollars in thousands):
Pricing Type of Principal Series Date Collateral Amount ------ ---- ---------- ------ 1987-A 02/19/87 FHLMC $ 445,000 1987-B 03/13/87 FNMA 275,000 1987-C 03/27/87 GNMA 126,900 1987-D 04/13/87 GNMA 110,000 1988-E 09/07/88 GNMA 200,000 --------- $1,156,900
The Company established the following Trust Funds, which sold Conduit Mortgage Pass-Through Certificates since inception (dollars in thousands):
Pricing Principal Series Date Amount ------ ------- ---------- 1987-1, Class A 07/16/87 $ 72,600 1988-1, Class A 10/13/88 63,794 1988-2, Class A 10/19/88 95,000 1988-3, Class A 11/02/88 61,692 1988-4, Class A 11/09/88 45,893 1989-1, Class A 01/31/89 86,612 1989-2, Class A 02/09/89 81,300 1989-4, Class A 05/03/89 99,877 1989-5, Class A 12/21/89 144,015 1990-1, Class A 09/27/90 134,070 1991-1, Class A 12/24/91 110,201 1992-1, Class A 02/14/92 174,564 1992-2, Class A 07/15/92 131,153 1992-3, Class A 07/23/92 92,623 1992-4, Class A 09/17/92 156,397 1992-5, Class A 09/17/92 115,196 1993-1, Class A 03/01/93 81,879 1993-2, Class A 03/31/93 296,803 1993-3, Class A 04/28/93 50,839 1993-4, Class A 06/11/93 115,000 1993-5, Class A 07/29/93 342,468 1993-6, Class A 08/27/93 208,700 1993-6R 02/23/94 18,997 1993-2R 08/15/94 21,409 1995-1, Class A 12/15/95 1,278,320 1996-1, Class A 05/28/96 305,580 1996-1R 10/04/96 73,672 1996-2 12/09/96 280,000 1996-3 12/19/96 278,286
Page 6 Item 1. Business (continued)
Pricing Principal Series Date Amount ------ ------- ---------- 1997-1 03/17/97 392,795 1997-1 03/17/97 200,000 1997-1 07/28/97 142,421 1997-1 08/21/97 200,000 1997-2 09/17/97 389,642 1997-WFC1 09/25/97 130,639 1997-CCB1 09/25/97 728,242 1997-2 11/17/97 400,000 1998-1 03/05/98 139,648 1998-CCB1 03/27/98 560,162 1998-WFC2 06/24/98 128,694 ---------- $8,429,183 ==========
The collateral in the Trust Fund issuances listed above consists of mortgage pools of fixed and adjustable rate, fully amortizing mortgage loans. The Company, as Seller, has also issued the following Commercial/Multifamily Mortgage Pass-Through Certificates since inception (dollars in thousands):
Series Date Amount ------ ---- ------ 1993-M1 08/12/93 $ 97,118 1994-M1 03/11/94 157,570 Series 94 05/16/94 15,000 Series 94-E 05/16/94 16,802 1994-CFB1 06/22/94 262,189 1994-MHC1 10/04/94 303,524 1995-AEW1 10/30/95 287,679 1995-FHA1 11/15/95 171,543 1995-MBL1 11/28/95 108,566 1995-WF1 12/21/95 243,850 1997-C1 06/25/97 897,903 1997-C2 12/12/97 1,293,736 1998-C1 06/11/98 2,197,390 1998-C2 11/20/98 1,688,900 ---------- $7,741,770 ==========
The Company, as Seller, has also issued the following Home Equity Loan Pass-Through Certificates since inception (dollars in thousands):
Series Date Amount ------ ---- ------ 1993-H1 09/29 $78,017 =======
Item 2. Properties The Company neither owns nor leases any physical property. Item 3. Legal Proceedings The Company is not a party to any material actual or pending legal proceedings. Page 7 Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the year ended December 31, 1998. Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters As of March 26, 1999 all outstanding shares of the Company's common stock are owned indirectly by Credit Suisse First Boston, Inc. and are not traded in any exchange or in the over-the-counter market. Item 6. Selected Financial Data Selected financial data is omitted because the information is in the financial statements or notes thereto included herein. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The principal activities of the Company include (i) issuing and selling collateralized mortgage obligations (the "Bonds"), (ii) issuing and selling Strips of Participation Certificates ("Splits"), (iii) issuing and selling Conduit Mortgage Pass-Through Certificates ("Conduits"), (iv) issuing and selling Commercial/Multifamily Mortgage Pass-Through Certificates ("Multifamily") and (v) issuing and selling Home Equity Loan Pass-Through Certificates ("Home Equity"). Results of Operations The Company recorded no gains on the sale of beneficial interests during the years ended December 31, 1998, 1997, and 1996. Net unrealized gains and losses on mortgage pass-through certificates are reflected in principal transactions. Realized gains and losses on the sale of mortgage pass-through certificates are also reflected in principal transactions. For the years ended December 31, 1998, 1997 and 1996, principal transactions gains of $863,000, $1,358,000 and $1,188,000, respectively, are included in the Company's Statements of Operations. During the years ended December 31, 1998, 1997 and 1996 the Company issued, as depositor, aggregate principal amounts of Conduits and Multifamily of $4,714,794,000, $4,775,378,000, and $937,538,000, respectively. Credit Suisse First Boston Corporation, (the "Corporation") a wholly owned subsidiary