ITEM 1. BUSINESS
Mountain States Guaranty Mortgage Company (the "Company") is a corporation established under the laws of the State of Colorado on January 22, 1988.
The Company was created for the sole purpose of issuing and selling collateralized mortgage obligations (the "Bonds") secured by mortgage-backed certificates (the "Certificates"). The Bonds represent obligations solely of the company.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not own any buildings or real estate and has no physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a part to any pending legal proceedings, nor is the Company aware of any proceedings contemplated by governmental authorities.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Not Applicable.
(a) There is no established public-trading market for any of the classes of stock.
(b) There are three holders of common stock as of December 31, 1996.
(c) There have been no dividends declared or paid since inception of the Company.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable as the Company has had no income or expenses since inception of the company (see Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On July 28, 1988, the Company issued bonds with an outstanding aggregate principal balance of $20,000,000 (the "Series One Bonds") which are collateralized by mortgage-backed certificates having annual pass-through rates of 9.5%. (See Note 2 in Notes to Financial Statements for information on the principal amounts of the Bonds outstanding at December 31, 1996, and the interest rates and stated maturities of the Bonds).
On March 28, 1989, the Company issued bonds with an outstanding aggregate principal balance of $20,000,000 (the "Series Two Bonds") which are collateralized by mortgage-backed certificates having annual pass-through rates of 10.5%. (See Note 2 in Notes to Financial Statements for information on the principal amounts of the Bonds outstanding at December 31, 1996, and the interest rates and stated maturities of the Bonds).
Issuance of the Bonds and simultaneous delivery of the Certificates to the Trustee for the benefit of the Bondholders has been accounted for as a sale of the Certificates. The net proceeds from the sale of the Bonds and the residual interest therein equalled the purchase price of the Certificates; accordingly, there is no income, expense, gain or loss resulting from the aforementioned transactions.
CAPITAL RESOURCES AND LIQUIDITY
The Company's sole source of funds with respect to repaying the Bonds is the receipt of payments of principal and interest, including prepayments on the Certificates, together with the reinvestment income thereon. The Company expects that, at all times, the aggregate future receipts of principal and interest on the Certificates securing the Bonds, together with reinvestment income thereon, will exceed the aggregate of future amounts due as payments of principal and interest on the Bonds.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Mountain States Guaranty Mortgage Company:
We have audited the accompanying balance sheets of Mountain States Guaranty Mortgage Company as of December 31, 1996 and 1995 and the related statements of cash flow for each of the three years in the period ended December 31, 1996. 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 misstatements. 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, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1996 and 1995, and its cash flow for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP Denver, Colorado March 25, 1997
MOUNTAIN STATES GUARANTY MORTGAGE COMPANY
BALANCE SHEETS DECEMBER 31, 1996 AND 1995
ASSETS
STOCKHOLDERS' EQUITY
See accompanying notes to financial statements.
MOUNTAIN STATES GUARANTY MORTGAGE COMPANY
STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
See accompanying notes to financial statements.
MOUNTAIN STATES GUARANTY MORTGAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND OPERATIONS
Mountain States Guaranty Mortgage Company (the "Company") is a limited purpose corporation established under the laws of Colorado on January 22, 1988. The Company was organized for the purpose of issuing collateralized mortgage obligations (the "Bonds") secured by mortgage-backed certificates (the "Certificates"). Bonds issued are obligations solely of the Company.
Statement of Financial Accounting Standards (SFAS) No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", effective for the transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996, would preclude sales treatment for transactions involving the issuance of collateralized mortgage obligations and simultaneous transfer of mortgage-backed securities as previously entered into by the Company. However, as SFAS No. 125, is to be applied prospectively, there is no effect on the Company's December 31, 1996 financial statements or transactions entered into prior to December 31, 1996.
NOTE 2 - COLLATERALIZED MORTGAGE OBLIGATIONS
On July 28, 1988, the Company issued Bonds (the Series One Bonds) in the aggregate principal amount of $20,000,000. The principal amounts outstanding at December 31, 1996, the interest rates and the stated maturities of the Bonds are as follows:
The Series One Bonds are collateralized by Certificates having annual pass- through rates of 9.5%. The par value of the Certificates outstanding at December 31, 1996, is $4,111,000. The Trustee is in possession of $77,000 which reduced the Principal Amount of Bonds outstanding on January 1, 1997.
On March 28, 1989, the Company issued Bonds (the Series Two Bonds) in the aggregate principal amount of $20,000,000. The principal amounts outstanding at December 31, 1996, the interest rates and the stated maturities of the Bonds are as follows:
MOUNTAIN STATES GUARANTY MORTGAGE COMPANY
The Series Two Bonds are collateralized by Certificates having annual pass- through rates of 10.5%. The par value of the Certificates outstanding at December 31, 1996, is $3,357,000. The Trustee is in possession of $42,000 which reduced the Principal Amount of Bonds outstanding on January 1, 1997.
The issuance of Series One and Two Bonds and related residual interests, and the respective simultaneous delivery of the Certificates to State Street Bank and Trust Company (the "Trustee) for the benefit of the Bondholders has been accounted for as a sale of the Certificates, which transaction resulted in no gain or loss to the Company. Accordingly, no statement of operations is presented and the Bonds and the related Certificates do not appear in the accompanying balance sheets.
