-----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, HeSjClHS87/FlQug+CrYFk/cVr0tBm1y+gLMWI0oPTthFgKzuEtvp/yyhRu87236 gMQT9yZQmWwWEHuwSF/sIA== 0000929624-97-000025.txt : 19970122 0000929624-97-000025.hdr.sgml : 19970122 ACCESSION NUMBER: 0000929624-97-000025 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970121 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIS MORTGAGE INVESTMENT CO CENTRAL INDEX KEY: 0000833088 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 943067889 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10004 FILM NUMBER: 97508153 BUSINESS ADDRESS: STREET 1: 655 MONTGOMERY ST STE 800 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153938000 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10004 TIS MORTGAGE INVESTMENT COMPANY (Exact name of registrant as specified in its charter) MARYLAND 94-3067889 (State of incorporation) (I.R.S. Employer Identification No.) 655 MONTGOMERY STREET, SUITE 800 SAN FRANCISCO, CALIFORNIA 94111 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 393-8000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- COMMON STOCK, NEW YORK STOCK EXCHANGE PAR VALUE $.001 PER SHARE PACIFIC STOCK EXCHANGE ______________________________ Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K is not contained here, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No X --- --- On March 14, 1996, there were 8,105,880 shares of Common Stock outstanding and the aggregate market value of the Registrant's voting stock held by non- affiliates (based upon the closing price on that date of the shares on the New York Stock Exchange as reported on the Composite Tape) was approximately $10,132,000. Documents Incorporated by Reference Part III of this Form 10-K is incorporated by reference to the Registrant's 1996 definitive proxy statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant's fiscal year. PRELIMINARY STATEMENT --------------------- This Form 10-K/A is being filed by TIS Mortgage Investment Company (the "Company") in order to (1) provide additional information regarding long- term debt in Item 6. Selected Financial Data, (2) to provide additional information on Mortgage Related Assets and Principal Payments on CMOs and additional information on Real Estate markets in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. In addition, the Company is including the signature indication in this filing for Item 14, Financial Statements and Report of Arthur Andersen LLP, Independent Public Accountants. In accordance with the rules of the Securities and Exchange Commission, the Company has amended and restated in its entirety Items 6 and 7 as well as the Report of Arthur Andersen LLP in Item 14 of its previously filed Annual Report on Form 10-K for its fiscal year ended December 31, 1995 under cover of this Form 10-K/A. PART II, ITEM 6. SELECTED FINANCIAL DATA The following selected financial data is qualified in its entirety by, and should be read in conjunction with, the financial statements and notes thereto appearing in sections of this Annual Report on Form 10-K. The data as of December 31, 1995, 1994 and 1993 and for the years ended December 31, 1995, 1994 and 1993 have been derived from the Company's financial statements which are included elsewhere in this Annual Report on Form 10-K.
