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[DISCUSSION DRAFT OF 07/27/99]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
June 30, 1999
MELLON BANK PREMIUM FINANCE LOAN MASTER TRUST
---------------------------------------------
(Exact name of registrant as specified in charter)
New York 333-11961 25-0659306
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258-0001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (412) 234-5000
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
The tables attached hereto as Exhibit 19.1 (the "Updated
Tables") update the tables contained on pages 37 through 41 (the "Original
Tables") of the Mellon Bank Premium Finance Loan Master Trust Prospectus, dated
December 12, 1996 (the "Prospectus"), which forms a part of the Registration
Statement on Form S-3, No. 333-11961. The "Geographic Concentration" table
appearing on pages 38 and 39 of the Prospectus has been updated to reflect the
fact that additional states became Permitted States and that address changes for
insureds have occurred. The table under the caption "Loan Loss Experience" has
been updated to set forth loss experience for the Identified Portfolio for the
six month periods ended June 30, 1999 and 1998, respectively, and the years
ended December 31, 1998 and 1997, respectively. The table under the caption
"Loan Delinquency Experience Following Cancellation" has been updated to add a
new table to show delinquency experience for the Identified Portfolio for the
six month periods ended June 30, 1999 and 1998, respectively, and the years
ended December 31, 1998 and 1997, respectively. The table under the caption
"Originators' Portfolio Yield" has been updated to add a new table to show
portfolio yield information for the Identified Portfolio for the six month
periods ended June 30, 1999 and 1998, respectively, and the years ended December
31, 1998 and 1997, respectively. Capitalized but undefined terms used herein
have the meanings set forth in the Prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Annualized Portfolio Yield for the six month period ended
June 30, 1999 was 9.75% as compared to 11.56% for the six month period ended
June 30, 1998, and was 11.30% and 11.29% for the years ended December 31, 1998
and 1997, respectively. There are two primary reasons for the decrease between
the comparative six month periods. First, the cost of the Servicer's funds has
declined over the past twelve months, and the Servicer has passed its lower
costs on to its customers. Second, the Servicer's increased marketing focus on
larger loans, together with increased competition from insurance companies in
extending financing terms for small and medium loans, have resulted in a greater
concentration of larger loans, generally at comparatively lower rates, in the
portfolio.
Net charge offs, as an annualized percentage of the average
outstanding principal balance of loans in the Identified Portfolio, increased to
0.41% for the year ended December 31, 1998 from 0.16% for the year ended
December 31, 1997. This increase resulted from two factors.
First, the Servicer's policy is generally to charge off loans
if uncollected 270 days after cancellation of the related insurance policy. As a
result, in any period the annualized percentage of charge-offs is affected by
the delinquency profile of loans in the pool at the beginning of the period. A
beginning of period pool characterized by delinquencies which are relatively low
in number and/or of relatively short duration will tend to have, all other
things being equal, a relatively lower annualized percentage of charge-offs in
the period. The Identified Portfolio was initially constituted in December, 1996
with a bulk transfer of loans to the Trust. One of the requirements for the
loans to be transferred was that the loans could not at the time of transfer
have been delinquent for more than thirty days. Consequently, the Identified
Portfolio at the beginning of the year ended December 31, 1997 (approximately
two weeks after the initial transfer of loans to the Trust), contained a
relatively low proportion of loans delinquent for more than thirty days. By
comparison, the delinquency profile of the loans in the Identified Portfolio at
the beginning of the year ended December 31, 1998 was not so affected by a bulk
transfer of non-delinquent loans shortly prior to the beginning of the period.
As a consequence, the annualized net charge-off percentage for the latter period
increased.
The increase in the annualized net charge-off percentage also
resulted from lower originations of new loans which, when compared to
charge-offs resulting in part from higher
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originations in the prior period, yielded a higher charge-off percentage;
economic pressures affecting the insurance industry, which resulted in insurance
companies being more assertive in resisting making unearned premium refunds; the
utilization of new insurance agents and increased extended payment terms, which
resulted in increased risk of nonpayment; and higher levels of borrower
bankruptcies.
In the accompanying table "Originators' Portfolio
Yield/Identified Portfolio", the Average Month Outstanding Principal Balance
Receivables for the six month periods ended June 30, 1999 and 1998,
respectively, and the year ended December 31, 1998 do not include amounts held
on deposit during such periods in the Excess Funding Account, and the Interest
and Fee Income does not include earnings on amounts so held on deposit. Funds
were deposited in the Excess Funding Account in January, March, April, May,
June, September and December 1998 and each month of 1999 for the purpose of
maintaining the required Minimum Transferor Interest under the Pooling and
Servicing Agreement. If the amounts so held on deposit and the earnings on such
amounts had been included in the table, the Average Revenue Yield for (1) the
six month period ended June 30, 1999 would have been 9.60% as compared to 9.75%,
(2) the six month period ended June 30, 1998 would have been 11.39% as compared
to 11.56% and (3) the year ended December 31, 1998 would have been 11.20% as
compared to 11.30% set forth in the accompanying "Originators' Portfolio
Yield/Identified Portfolio" table.