Coughlin & Company, Inc., an entity which has common ownership with the Company, served as Underwriter for these issuances. Another entity having the same owners purchased the residual interest in the collateral securing the Bonds.
NOTE 3 - CERTIFICATES HELD BY TRUSTEE
As required by the Indenture relating to the Bonds, the Certificates securing the Bonds are held as collateral by the Trustee. The Trustee collects principal and interest payments on the Certificates and makes principal and interest payments on the Bonds using a collection account, including reinvestment earnings thereon, established for the Bonds.
NOTE 4 - INCOME TAXES
The Company has elected to treat each issuance as a real estate mortgage investment conduit for federal income tax purposes. Accordingly, the Company does not report any income or loss. Therefore, no provision for income taxes has been made in the accompanying financial statements
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of directors and executive officers of the Company. All of such directors and executive officers have served in their respective capacities since the incorporation of the Company.
Dennis F. Coughlin 53 Director/President James M. Coughlin 61 Director George F. Coughlin 58 Director Harold C. Jones 42 Secretary/Treasurer
DENNIS F. COUGHLIN, 53, is President and a Director of the Company. He joined Coughlin & Company Inc., a regional investment banking firm, in 1966 and became head of the Marketing Department and Vice President in 1972, and a member of the Board of Directors in 1987. He served in the Colorado Air National Guard in Korea from 1968 to 1969. Mr. Coughlin graduated from St. Mary's College in Moraga, California, with a B.S. in Business Administration in 1966. Mr. Coughlin has served as a member of the Executive Committee of Coughlin & Company, Managing Partner of Coughlin Properties, and Director of Coughlin Asset Management. Mr. Coughlin has also served as President and Treasurer of the Colorado Municipal Bond Dealers Association.
JAMES M. COUGHLIN, 61 is a Director of the Company. He has been President and Director of Coughlin Company, Inc. since January, 1968, and has been a member of the Executive Committee of Coughlin & Company since 1987. Mr. Coughlin was elected Vice President of Coughlin & Company in January 1964, and was responsible for the underwriting of debt issues of non-profit corporations. Mr. Coughlin is also a Director and Officer of Coughlin Asset Management, a registered investment advisor. In January, 1988, Mr. Coughlin completed a three year term on the District 3 Business Conduct Committee of the National Association of Securities Dealers, Inc., serving as Vice Chairman in 1986, and as Chairman in 1987. Mr. Coughlin joined Coughlin & Company in June 1957, after graduating from the University of Notre Dame with a Bachelor of Business Administration Degree.
GEORGE F. COUGHLIN, 58, is a Director of the Company. He joined Coughlin & Company, Inc. in 1961 after graduating from Regis College in Denver. As an Officer and Director of Coughlin & Company since 1965, Mr. Coughlin oversees the underwriting and trading activities of the firm. He has been a member of the Executive Committee of Coughlin & Company since 1987. He is a Director of Coughlin Asset Management, a registered investment advisor. Mr. Coughlin is a past President of the Colorado Municipal Bond Dealers Association and a past member of the Board of Directors of the Public Securities Association.
HAROLD C. JONES, 42, is Secretary/Treasurer of the Company. He has been Treasurer of Coughlin & Company, Inc. since March, 1982, and has been on the Executive Committee of Coughlin & Company since 1987. Mr Jones served as
Assistant Treasurer for Coughlin & Company from February 1981 to March, 1982. He received his accreditation as a Certified Public Accountant while working for Deloitte Haskins & Sells from July 1979 to February, 1981. Mr. Jones graduated from Brigham Young University in 1979.
All directors and executive officers of the Company hold office during the term for which they are elected and until their successors are elected and qualified.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Company has not paid any remuneration to any of its directors or officers. The Company may in the future pay to one or more of its directors or officers, consulting fees, underwriting discounts and commissions or other remuneration.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial owners of more than five percent of the Company's common stock, par value $1.00 per share (the "Common Stock"):
Dennis F. Coughlin, George F. Coughlin and James M. Coughlin are all Directors, and Dennis F. Coughlin is President and Chief Executive Officer of the Company and is a cousin of George Coughlin and Jim Coughlin. George Coughlin and Jim Coughlin are brothers. Each of such individuals may be deemed to be promoters of the Company as that term is defined in regulations promulgated under the Securities Act of 1933.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 on Page 8 of the Financial Statements.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
DESCRIPTION PAGE ----------- ----
Independent Auditors' Report 5
Balance Sheets at December 31, 1996 & 1995 6
Statements of Cash Flow for the Years ended December 31, 1996, 1995 and 1994 7
Notes to Financial Statements 8
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted because they are not applicable, not required or the required information is included in the financial statements or notes thereto.
3. EXHIBITS:
The exhibits required by this item and incorporation herein by reference are listed in the accompanying index (page 15) to exhibits.
(B) REPORTS ON FORM 8-K:
No reports were filed on form 8-K.
SIGNATURE
Pursuant to the requirements of 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.
Dated: March 31, 1997
By: Mountain States Guaranty Mortgage Company -------------------------------------------
By: /s/ Dennis F. Coughlin -------------------------------------------
Name: Dennis F. Coughlin -------------------------------------------
Title: President -------------------------------------------
INDEX TO EXHIBITS ITEM 14(C)
Pursuant to the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, the following Exhibits previously filed with the Securities and Exchange Commission are incorporated by reference as Exhibits to the Form 10-K: