<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended: June 30, 1998
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Commission File Number 000-22567
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THE WMF GROUP, LTD.
-------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1647759
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (703) 610-1400
--------------
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 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
--- ---
Common Stock, $.01 par value, outstanding as of December 21, 1998
5,299,383 Shares of Common Stock
1
<PAGE> 2
EXPLANATORY NOTE
In this Form 10-Q/A, The WMF Group, Ltd. (the "Company") is filing
restated financial statements for the period ended June 30, 1998, to reflect
revisions in its accounting for U.S. Treasury short sale positions. On October
14, 1998, the Company announced that it was revising WMF Capital Corp.'s
accounting for U.S. Treasury short sale positions. The revision was effective
for the quarter ended September 30, 1998 and was reflected in the Company's form
10-Q for that period. This Form 10-Q/A presents the impact of this accounting
revision on the Company's financial results for the period ended June 30, 1998.
See Note 2 to the Consolidated Financial Statements included in Item 1 and the
discussion under the heading "Restatement" in Item 2, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The Company has not amended this report to reflect events occurring
after June 30, 1998.
2
<PAGE> 3
The WMF GROUP, LTD.
FORM 10-Q/A
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
- ------- ----------------------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 1
As Restated as of June 30, 1998 (unaudited) and as of December 31, 1997
Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 (as restated) and
1997 (unaudited) and for the Six Months Ended June
30, 1998 (as restated) and 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 (as restated) and 1997 (unaudited) 3
Notes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II. Other Information
- -------- -----------------
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matter to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
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</TABLE>
3
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The WMF GROUP, LTD.
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
As Restated
(Note 2)
As of As of
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash $14,583 $10,786
Restricted cash equivalents 1,697 1,576
Mortgage-backed securities, at amortized cost, pledged 3,829 3,851
Mortgage loans held for sale, pledged 362,116 49,431
Due from broker 476,308 -
Principal, interest and other servicing advances 3,058 2,631
Furniture, equipment and leasehold improvements, net 3,674 2,299
Servicing rights, net 27,776 26,796
Goodwill, net 22,174 18,465
Other assets 5,957 3,496
----------------------------------------------------
Total Assets $921,172 $119,331
====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $5,926 $5,730
Warehouse lines of credit 347,453 48,743
Securities sold but not yet purchased 482,813 -
Servicing acquisition line of credit 4,962 5,462
Revolving credit facility 23,348 5,699
Deferred fees 9,243 3,600
Accrued loan servicing losses 5,653 5,125
Other liabilities 2,476 6,147
----------------------------------------------------
Total Liabilities 881,874 80,506
----------------------------------------------------
Stockholders' Equity:
Common stock, $.01 par value, 25,000,000
shares authorized; 5,267,025 and 5,042,723 issued and
outstanding, respectively 53 50
Additional paid-in capital 39,352 35,178
Retained earnings (deficit) (107) 3,597
----------------------------------------------------
Total Stockholders' Equity 39,298 38,825
----------------------------------------------------
Total Liabilities and Stockholders' Equity $921,172 $119,331
====================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
1
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THE WMF GROUP, LTD.
Consolidated Statements of Operations
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
As Restated As Restated
(Note 2) (Note 2)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Servicing fees $3,607 $2,905 $7,301 $5,631
Gain on sale of mortgage loans, net 7,101 3,510 12,334 5,917
Interest income 4,328 1,178 5,484 2,111
Placement fee income 2,076 1,187 4,137 2,312
Other income 1,216 320 2,360 569
-----------------------------------------------------------
Total Revenues 18,328 9,100 31,616 16,540
-----------------------------------------------------------
Expenses:
Salaries and employee benefits 7,614 4,097 13,884 7,654
General and administrative 3,963 1,516 7,036 2,788
Occupancy expense 964 510 1,802 1,038
Provision for loan servicing losses 273 279 528 453
Unrealized losses on treasury short sales 6,505 - 6,505 -
Interest expense 3,280 350 3,858 603
Amortization of servicing rights 1,429 1,126 2,503 2,208
Depreciation and amortization 680 406 1,301 739
-----------------------------------------------------------
Total Expenses 24,708 8,284 37,417 15,483
-----------------------------------------------------------
Income (loss) before income tax expense (benefit) (6,380) 816 (5,801) 1,057
Income tax expense (benefit) (2,395) 432 (2,097) 606
-----------------------------------------------------------
Net income (loss) ($3,985) $384 ($3,704) $451
===========================================================
Net income (loss) per share - Basic and Diluted ($0.76) $0.09 ($0.71) $0.11
===========================================================
Weighted average shares 5,250 4,217 5,163 4,217
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
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THE WMF GROUP, LTD.