The Average Month Outstanding Principal Balance Receivables
for the six month period ended June 30, 1999 was $519,109,000 as compared to
$529,780,000 for the six month period ended June 30, 1998, and $536,913,000 and
$562,229,000 for the years ended December 31, 1998 and 1997, respectively. The
decrease has resulted primarily from a reduction in the overall market for
premium finance loans as insurance companies have begun to extend financing
terms to insureds. At June 30, 1999, the outstanding principal balance of
Receivables was $544,313,563.24. At such date, no amounts were held in the
Excess Funding Account.
As of June 30, 1998, the Pooling and Servicing Agreement was
amended so as to permit the transfer to the Trust of Receivables represented by
Premium Finance Agreements financing insurance policies which included policies
written by Lloyds of London, subject to other limitations contained in the
Pooling and Servicing Agreement. The amendment also confirms the prohibition of
the transfer to the Trust of Receivables relating to any insurance carrier known
to any of the Originators or the Transferor to be subject of any insolvency,
receivership or other similar proceedings. The additional Receivables permitted
by this amendment began to be transferred to the Trust on July 1, 1998.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
Exhibit No.
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19.1 Updated Tables
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MELLON BANK PREMIUM FINANCE LOAN MASTER TRUST
---------------------------------------------
(Registrant)
By: AFCO Credit Corporation, on
behalf of Mellon Bank
Premium Finance Loan
Master Trust
By: /s/ C. Leonard O'Connell
-----------------------------
Name: C. Leonard O'Connell
Title: Senior Vice President,
Treasurer and Chief
Financial Officer
Date: August 6, 1999
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EXHIBIT INDEX
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Exhibit Number Description
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19.1 Updated Tables
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Exhibit 19.1
AFCO AGGREGATE RECEIVABLES BALANCE BY AMOUNT - IDENTIFIED PORTFOLIO
AS OF 6/30/99
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF AGGREGATE AGGREGATE
NUMBER OF RECEIVABLES RECEIVABLES
AGGREGATE RECEIVABLES BALANCE NUMBER OF ACCTS ACCTS BALANCE BALANCE
<C> <C> <C> <C> <C> <C>
1. 5,000 or less 23,536 65.85% $ 39,902,433.34 7.13%
2. 5,000 - 10,000 4,774 13.36% 33,846,866.67 6.05%
3. 10,000 - 25,000 4,164 11.65% 64,840,259.55 11.59%
4. 25,000 - 50,000 1,613 4.51% 56,430,343.75 10.08%
5. 50,000 - 75,000 578 1.62% 35,279,455.50 6.30%
6. 75,000 - 100,000 286 0.80% 24,615,694.38 4.40%
7. 100,000 - 250,000 466 1.30% 70,633,227.06 12.62%
8. 250,000 - 500,000 187 0.52% 65,674,639.38 11.73%
9. 500,000 - 1,000,000 81 0.23% 55,645,868.10 9.94%
10. 1,000,000 - 5,000,000 51 0.14% 88,046,078.97 15.73%
11. Over 5,000,000 4 0.01% 24,771,666.59 4.43%
Total: 35,740 $559,686,533.29 (1)
</TABLE>
(1) Includes $725,066.71 of loan commitments.
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AFCO COMPOSITION OF RECEIVABLES BY REMAINING INSTALLMENT TERM -
IDENTIFIED PORTFOLIO AS OF 6/30/99
<TABLE>
<CAPTION>
PERCENT OF
PERCENT AGGREGATE AGGREGATE
OF NUMBER OF RECEIVABLES RECEIVABLES
REMAINING INSTALLMENT TERM NUMBER OF ACCTS ACCTS BALANCE BALANCE
<C> <C> <C> <C> <C>
03 Months or Less 13,224 37.00% $ 66,865,816.09 11.95%
04 to 06 Months 12,747 35.67% 159,315,871.04 28.47%
07 to 09 Months 9,297 26.01% 224,586,194.36 40.13%
10 to 12 Months 245 0.69% 39,048,078.58 6.98%
13 to 18 Months 109 0.30% 25,986,013.24 4.64%
More than 18 Months 118 0.33% 43,884,559.98 7.84%
Total: 35,740 $559,686,533.29 (1)
(1) Includes $725,066.71 of loan commitments.