of the Parent Company, provides certain administrative functions on behalf of the Company. Beginning in 1997, the Corporation charged the Company a management fee for providing these services. The fee represents an allocation of the Corporation's costs based on an evaluation of the level of business activity of the Company and the services provided by the Corporation. $852,000 and $1,597,000 were charged to the Company as management fees for the years ended December 31, 1998 and 1997, respectively. Prior to 1997, the fees associated with the Corporation's services were not reflected in the Company's financial statements. In addition, during 1998 and 1997 the Company incurred other miscellaneous expenses totaling $4,000 and $21,000, respectively, which are reflected in the Company's Statements of Operations. Liquidity and Capital Resources The Company utilizes FBSC to borrow funds and facilitate the settlement of all transactions through intercompany accounts as required with FBSC. FBSC does not charge the Company interest on such borrowings. Page 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Year 2000 Issue The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify the year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems, which use certain dates in 1999 to represent something other than a date. The effects of Year 2000 Issues may be experienced before, on, or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failure, which could affect a company's ability to conduct normal business operations. The potential impact of the Year 2000 Issue on the company is being addressed by Credit Suisse First Boston, Inc., which has a contingency plan in place. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the Company, including those related to the efforts of customers or other third parties, will be fully resolved. Item 7a. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates and prices. The Company monitors market risks in accordance with established policies and may enter into various derivatives and U.S. Government securities transactions, as it deems necessary. Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS PAGE Independent Auditors' Report 10 Balance Sheets as of December 31, 1998 and 1997 11 Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 12 Statements of Changes in Stockholder's Equity for the Years Ended December 31, 1998, 1997 and 1996 12 Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 13 Notes to Financial Statements 14
Financial Statement Schedules are omitted because they are not required, inapplicable, or the information is included in the financial statements or notes thereto. Page 9 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. NOTES TO FINANCIAL STATEMENTS 1. Description of business Credit Suisse First Boston Mortgage Securities Corp. (the "Company"), is a wholly owned subsidiary of Credit Suisse First Boston Management Corporation ("FBSC"), which is a wholly owned subsidiary of Credit Suisse First Boston, Inc. (the "Parent Company"), a privately owned holding company. The Company was granted authority to do business in the state of Delaware on April 18, 1986 ("date of inception"). The Company was organized to form trusts ("Trusts"); to issue and sell Collateralized Mortgage Obligations ("CMOs"); to issue Strips of Participation Securities ("Splits"); to issue Conduit Mortgage Pass-Through Certificates ("Conduits"); to issue Commercial/Multifamily Mortgage Pass-Through Certificates ("Multifamily"); and to issue Home Equity Pass-Through Certificates ("Home Equity"). CMOs are backed by mortgage-backed certificates (the "Certificates") issued and guaranteed as to the payment of principal and interest by the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and/or mortgage loans and participations therein. Splits are backed by Certificates. Conduits, Multifamily, and Home Equity represent undivided fractional interests in their respective trust, formed by the Company, where the trust property consists of a pool of mortgage loans, a pool of commercial/multifamily mortgage loans and a pool of home equity loans, respectively. Since the date of inception, the Company has had the following activity: - Established 21 Trusts which have issued CMOs with an aggregate principal balance of $7,281,794,000 as of their respective date of issuance. Additionally, the Company sold, through private placements, 21 Trusts consisting of beneficial interests in Owner Trusts. There were no Trusts issued during the years ended December 31, 1998, 1997, and 1996, respectively. - As seller, has issued 5 series of Splits with an aggregate principal balance of $1,156,900,000 as of their respective date of issuance. No Splits have been issued since 1988. - Established 37 Trust Funds which sold Conduits with