Consolidated Statements Of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
As Restated (Note 2)
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($3,704) $451
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization of furniture, equipment
and leasehold improvements 497 255
Amortization of mortgage servicing rights 2,503 2,208
Amortization of goodwill 804 458
Compensation related to stock options 160 -
Provision for loan servicing losses 528 453
Mortgage loans originated (1,738,381) (396,201)
Mortgage loans sold 1,425,696 414,818
Increase in principal, interest and other servicing advances (427) (265)
Increase in due to affiliates - 255
Increase in restricted cash equivalents (121) (188)
Decrease (increase) in other assets (2,439) 329
Increase (decrease) in accounts payable and accrued expenses 196 (184)
Increase in deferred fees 5,643 485
Decrease in other liabilities (3,831) (823)
---------------------------------------------
Net cash provided by (used in) operating activities (312,876) 22,051
---------------------------------------------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (1,872) (385)
Purchase of mortgage servicing rights (929) (1,534)
Increase in due from broker (476,308) -
Increase in securities sold but not yet purchased 482,813 -
Origination of servicing rights (2,554) (1,135)
Assets acquired and liabilities assumed, net of cash (4,513) -
---------------------------------------------
Net cash used in investing activities (3,363) (3,054)
---------------------------------------------
Cash flows from financing activities:
Repayment of servicing acquisition line of credit (500) (250)
Increase (decrease) in warehouse lines of credit, net 298,710 (19,054)
Increase in revolving credit facility 17,649 -
Proceeds from stock issuance 4,177 -
---------------------------------------------
Net cash provided by (used in) financing activities 320,036 (19,304)
---------------------------------------------
Net increase (decrease) in cash 3,797 (307)
Cash at beginning of period 10,786 6,601
---------------------------------------------
Cash at end of period $14,583 $6,294
=============================================
Supplemental disclosures:
Cash paid during the period for interest $2,674 $337
Cash paid during the period for income taxes 758 -
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
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THE WMF GROUP, LTD.
Notes to unaudited consolidated financial statements
(in thousands, except share data)
1. ORGANIZATION:
The WMF Group, Ltd. (the "Company") is one of the largest independent
commercial mortgage bankers in the United States as measured by servicing
portfolio size based on the 1997 survey published by the Mortgage Bankers
Association of America ("MBA"), is the largest originator of Federal National
Mortgage Association ("Fannie Mae") multifamily loans based on statistics
provided by Fannie Mae, and is the largest originator of Federal Housing
Authority ("FHA") insured multifamily and healthcare loans based on statistics
provided by Department of Housing and Urban Development ("HUD"). The Company
originates, underwrites, structures, places, sells and services multifamily and
commercial real estate loans. With the formation of WMF Capital Corp. and WMF
Carbon Mesa Advisors, Inc. in the first quarter of 1998, the Company operates a
commercial mortgage conduit, manages commercial mortgage investment funds and
provides special asset management services. Through its relationships with
Government Sponsored Enterprises ("GSEs"), investment banks, life insurance
companies, commercial banks and other investors, the Company provides and
arranges financing to owners of multifamily and commercial real estate on a
nationwide basis using both a retail and wholesale network. The Company
generates revenues through origination fees, servicing fees, net interest income
on loans held for sale and placement fees. The Company expects that
securitization trading profits from WMF Capital Corp. and funds management fees
from WMF Carbon Mesa Advisors, Inc. will provide the Company with additional
sources of revenue. During the second quarter of 1998, the Company invested in a
private real estate investment trust ("REIT") designed to invest in structured
commercial loan products. WMF Carbon Mesa Advisors, Inc. will manage the REIT
called Commercial Mortgage Investment Trust ("COMIT").
The Company is a Delaware corporation formed in October 1992. The
Company has three direct wholly owned subsidiaries: WMF Washington Mortgage
Corp. ("WMF Washington Mortgage") (previously known as Washington Mortgage
Financial Group, Ltd.), WMF Capital Corp. ("Capital Corp."), and WMF Carbon Mesa
Advisors, Inc. ("Carbon Mesa") which are incorporated under the laws of
Delaware. WMF Washington Mortgage's wholly owned subsidiaries are WMF Huntoon,
Paige Associates Limited ("WMF Huntoon Paige"), WMF Proctor Ltd. ("WMF
Proctor"), and WMF Robert C. Wilson Ltd. ("WMF Robert C. Wilson"), which are
incorporated under the laws of the states of Delaware, Michigan and Texas,
respectively.