(IN THOUSANDS, EXCEPT PER SHARE DATA) - --------------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1995 1994 1993 1992 1991 ----------------------------------------------------------- STATEMENT OF OPERATIONS DATA Income Interest Income on Mortgage $ 13,735 $18,298 $ 36,873 $ 54,337 $64,307 Certificates Interest Income on Residual Interests 1,483 3,650 186 2,001 10,248 Income from PO Bonds 0 0 0 107 15 Income from IO Bonds 1,128 2,208 1,997 1,983 0 Income from Commercial Securitizations 89 51 0 0 0 Interest on Short-term Investments 115 126 179 400 539 Gain (Loss) on Sales of Mortgage Related Assets (2,385) 0 0 1,391 0 Valuation Reserve Reduction (Provision) 541 (398) 0 0 0 Loss from Real Estate Operations (289) 0 0 0 0 Other Income 30 60 89 123 154 Total Income 14,447 23,995 39,324 60,342 75,263 Expenses Interest Expense on CMOs 14,749 18,987 38,323 52,747 61,909 Interest Expense on Short-term Debt 429 509 568 781 284 Write-downs of Mortgage Assets 0 0 12,388 25,047 0 Amortization of Deferred Bond Issuance Costs 276 351 1,857 1,638 741 Administrative and Management Expenses 1,572 1,611 1,920 1,624 2,949 Total Expenses 17,026 21,458 55,056 81,837 65,883 Minority Interest 0 0 172 108 (215) Income (Loss) Before Cumulative Effect of Change in Accounting for Real Estate Investments (2,579) 2,537 (15,560) (21,387) 9,165 Cumulative Effect of Change in Accounting for Real Estate Investments 0 0 (9,879) 0 0 Net Income (Loss) ($2,579) $ 2,537 ($25,439) ($21,387) $ 9,165 Net Income (Loss) per Share Before Cumulative Effect of Change in Accounting for Real Estate Investments ($0.32) $0.31 ($1.92) ($2.64) $1.13 Cumulative Effect of Change in Accounting for Real Estate Investments 0.00 0.00 (1.22) 0.00 0.00 Net Income (Loss) ($0.32) $0.31 ($3.14) ($2.64) $1.13 Dividends Declared per Share $0.00 $0.02 $0.20 $0.61 $1.34 Weighted Average Shares Outstanding 8,106 8,106 8,106 8,103 8,100 - ---------------------------------------------------------------------------------------------------
20 SELECTED FINANCIAL DATA (CONTINUED)
(IN THOUSANDS) DECEMBER 31 ---------------------------------------------------------- 1995 1994 1993 1992 1991 ---------------------------------------------------------- BALANCE SHEET DATA Mortgage Certificates, net $109,752 $163,817 $250,015 $460,438 $643,176 Residual Interests 725 8,675 11,919 22,648 59,646 PO Bonds 0 0 0 0 4,796 IO Bonds 3,150 9,794 12,212 26,614 0 Commercial Securitizations 191 1,194 0 0 0 Reserve for Loss on Investments (4,277) (4,818) (3,852) 0 0 Operating Real Estate Assets 29,384 395 0 0 0 Total Assets 145,247 188,957 300,190 545,645 735,835 Total Liabilities 133,266 172,864 284,410 502,881 666,628 Notes Payable on Real Estate 20,362 0 0 0 0 Short-term Debt 2,118 8,325 11,745 17,957 7,131 Minority Interest 0 0 0 1,275 1,428 Total Shareholders' Equity 11,981 16,093 15,780 41,489 67,779 - ---------------------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company commenced operations on August 26, 1988 in connection with its initial public offering of 8,100,000 shares of Common Stock. INVESTMENT ACTIVITIES In 1994 the Company announced that it was changing its investment focus from investments in Structured Securities to multifamily real estate located in California's Central Valley. As a result, during 1995 the Company sold a majority of its investments in Structured Securities and acquired a portfolio of four income-producing residential real estate properties. In the future, the Company expects that increasing portions of its assets and operating income (loss) will be related to investments in multifamily real estate. Sales of investments in 1995 generated $10,751,000 of proceeds, essentially all of which was reinvested in multifamily properties. Net losses related to these sales totaled $2,385,000. The total cost of such properties was $29,305,000 which was partially offset by the assumption of existing secured debt and new debt totaling $20,490,000. Additionally, short-term debt was reduced by $6,207,000 to $2,118,000 at the end of 1995. During 1994 the Company reinvested $1,232,000 in Commercial Securitizations and reduced its short-term borrowings by $3,420,000. In addition, the Company incurred costs of $395,000 related to the 1995 purchase of multifamily residential properties. At December 31, 1994, these costs were included in other assets. During 1993 the Company reinvested $4,069,000 in IO Bonds and $340,000 in Residual Interests and reduced its short-term borrowing by $6,212,000. The funds came from operating activities and the principal returned to the Company from its investments. The following table illustrates the Company's cash receipts, disbursements and reinvestments for the last four years. 21
CASH FLOW ANALYSIS (IN THOUSANDS) 1995 1994 1993 1992 - -------------------------------------------------------------------------------- Beginning Cash Balance $ 1,718 $ 680 $ 903 $ 1,902 Cash Received: Mortgage Related Assets 6,412 10,926 16,111 20,949 Short-term Investments 0 0 0 1,835 Sale of Mortgage Related Assets 10,751 0 0 6,008 Increase to Short-term Debt 0 0 0 10,826 Increase in Real Estate Notes 20,362 0 0 0 Cash Disbursements: Cash Expenses (3,348) (5,074) (3,687) (2,566) Real Estate Assets (29,490) 0 0 0 Dividends 0 (162) (2,026) (7,291) Reinvestments 0 (1,232) (4,409) (30,760) Decrease to Short-term Debt (6,207) (3,420) (6,212) 0 - -------------------------------------------------------------------------------- Ending Cash Balance $ 198 $ 1,718 $ 680 $ 903 - --------------------------------------------------------------------------------