an aggregate principal balance of $8,429,183,000 as of their respective date of issuance, including $828,504,000, $2,583,739,000 and $937,538,000 issued during the years ended December 31, 1998, 1997, and 1996, respectively. - As seller, has issued 12 series of Multifamily certificates with an aggregate principal balance of $7,741,770,000 as of their respective date of issuance, including $3,866,290,000 and $2,191,639,000 issued during the years ended December 31, 1998 and 1997, respectively. There were no Multifamily certificates issued during 1996. - As seller, has issued 1 series of Home Equity certificates with an aggregate principal balance of $78,017,000 as of December 31, 1993. There were no Home Equity certificates issued since 1993. Page 14 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. NOTES TO FINANCIAL STATEMENTS 2. Summary of significant accounting policies Deferred debt issuance costs, which consist primarily of shelf registration costs, are allocated to the specific Trust to which the expense relates on the date of issuance and are included in the cost of investment upon sale. The Company's investments in the Trusts are carried at cost less cash distributions received to date. Cash in excess of the Company's cost is recognized as income when received. Certain expenses are paid on behalf of the Company by Credit Suisse First Boston, Inc. The Company is included in the consolidated federal and combined state and local income tax returns of Credit Suisse First Boston, Inc. The amount of income tax expense is computed on a separate company basis and allocated by Credit Suisse First Boston, Inc. to the Company. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Mortgage Pass-Through Certificates In the normal course of business, the Company establishes Trusts which sell mortgage pass-through certificates. All certificates are generally purchased from the Trusts by the underwriter and sold to third parties. As of December 31, 1998 and 1997, the Company held $695,000 and $4,776,000, respectively, of certificates which they purchased directly from the Trusts. The certificates are carried at market value and are expected to be sold in the near future. The effective interest rate yield of 7.4%, as of December 31, 1998, will be used to accrue income in the following period. The effective interest rate yield of 7.3%, as of December 31, 1997, was used to accrue income in the following period. Net unrealized gains/losses on the certificates are reflected in principal transactions in the accompanying Statements of Operations. Realized gains/losses on the sale of the certificates are also reflected in principal transactions in the accompanying Statements of Operations. To acquire the mortgage pass-through certificates, the Company established an intercompany loan included in payables to affiliates on the balance sheets. 4. Related party transactions Credit Suisse First Boston Corporation, (the "Corporation") a wholly owned subsidiary of the Parent Company, provides certain administrative functions on behalf of the Company. Beginning in 1997, the Corporation charged the Company a management fee for providing these services. The fee represents an allocation of the Corporation's costs based on an evaluation of the level of business activity of the Company and the services provided by the Corporation. $852,000 and $1,597,000 were charged to the Company as management feees for the years ended December 31, 1998 and 1997, respectively. Prior to 1997, the fees associated with the Corporation's services were not reflected in the Company's financial statements. Page 15 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. NOTES TO FINANCIAL STATEMENTS 5. Reorganization On July 1, 1996, the Parent Company's principal shareholder, CS Holding, announced a plan to reorganize its corporate structure, including the operations of the Parent Company. This reorganization was fully implemented as of January 1, 1997. Pursuant to this reorganization, CS Holding changed its name to Credit Suisse Group and is comprised of four distinct business units. As part of this reorganization the Parent Company changed its name from CS First Boston, Inc. to Credit Suisse First Boston, Inc. and the Company changed its name from CS First Boston Mortgage Securities Corp. to Credit Suisse First Boston Mortgage Securities Corp.. FBSC changed its name from CS First Boston Securities Corporation to Credit Suisse First Boston Management Corporation. Page 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The directors and executive officers of the Company are as follows:
NAME AGE TITLE DATE ELECTED ---- --- ----- ------------ Lawrence A. Shelley 40 President and Director 02/26/97 Zev Kindler 35 Treasurer 11/10/98 Rhonda G. Matty 40 Assistant Secretary 08/24/94 Thomas A. DeGennaro 44 Director of Taxes 07/16/90 Thomas M. Zingalli 40 Controller and Principal 08/05/94 Accounting Officer