2. RESTATEMENT:
As publicly announced on October 14, 1998, the Company has retroactively
revised its accounting for U.S. Treasury short sale positions held by Capital
Corp. Capital Corp. uses U.S. Treasury short sales to offset the interest rate
risk between its short position (warehouse financing) and its long position
(mortgage loans held for sale). Capital Corp. previously used hedge accounting
for these positions, offsetting losses on U.S. Treasury short sales against the
value of mortgages held for sale to reflect the economic substance of the hedged
position.
As a result of the accounting revision, Capital Corp.'s U.S. Treasury
short sale positions will be recorded on the Company's balance sheet with any
realized and unrealized losses recognized during the period in which they were
incurred. As a result, Capital Corp. now reports its U.S. Treasury short sale
positions at fair market value, but the value of its mortgages held for sale
will be reported at the lower of cost or market value.
Provided below is a summary of the impact of this accounting revision
and a reconciliation of the financial results previously reported in the
Company's Form 10-Q filed on August 14, 1998, to the restated financial
statement amounts presented in this Form 10-Q/A.
4
<PAGE> 8
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
As previously As Restated
reported (Note 2)
At June 30, 1998 At June 30, 1998
(unaudited) Adjustments (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash $14,583 $14,583
Restricted cash equivalents 1,697 1,697
Mortgage-backed securities, at amortized cost, pledged 3,829 3,829
Mortgage loans held for sale, pledged 362,116 362,116
Due from broker - 476,308 476,308
Principal, interest and other servicing advances 3,058 3,058
Furniture, equipment and leasehold improvements, net 3,674 3,674
Servicing rights, net 27,776 27,776
Goodwill, net 22,174 22,174
Other assets 5,957 5,957
-------------------------------------------------------
Total assets $444,864 $476,308 $921,172
=======================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $5,926 $5,926
Warehouse lines of credit 347,453 347,453
Securities sold but not yet purchased - 482,813 482,813
Servicing acquisition line of credit 4,962 4,962
Revolving credit facility 23,348 23,348
Deferred fees 9,243 9,243
Accrued loan servicing losses 5,653 5,653
Other liabilities 4,932 (2,456) 2,476
-------------------------------------------------------
Total liabilities 401,517 480,357 881,874
-------------------------------------------------------
Stockholders' equity:
Common stock, $.01 par value, 25,000,000
Shares authorized; 5,267,025 and 5,042,723 issued
and outstanding, respectively 53 53
Additional paid-in capital 39,352 39,352
Retained earnings (deficit) 3,942 (4,049) (107)
-------------------------------------------------------
Total stockholders' equity 43,347 (4,049) 39,298
-------------------------------------------------------
Total liabilities and stockholders' equity $444,864 $476,308 $921,172
=======================================================
</TABLE>
5
<PAGE> 9
Consolidated Statement of Operations
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
As previously As Restated
reported (Note 2)
Three months Three months
ended June 30, ended June 30,
1998 1998
(unaudited) Adjustments (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Servicing fees $3,607 $3,607
Gain on sale of mortgage loans, net 7,101 7,101
Interest income 4,328 4,328
Placement fee income 2,076 2,076
Other income 1,216 1,216
------------------------------------------------------
Total Revenues 18,328 - 18,328
------------------------------------------------------
Expenses:
Salaries and employee benefits 7,614 7,614
General and administrative 3,963 3,963
Occupancy expense 964 964
Provision for loan servicing losses 273 273
Unrealized loss on treasury short sales - 6,505 6,505
Interest expense 3,280 3,280
Amortization of servicing rights 1,429 1,429
Depreciation and amortization 680 680
------------------------------------------------------
Total Expenses 18,203 6,505 24,708
------------------------------------------------------
Income before income tax expense (benefit) 125 (6,505) (6,380)
Income tax expense (benefit) 61 (2,456) (2,395)
------------------------------------------------------
Net income (loss) $64 ($4,049) ($3,985)
======================================================
Net income (loss) per share - Basic and Diluted $0.01 ($0.77) ($0.76)
======================================================
</TABLE>
6
<PAGE> 10
Consolidated Statement of Operations
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
As previously As Restated
reported (Note 2)
Six months ended Six months ended
June 30, 1998 June 30, 1998
(unaudited) Adjustments (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Servicing fees $7,301 $7,301
Gain on sale of mortgage loans, net 12,334 12,334
Interest income 5,484 5,484
Placement fee income 4,137 4,137
Other income 2,360 2,360
------------------------------------------------------
Total Revenues 31,616 - 31,616
Expenses:
Salaries and employee benefits 13,884 13,884
General and administrative 7,036 7,036
Occupancy expense 1,802 1,802
Provision for loan servicing losses 528 528
Unrealized loss on treasury short sales - 6,505 6,505
Interest expense 3,858 3,858
Amortization of servicing rights 2,503 2,503
Depreciation and amortization 1,301 1,301