The Company decreased the level of reinvestments in 1994 over the two prior years because the cash flows from investments did not provide cash at prior year's levels. In 1993 the Company purchased two Inverse IO Bonds for $4,069,000 and purchased for $340,000 all of the outstanding minority interest in an equity residual and minority interests in two other Equity Residuals. In 1994 the Company purchased two Commercial Securitizations for $1,232,000. ACCOUNTING CHANGE On December 31, 1993 the Company adopted Statement of Financial Accounting Standards No. 115 ("SFAS 115") - Accounting for Certain Investments in Debt and Equity Securities. In accordance with this new Standard, the Company is required to classify its investments in mortgage related assets as either trading investments, available-for-sale investments or held-to-maturity investments. The Company is not in the business of trading its investments in mortgage related assets. However, from time to time the Company may sell an investment as part of its efforts to adjust its portfolio composition to reflect changes in economic conditions. Therefore, the Company has classified all its investments in mortgage related assets as available-for-sale investments, carried at fair value in the financial statements. Unrealized holding gains and losses for available-for-sale investments are excluded from earnings and reported as a net amount in shareholders' equity until realized. SFAS No. 115 became effective for years beginning after December 15, 1993; however an enterprise was permitted to apply this statement effective in the fourth quarter of 1993. Prior years' financial statements were not permitted to be restated. The Company elected to adopt SFAS No. 115 in the fourth quarter of 1993. The Company is not in the business of trading its Structured Securities. However, from time to time the Company may sell an asset as part of the Company's ongoing effort to adjust its portfolio composition to reflect changes in economic conditions. As such, the Company does not meet the stringent requirements of SFAS No. 115 related to classifying its real estate investments as held-to-maturity and, therefore, has classified all of its real estate investments as available-for-sale. The Company recognized a $9,879,000 charge to earnings in 1993 from the cumulative effect at December 31, 1993 of adopting the new standard for assets which meet the definition of other than temporary impairment. For assets which do not meet the definition of other than temporary impairment and for assets where the fair value exceeds amortized cost, the Company has recorded, as a cumulative 22 effect of change in accounting for investments, a net unrealized gain of $1,351,000 as a separate component of equity as prescribed by SFAS No. 115 for assets classified as available-for-sale. Prior years' consolidated financial statements were not permitted to be restated. RESULTS OF OPERATIONS The Company had a net loss of $2,579,000, or $0.32 per share, for the year ended December 31, 1995. For the year ended December 31, 1994 it had net income of $2,537,000, or $0.31 per share. For the year ended December 31, 1993 it had a net loss of $25,439,000, or $3.14 per share. The 1993 loss included $9,879,000, or $1.22 per share, as the cumulative effect of a change in accounting for mortgage related assets occasioned by the Company's decision to adopt SFAS No. 115 as of its fiscal year ended December 31, 1993. Additionally, the 1993 net loss included write-downs of Structured Securities of $12,388,000. No dividends were declared for 1995. The Company declared dividends totaling $162,000 for 1994, or $0.02 per share as compared with $1,621,000 for 1993, or $0.20 per share. The 1994 dividend of $0.02 per share was declared to minimize the Company's corporate income taxes. 1995 COMPARED TO 1994 The nature of the Company's operations changed radically in 1995 because of the change in investment focus from investments in Structured Securities to multifamily real estate located in California's Central Valley. As a result, during 1995 the Company sold a majority of its investments in Structured Securities and acquired a portfolio of four income-producing residential real estate properties. Income from Residual Interests and Interest Only Bonds declined by more than half because these investments were included in the Company's portfolio for only a portion of the year. Sales of these investments resulted in a loss of $2,385,000 although $1,048,000 of this loss had been previously recognized as a reduction of shareholders' equity. Net interest margin (interest income from Mortgage Certificates net of interest expense on CMOs) declined in 1995 to a net interest expense of $1,014,000 from net interest expense of $689,000 in 1994 as shown in the following table. The primary cause of the decline was a change in the method of amortization of original issue discount on CMOT 28 to a method that better relates amortization to principal reductions.