Item 11. Executive Compensation No compensation was paid by the Company to persons who were directors, officers or employees of the Company for their services as directors or officers of the Company. Item 12. Security Ownership of Certain Beneficial Owners and Management Not applicable. Item 13. Certain Relationships and Related Transactions Not applicable. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: (1) Financial Statements: The Financial Statements and Notes to Financial Statements appear on pages 11 through 16. The Report of Independent Auditors, KPMG LLP, pertaining to the 1998, 1997 and 1996 financial statements appears on page 10. (2) Financial Statement Schedules Financial Statement Schedules are omitted because they are not required, inapplicable, or the information is included in the financial statements or notes thereto. (3) Exhibits: Articles of Incorporation of the Company as of December 31, 1985 (incorporated by reference to Exhibit 3.1 of the Company's Form S-11 Registration Statement No. 33-8856 dated September 18, 1986). Page 17 (b) Reports on Form 8-K
Items Reported Financial Statements Filed Date of Filing -------------- -------------------------- -------------- Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable October 15, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable October 22, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable October 30, 1998 Items 5 & 7. Other Events and Monthly Statements and Exhibits Not Applicable October 30, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 4, 1998 Items 5 & 7. Other Events and Monthly Statements and Exhibits Not Applicable November 6, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 10, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 12, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 12, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 17, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable November 24, 1998 Items 5 & 7. Other Events and Monthly Statements and Exhibits Not Applicable December 3, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable December 3, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable December 10, 1998 Items 5 & 7. Other Events and Financial Statements and Exhibits Not Applicable December 31, 1998
(c) Exhibits filed as part of this report are included in Item 14(a) (3) above. Page 18 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) 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, on this 26th day of March, 1999. CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. By: /s/ LAWRENCE A. SHELLEY -------------------------------- Lawrence A. Shelley President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 26, 1999. By: /s/ ZEV KINDLER By: /s/ RHONDA G. MATTY -------------------------------- ---------------------------- Zev Kindler Rhonda G. Matty Treasurer Assistant Secretary By: /s/ THOMAS A. DEGENNARO By: /s/ THOMAS M. ZINGALLI -------------------------------- ---------------------------- Thomas A. DeGennaro Thomas M. Zingalli Director of Taxes Controller and Principal Accounting Officer
Page 19 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) 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, on this 26th day of March, 1999. CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. By: -------------------------------- Lawrence A. Shelley President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 26, 1999. By: -------------------------------- By: ---------------------------- Zev Kindler Rhonda G. Matty Treasurer Assistant Secretary By: -------------------------------- By: ---------------------------- Thomas A. DeGennaro Thomas M. Zingalli Director of Taxes Controller and Principal Accounting Officer
Page 19 INDEX TO EXHIBITS
Exhibit Number Description of Exhibit Page - ------- ---------------------- ---- 3.1 Articles of Incorporation of the Company as of December 31, 1985. * 3.2 By-Laws of the Company as of December 31, 1985. *