------------------------------------------------------
Total Expenses 30,912 6,505 37,417
Income before income tax expense (benefit) 704 (6,505) (5,801)
Income tax expense (benefit) 359 (2,456) (2,097)
------------------------------------------------------
Net income (loss) $345 ($4,049) ($3,704)
======================================================
Net income (loss) per share - Basic and Diluted $0.07 ($0.78) ($0.71)
======================================================
</TABLE>
7
<PAGE> 11
Consolidated Statement Of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
As Restated
(Note 2)
Six Months Six months
Ended ended June
June 30, 1998 30, 1998
(unaudited) Adjustments (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $345 ($4,049) ($3,704)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization of furniture, equipment
And leasehold improvements 497 497
Amortization of mortgage servicing rights 2,503 2,503
Amortization of goodwill 804 804
Compensation related to stock options 160 160
Provision for loan servicing losses 528 528
Mortgage loans originated (1,738,381) (1,738,381)
Mortgage loans sold 1,425,696 1,425,696
Increase in principal, interest and other servicing advances (427) (427)
Increase in due to affiliates - -
Increase in restricted cash equivalents (121) (121)
Increase in other assets (2,439) (2,439)
Increase in accounts payable and accrued expenses 196 196
Increase in deferred fees 5,643 5,643
Decrease in other liabilities (1,375) (2,456) (3,831)
----------------------------------------------
Net cash used in operating activities (306,371) (6,505) (312,876)
----------------------------------------------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (1,872) (1,872)
Purchase of mortgage servicing rights (929) (929)
Increase in due from broker - (476,308) (476,308)
Increase in securities sold but not yet purchased - 482,813 482,813
Origination of servicing rights (2,554) (2,554)
Assets acquired and liabilities assumed, net of cash (4,513) (4,513)
----------------------------------------------
Net cash used in investing activities (9,868) 6,505 (3,363)
----------------------------------------------
Cash flows from financing activities:
Repayment of servicing acquisition line of credit (500) (500)
Increase in warehouse lines of credit, net 298,710 298,710
Increase in revolving credit facility 17,649 17,649
Proceeds from stock issuance 4,177 4,177
----------------------------------------------
Net cash provided by financing activities 320,036 - 320,036
----------------------------------------------
Net increase in cash 3,797 - 3,797
Cash at beginning of period 10,786 - 10,786
----------------------------------------------
Cash at end of period $14,583 $14,583
==============================================
Supplemental disclosures:
Cash paid during the period for interest $2,674 - $2,674
Cash paid during the period for income taxes 758 - 758
</TABLE>
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3. BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany balances
and transactions have been eliminated in consolidation. Certain prior period
amounts have been reclassified to conform with the current period presentation.
The condensed consolidated financial statements of the Company at June
30, 1998 and for the three and six months ended June 30, 1998 and 1997 included
herein are unaudited and include all adjustments necessary for the fair
presentation of the financial position, results of operations and cash flows of
the Company as of and for the periods presented. All such adjustments are of a
normal recurring nature. Interim results are not necessarily indicative of
results that may be expected for the full year.
4. BALANCE SHEET CLASSIFICATION:
The Company prepares its consolidated balance sheet using an
unclassified balance sheet presentation as is customary in the mortgage banking
industry. A classified presentation would have aggregated current assets,
current liabilities, and net working capital as follows:
<TABLE>
<CAPTION>
As previously Restated
reported as of (Note 2) As of
June 30, As of June December 31,
1998 30, 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current assets $385,714 $862,022 $66,344
Current liabilities 388,628 871,441 67,645
------- ------- ------
Net working deficit ($2,914) ($9,419) ($1,301)
======== ======== ========
</TABLE>
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997, but need not be applied to interim financial statements in the initial
year of application. The impact, if any, of this statement on the Company would
be to require additional disclosures in the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognizes
all derivatives as either assets or liabilities in the statement of financial
position and measures those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. If certain conditions are met, a
derivative may be specifically designated as (a) a hedge of certain exposure to
changes in the fair value of a recognized asset or liability or an unrecognized
firm commitment, (b) a hedge of the exposure to variable cash flows of a
forecasted transaction, or (c) a hedge of the foreign currency exposures. This
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Earlier adoption is permitted. The Company has not yet determined
the impact, if any, of this Statement, including its provisions for the
potential reclassifications of investment securities, on earnings, financial
condition or equity.