(In thousands) 1995 1994 Change -------- ------- -------- Interest Income from Mortgage $ 13,313 $17,518 ($4,205) Certificates Amortization of Market Discount 522 780 (258) -------- ------- ------- Net Interest Income 13,735 18,298 (4,563) -------- ------- ------- Interest Expense on CMOs 13,086 17,528 (4,442) Amortization of Original Issue Discount 1,663 1,459 204 -------- ------- ------- Net Interest Expense 14,749 18,987 (4,328) -------- ------- ------- Net Interest Margin ($1,014) ($689) ($325) ======== ======= =======
Net interest margin continues to be negative because of the retirement of some of the lower coupon bonds leaving primarily bonds which bear an interest rate equal to or close to the mortgage rate. The reserve for loss on investments was reduced by $541,000 in 1995 in relation to the decline in the amounts of principal outstanding in the underlying residual series. 23 In the first partial year of real estate operations, the Company's income from real estate operations before depreciation and amortization ("Funds from Operations") was $88,000. However, real estate operations after depreciation and amortization showed a loss of $289,000. The first year of real estate operations relates to properties acquired in a series of four closings throughout 1995 and therefore does not constitute a full year of operations. During the year, the Company made some needed improvements to the properties while increasing average occupancy rates by 5%. The Company believes that the demographics of the California Central Valley are favorable for the ownership of apartments. The population growth rate in the San Joaquin Valley has been higher than the California Average in most years since 1970. Per capita housing stock has decline since 1980 implying that housing stock growth has lagged population growth over that period. Overall, the San Joaquin valley has fewer apartment buildings per capita, relative to the rest of the State. The Company believes that it has acquired its properties at levels below current replacement cost or the development cost of new competitive apartments. These factors should all favorably influence the Company's ability to maintain adequate levels of occupancy at attractive rental rates At the same time, the Company anticipates improved results from real estate operations in future years as much of the secured real estate debt is expected to be refinanced in 1996 at lower interest rates. Interest expense on repurchase agreements decreased from $509,000 in 1994 to $429,000 in 1995. This is the result of a decrease in the average amount of debt outstanding from $10,020,000 in 1994 to $5,676,000 in 1995. However, this reduction was offset by an increase in the weighted average interest rate from 5.08% in 1994 to 7.56% in 1995. Management and residual interest administration fees remained essentially constant in 1995 because of the somewhat increased level of average invested assets related to real estate acquisitions offset by a $10,000 decline in the 1995 residual interest administration fee. In 1995 the Company incurred management fees of $130,000 and residual interest administration fees of $90,000 as compared to fees of $121,000 and $100,000, respectively, in 1994. General and administrative expense declined from $1,229,000 in 1994 to $1,212,000 in 1995 because of overall economies on the part of the Company and the Manager in 1995. 1994 COMPARED TO 1993 As a result of the accounting change described above which adjusted the carrying value of the Company's Structured Securities to fair value, 1994 operating results were likely to be favorable in most stable interest rate environments. As shown in the Net Interest Income Analysis below, the average yield from residual interests and IO bonds was 35.65% and 18.77%, respectively. Net interest margin (interest income from Mortgage Certificates net of interest expense on CMOs) improved to a net interest expense of $689,000 in 1994 from a net interest expense of $1,450,000 in 1993 as shown in the following table.