* Incorporated by reference to the same Exhibits in Registration Statement No. 33-8856 on Form S-11 filed with the Securities and Exchange Commission on September 18, 1986. Page 20 Consent of Independent Certified Public Accountants The Board of Directors Credit Suisse First Boston Mortgage Securities Corp.: We consent to incorporation by reference in the registration statement Nos. 33-11623, 33-15833, 33-16145, 33-21329, 33-25751, 33-29239, 33-33807, 33-51771, 33-53115, 33-25751 and 33-61167 on Form S-3 of Credit Suisse First Boston Mortgage Securities Corp. of our report dated March 26, 1999 relating to the balance sheets of Credit Suisse First Boston Mortgage Securities Corp. as of December 31, 1998 and 1997, and the related statements of operations, changes in stockholder's equity, and cash flows for each of the years in the three year period ended December 31, 1998, which report appears in the December 31, 1998 annual report on Form 10-K of Credit Suisse First Boston Mortgage Securities Corp. /s/ KPMG LLP New York, New York March 26, 1999 Page 21 Independent Auditors' Report The Board of Directors Credit Suisse First Boston Mortgage Securities Corp.: We have audited the accompanying balance sheets of Credit Suisse First Boston Mortgage Securities Corp. as of December 31, 1998 and 1997, and the related statements of operations, changes in stockholder's equity, and cash flows for each of the years in the three-year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Credit Suisse First Boston Mortgage Securities Corp. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ KPMG LLP New York, New York March 26, 1999 Page 10 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. BALANCE SHEETS
December 31, 1998 1997 ---- ---- (in thousands, except par value and share data) Assets: Cash $ 11 $ 11 Investment in trusts - 624 Mortgage Pass-Through Certificates 695 4,776 Receivables from affiliates 619 - Accrued interest 16 456 -------- -------- Total Assets $ 1,341 $ 5,867 ======== ======== Liabilities and Stockholder's Equity: Payables to affiliates $ - $ 4,739 Other Payables 47 - -------- -------- Total Liabilities 47 4,739 -------- -------- Stockholder's Equity: Common Stock, (par value $1.00 per share, 1,000 shares authorized and outstanding) 1 1 Retained earnings 1,293 1,127 -------- -------- Total Stockholder's Equity 1,294 1,128 -------- -------- Total Liabilities and Stockholder's Equity $ 1,341 $ 5,867 ======== ========
See Accompanying Notes to Financial Statements. Page 11 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. STATEMENTS OF OPERATIONS
Year Ended December 31, 1998 1997 1996 ------ ------ ------ (in thousands) Revenues: Principal transactions $ 863 $1,358 $1,188 Interest income 644 1,026 535 ------ ------ ------ Total revenues 1,507 2,384 1,723 Expenses: Interest expense 396 367 388 General and administrative expenses 856 1,618 -- ------ ------ ------ Total expenses 1,252 1,985 388 Income from operations before income taxes 255 399 1,335 Income taxes 89 140 467 ------ ------ ------ Net income $ 166 $ 259 $ 868 ====== ====== ======
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Year Ended December 31, 1998 1997 1996 ------ ------ ------ (in thousands) Common stock - balance at beginning of year $ 1 $ 1 $ 1 ------ ------ ------ Common stock - balance at end of year $ 1 $ 1 $ 1 ====== ====== ====== Retained earnings - balance at beginning of year $1,127 $ 868 $ -- Net income 166 259 868 ------ ------ ------ Retained earnings - balance at end of year $1,293 $1,127 $ 868 ------ ------ ------ Total $1,294 $1,128 $ 869 ====== ====== ======
See Accompanying Notes to Financial Statements. Page 12 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. STATEMENTS OF CASH FLOWS
Year Ended December 31, 1998 1997 1996 ------ ------ ------ (in thousands) Cash Flows From Operating Activities: - ------------------------------------- Net Income $ 166 $ 259 $ 868 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Decrease (increase) in investments in and distribution by trusts 624 (19) 18 Decrease (increase) in Mortgage Pass-Through Certificates 4,081 3,176 (7,952) Decrease (increase) in resale agreements -- 23,109 (23,109) (Increase) decrease in receivables from affiliates (619) 76 (76) Decrease (increase) in accrued interest receivable 440 86 (542) (Decrease) increase in accrued interest payable -- (712) 712 (Increase) in other payables 47 -- -- ------- ------- ------- Net Cash provided by (used for) Operating Activities 4,739 25,975 (30,081) ------- ------- ------- Cash Flows From Financing Activities: - ------------------------------------- (Decrease) increase in securities sold not yet purchased -- (22,859) 22,859 Decrease in deferred debt issuance costs -- -- 945 (Decrease) increase in payables to affiliates (4,739) (3,116) 6,277 ------- ------- ------- Net Cash (used for) provided by Financing Activities (4,739) (25,975) 30,081 ------- ------- ------- Net increase in cash -- -- -- Cash at beginning of year 11 11 11 ------- ------- ------- Cash at end of year $ 11 $ 11 $ 11 ======= ======= ======= Supplemental Disclosure of Cash Flow Information: - ------------------------------------------------- Interest -- 1,079 -- Income Taxes 89 140 467
See Accompanying Notes to Financial Statements. Page 13 EX-27 2 ART. 5 FDS FOR 4TH QUARTER 10-K
5 1,000 12-MOS DEC-31-1998 DEC-31-1998 11 0 619 0 695 1,341 0 0 1,341 47 0 0 0 1 1,293 1,341 0 1,507 0 0 856 0 396 255 89 166 0 0 0 166 0 0
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