</TABLE>
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AFCO GEOGRAPHIC CONCENTRATION - IDENTIFIED PORTFOLIO
AS OF 6/30/99
PERCENTAGE OF
AGGREGATE AGGREGATE
RECEIVABLES RECEIVABLES
STATES BALANCE BALANCE
CALIFORNIA $128,656,023.68 22.99%
TEXAS 70,442,791.30 12.59%
NEW YORK 41,383,548.67 7.39%
FLORIDA 38,388,219.64 6.86%
PENNSYLVANIA 26,661,447.91 4.76%
NEW JERSEY 25,245,156.26 4.51%
OHIO 18,408,558.23 3.29%
MASSACHUSETTS 16,329,064.57 2.92%
WASHINGTON 15,542,251.95 2.78%
ILLINOIS 14,131,453.29 2.52%
LOUISIANA 12,711,733.57 2.27%
VIRGINIA 11,779,245.33 2.10%
NORTH CAROLINA 11,321,422.32 2.02%
GEORGIA 10,433,072.53 1.86%
INDIANA 9,565,747.42 1.71%
MICHIGAN 8,548,318.09 1.53%
COLORADO 7,674,319.50 1.37%
OREGON 7,352,215.86 1.31%
TENNESSEE 6,962,134.03 1.24%
ALASKA 6,525,845.47 1.17%
CONNECTICUT 5,995,521.79 1.07%
MISSOURI 5,704,477.76 1.02%
KENTUCKY 5,648,561.57 1.01%
MISSISSIPPI 5,106,225.06 0.91%
OKLAHOMA 4,735,158.19 0.85%
MARYLAND 4,437,033.82 0.79%
MINNESOTA 4,366,382.15 0.78%
WEST VIRGINIA 4,167,107.37 0.74%
ARIZONA 4,092,752.49 0.73%
ALABAMA 3,982,379.69 0.71%
ARKANSAS 3,741,394.48 0.67%
WISCONSIN 3,649,354.46 0.65%
SOUTH CAROLINA 3,325,426.04 0.59%
NEVADA 2,808,431.85 0.50%
IDAHO 2,556,244.31 0.46%
HAWAII 1,581,634.28 0.28%
NEW HAMPSHIRE 1,141,623.16 0.20%
MAINE 903,295.92 0.16%
NEBRASKA 715,844.03 0.13%
UTAH 706,155.02 0.13%
IOWA 648,104.49 0.12%
MONTANA 527,321.38 0.09%
RHODE ISLAND 466,049.40 0.08%
WYOMING 459,266.99 0.08%
SOUTH DAKOTA 104,151.04 0.02%
VIRGIN ISLANDS 46,966.83 0.01%
NEW MEXICO 3,828.83 0.00%
KANSAS 2,535.68 0.00%
BRITISH COLUMBIA 735.59 0.00%
Total: $559,686,533.29 (1)
(1) Includes $725,066.71 of loan commitments.
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LOAN LOSS EXPERIENCE (1)
IDENTIFIED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
ENDED JUNE 30, ENDED DECEMBER 31,
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Month Principal Balance (2) $519,109 $529,780 $536,913 $562,229
Gross Charge Offs 1,377 1,477 3,010 1,002
Recoveries 567 352 804 102
Net Charge Offs 810 1,125 2,206 900
Net Charge Offs as a Percentage of Average
Aggregate Outstanding Principal Balance 0.31% (3) 0.42% (3) 0.41% 0.16%
</TABLE>
(1) A loan is generally written off to the extent it is uncollected 270 days
after the effective date of cancellation of the related insurance policy.
(2) Based on the average beginning of the month balances.
(3) Calculated on an annualized basis.
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LOAN DELINQUENCY EXPERIENCE FOLLOWING CANCELLATION
IDENTIFIED PORTFOLIO
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of days a loan remains overdue
after cancellation of the related insurance
policy
31-89 days 0.71% 0.71% 1.25% 1.17%
90-270 days 0.74% 1.18% 0.91% 0.93%
Over 270 days (1) 0.00% 0.00% 0.00% 0.00%
----- ----- ----- -----
Total 1.45% 1.89% 2.16% 2.10%
===== ===== ===== =====
</TABLE>
(1) A loan is generally written off to the extent it is uncollected 270 days
after the effective date of cancellation of the related insurance policy.
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ORIGINATORS' PORTFOLIO YIELD
IDENTIFIED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
ENDED JUNE 30, ENDED DECEMBER 31,
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Month Principal Balance (1) $519,109 $529,780 $536,913 $562,229
Interest & Fee Income 25,318 30,622 60,676 63,462
Average Revenue Yield on Outstanding 9.75%(2) 11.56% (2) 11.30% 11.29%
Principal Balance Receivables
</TABLE>
(1) Based on the average beginning of the month balances.
(2) Calculated on an annualized basis.
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