(In thousands) 1994 1993 Change -------- ------- -------- Interest Income from Mortgage $17,518 $33,160 ($15,642) Certificates Amortization of Market Discount 780 3,713 (2,933) ------- ------- ------- Net Interest Income 18,298 36,873 (18,575) ------- ------- ------- Interest Expense on CMOs 17,528 33,302 (15,774) Amortization of Original Issue Discount 1,459 5,021 (3,562) ------- ------- ------- Net Interest Expense 18,987 38,323 (19,336) ------- ------- ------- Net Interest Margin ($ 689) ($ 1,450) $ 761 ======= ======= =======
Net interest margin continues to be negative because of the retirement of some of the lower coupon bonds leaving primarily bonds which bear an interest rate equal to or close to the mortgage rate. 24 Interest expense on repurchase agreements decreased from $568,000 in 1993 to $509,000 in 1994. This is the result of a decrease in the average amount of debt outstanding from $15,371,000 in 1993 to $10,020,000 in 1994. However, this reduction was offset by an increase in the weighted average interest rate from 3.70% in 1993 to 5.08% in 1994. Management and residual interest administration fees declined in 1994 because of the lower level of average invested assets which arose from the 1993 write downs of Structured Securities. In 1994 the Company incurred management fees of $121,000 and residual interest administration fees of $100,000 as compared to fees of $179,000 and $110,000, respectively, in 1993. General and administrative expense declined from $1,430,000 in 1993 to $1,229,000 in 1994 because of lower costs of stockholder communications and the capitalization in 1994 of certain consulting fees. OUTLOOK The Company has determined that it will direct its future investments principally to multifamily residential properties. With regard to real estate investments, the acquisition strategy of the Company is to identify communities with an expanding employment base and demographics which will continue to provide economic growth. After identifying communities with a strong potential economic growth, the Company attempts to seek out those areas within a chosen community which are most likely to be positively affected by the economic growth of the community. Finally, the property sought for purchase within a given area is chosen because it is considered to be among the highest quality properties in that area and can be purchased below replacement cost. Management believes that this strategy will allow income from each of the properties to rise before the properties encounter significant competition from new construction. On December 29, 1994 the Company entered into a definitive agreement to acquire four multifamily housing properties in California's Central Valley. These properties consist of 539 units together with 9.75 acres of unimproved land slated for development of an additional 126 units. The properties were purchased in a series of closings occurring between mid-January and mid- November, 1995. The aggregate purchase price for the properties was be $29,305,000, including existing debt to be assumed by the Company. Prior to 1995, the Company's primary business was the ownership of Structured Securities. Because mortgage interest rates increased in 1994, the high level of prepayments experienced in 1992 and 1993 subsided. If mortgage rates decline sufficiently to cause prepayments to increase, the Company will again have write downs on certain of its single family Structured Securities. The Company has generated significant tax loss carryforwards from losses experienced over the last several years. Should the Company's real estate acquisitions be successful, the Company would be in a tax position to have the right, but not the obligation, to continue to use cash flows to rebuild its investment portfolio prior to resuming taxable dividend payments. LIQUIDITY AND CAPITAL RESOURCES The Company uses its cash flow to provide working capital to pay its expenses and debt service, acquire other assets and, at the discretion of the Board of Directors, to pay dividends to its shareholders. In 1995 the Company's operations generated cash flow of $1,635,000 as compared to $7,914,000 in 1994 and $4,342,000 in 1993. At December 31, 1995 the Company had outstanding short-term borrowings with two investment banking firms under repurchase agreements totaling $2,117,500 at a weighted average interest rate of 7.4335%. All of the borrowing had initial terms of one month, are renewed on a month-to-month basis and have a floating rate of interest which is tied to the one month LIBOR rate. At December 31, 1994 the Company had outstanding borrowings with one investment banking firm under repurchase agreements 25 totaling $8,325,000. The weighted average interest rate of these borrowings at that date was 6.9776%. In addition, at December 31, 1995 the Company had outstanding borrowings secured by multifamily real estate totaling $20,362,000. Approximately 85% of this debt has variable interest rates and 15% is at fixed rates. The weighted average interest rate at December 31, 1995 was 8.494%. The Company intends to refinance approximately $17,000,000 of the notes payable on real estate during 1996 at more favorable terms and rates. At December 31, 1995, the Company had no other borrowings or committed lines of credit. Because of the Company's accounting policy of consolidating Owner Trust Residuals when over 50% equity interest in the trust is held by the Company, the consolidated balance sheet includes mortgage certificates issued by these trusts and the collateralized mortgage obligations of the trusts. The Company receives significant cash flows from principal payments on the mortgage certificates. However, these inflows are essentially offset by outflows required to pay the collateralized mortgage obligations. The amounts involved in the three years ended December 31, 1993, 1994 and 1995 are shown in the table below (in thousands):
MORTGAGE CERTIFICATES Principal Outstanding - December 31, 1992 $468,793 Principal Reduction - Year Ended December 31, 1993 214,136 -------- Principal Outstanding - December 31, 1993 254,657 Principal Reduction - Year Ended December 31, 1994 86,978 -------- Principal Outstanding - December 31, 1994 167,679 Principal Reduction - Year Ended December 31, 1995 21,885 Principal Amount Sold - Year Ended December 31, 1995 34,488 -------- Principal Outstanding - December 31, 1995 $111,306 ======== COLLATERALIZED MORTGAGE OBLIGATIONS Principal Outstanding - December 31, 1992 $491,284 Principal Reduction - Year Ended December 31, 1993 213,672 -------- Principal Outstanding - December 31, 1993 277,612 Principal Reduction - Year Ended December 31, 1994 108,308 -------- Principal Outstanding - December 31, 1994 169,304 Principal Reduction - Year Ended December 31, 1995 22,627 Principal Amount Sold - Year Ended December 31, 1995 32,787 -------- Principal Outstanding - December 31, 1995 $113,890 ========
During the year ended December 31, 1995, the Company sold certain of its residual interests, IO bonds, commercial securitizations and its economic interest in TIS Mortgage Acceptance Corporation ("TISMAC"). These sales were made in order to provide funds for the acquisition of four multifamily housing properties in California's Central Valley. The results of these sales are summarized in the following table:
(in thousands) Sales Price Amortized Cost Gain (Loss) - ------------------------------------------------------------------------- Residual Interests $ 5,247 $ 6,277 ($1,030) IO Bonds 3,703 4,845 ( 1,142) Commercial Securitizations 1,016 899 118 TISMAC 785 1,116 (331) - ------------------------------------------------------------------------- Total $10,751 $13,137 ($2,385) =========================================================================
26 Management of the Company believes that the cash flow from operations and availability of repurchase agreements are sufficient to enable the Company to meet its current and anticipated future liquidity requirements including required payment of dividends to its shareholders, which must equal at least 95% of the Company's taxable income in order for the Company to qualify as a REIT.
NET INTEREST INCOME ANALYSIS 1995 1994 1993 -------------------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE (IN THOUSANDS) INTEREST BALANCE RATE INTEREST BALANCE RATE INTEREST BALANCE RATE - --------------------------------------------------------------------------------------------------------------------------------- Interest Income Mortgage Certificates $13,735 $147,131 9.34% $18,298 $194,679 9.40% $36,873 $361,602 10.20% Residual Interests 1,483 4,644 31.93% 3,650 10,239 35.65% 186 16,411 1.13% Interest Only Bonds 1,128 6,781 16.64% 2,208 11,762 18.77% 1,997 21,078 9.47% Other 204 4,060 5.02% 177 9,840 1.80% 179 16,372 1.09% - --------------------------------------------------------------------------------------------------------------------------------- Interest Income 16,550 162,616 10.18% 24,333 226,520 10.74% 39,235 415,463 9.44% Interest Expense Collateralized Mort- gage Obligations 14,749 145,017 10.17% 18,987 199,572 9.51% 38,323 376,933 10.17% Short-term Debt 429 5,676 7.56% 509 10,020 5.08% 568 15,371 3.70% - --------------------------------------------------------------------------------------------------------------------------------- Interest Expense 15,178 150,693 10.07% 19,496 209,592 9.30% 38,891 392,304 9.91% Net Interest Income $ 1,372 0.84% $ 4,837 2.14% $ 344 0.08% =================================================================================================================================
The above tables summarize the amount of interest expense, the average amounts outstanding of interest-bearing assets and liabilities, and the average effective interest rates. The table below summarizes the amount of change in interest income and interest expense due to changes in interest rates versus changes in volume.
1995 - 1994 1994 - 1993 1993 - 1992 ------------------------------ ----------------------------------- --------------------------------- (IN THOUSANDS) RATE VOLUME TOTAL RATE VOLUME TOTAL RATE VOLUME TOTAL - ---------------------------------------------------------------------------------------------------------------------------------- Interest Income Mortgage Certificates ($ 124) ($4,439) ($4,563) ($2,693) ($15,882) ($18,575) $2,837 ($20,301) ($17,464) Residual Interests ( 347) ( 1,820) ( 2,167) 3,507 (43) 3,464 ( 1,023) (792) (1,815) Interest Only Bonds ( 229) ( 851) ( 1,080) 384 (173) 211 (74) 88 14 Other 40 ( 13) 27 (5) 3 (2) (362) 34 (328) - ---------------------------------------------------------------------------------------------------------------------------------- Interest Income (660) ( 7,123) ( 7,783) 1,193 ( 16,095) ( 14,902) 1,378 ( 20,971) ( 19,593) Interest Expense CMOs 1,430 ( 5,668) ( 4,238) ( 2,323) ( 17,013) ( 19,336) 6,081 ( 20,505) ( 14,424) Short-term Debt ( 715) 635 (80) (832) 773 (59) (132) (81) (213) - ---------------------------------------------------------------------------------------------------------------------------------- Interest Expense ( 307) ( 5,033) ( 4,318) ( 3,155) ( 16,240) ( 19,395) 5,949 ( 20,586) ( 14,637) Net Interest Income ($1,375) ($2,090) ($3,465) $4,348 $ 145 $ 4,493 ($4,571) ($ 385) ($ 4,956) ==================================================================================================================================
27 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS AND REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of TIS Mortgage Investment Company: We have audited the accompanying consolidated balance sheets of TIS Mortgage Investment Company (a Maryland corporation) and Subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule 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 TIS Mortgage Investment Company and Subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, in 1993 the Company changed its method of accounting for its investments to adopt the provisions of Statement of Financial Accounting Standards No. 115 - Accounting for Certain Investments in Debt and Equity Securities. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The accompanying Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1995 - is presented for the purposes of complying with the Securities and Exchange Commission rules and is not part of the basic consolidated financial statements. This information has been subjected to the audit procedures applied in our audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP - ----------------------- Arthur Andersen LLP San Francisco, California, March 4, 1996 SIGNATURES Pursuant to the requirements of Section 12b-15 under 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. TIS MORTGAGE INVESTMENT COMPANY Date: January 21, 1997 By: /s/ Lorraine O. Legg ----------------------- Lorraine O. Legg, Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----