6. LITIGATION:
The Company is involved in litigation related to the normal course of
its business. Management is of the opinion that the litigation will not have a
material adverse impact on the Company's financial position or operating
results.
9
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All statements contained herein that are not historical facts, including
but not limited to statements regarding anticipated future capital requirements,
the Company's future acquisition and development plans, the Company's ability to
obtain additional debt, equity or other financing, and the Company's ability to
generate cash from operations and further savings from existing operations, are
based on current expectations. These statements are forward looking in nature
and involve a number of risks and uncertainties. Actual results may differ
materially from those projected, estimated, assumed or anticipated. Among the
factors that could cause actual results to differ are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as changes in fees
earned from originating and servicing multifamily and commercial mortgage loans,
the introduction of new competitors, future acquisitions and strategic
partnerships; general business and economic conditions; and the other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. Readers should not place undue reliance on
any such forward-looking statements, which are made pursuant to the Private
Securities Litigation Reform Act of 1995.
GENERAL OVERVIEW
Over the past several years, the Company has experienced significant
growth in its net income, revenues, annual production volume and servicing
volume. The Company seeks to continue to expand its business through (i)
acquisitions and internal growth; (ii) design and delivery of new mortgage
products; and (iii) expansion into related businesses. On a going-forward basis,
to the extent that the Company is successful in completing acquisitions, the
Company will experience increased expenses associated with the amortization of
goodwill and acquired mortgage servicing rights and, if the acquisitions are
financed by additional indebtedness, an increase in interest expense. Through
the acquisitions, the Company's primary focus is to increase its mortgage
origination capabilities and servicing portfolio as well as to expand into
related businesses. Accordingly, such acquisitions may result in a short-term
decrease in income from operations during the period from acquisition through a
period necessary to integrate the acquired companies.
RESTATEMENT
Capital Corp., a wholly owned subsidiary of the Company, uses U.S.
Treasury short sales to manage the interest rate risk of its long position,
commercial mortgage loans. Capital Corp. uses this strategy for all rate-locked
and closed loans. As publicly announced on October 14, 1998, the Company revised
its accounting for Capital Corp.'s U.S. Treasury short sale positions. The
revision will result in Capital Corp. reporting its U.S. Treasury short sale
positions at fair market value, but its loan portfolio will continue to be
reported at the lower of cost or market. Capital Corp. had previously used
derivative accounting and had offset losses on U.S. Treasury short sales against
mortgages held for sale to reflect the economic substance of the hedged
position.
Restated net income (loss) totaled ($4.0) million and $0.4 million for
the three months ended June 30, 1998 and 1997 respectively, ($0.76) and $0.09
per diluted share, respectively. Restated net income (loss) totaled ($3.7)
million and $0.5 million for the six months ended June 30, 1998 and 1997,
respectively, ($0.71) and $0.11 per diluted share, respectively. This represents
a decrease in income from the original reported income of $0.06 million for the
three months ended June 30, 1998 and $0.3 million for the six months ended June
30, 1998.
The decreases in the restated amounts are the result of additional
after-tax losses associated with the Company's revision in accounting for its
U.S. Treasury short sale positions. The loss on U.S. Treasury short sale
positions during the three months ended September 30, 1998 was $6.5 million,
with a tax benefit of $2.5 million, resulting in an after-tax net loss of $4.0
million.
10
<PAGE> 14
RESULTS OF OPERATIONS - SUMMARY
The Company's primary business activities are commercial and multifamily
loan servicing, loan originations and sales of the loans to investors in the
secondary market (loan fundings). With the formation of Capital Corp. and Carbon
Mesa, the Company operates a commercial mortgage conduit, manages commercial
mortgage investment funds, and provides special asset management services.
Revenues from mortgage banking activities are earned from the origination of
commercial and multifamily real estate mortgage loans and the servicing of such
loans. The Company's revenue includes loan servicing fees, gains on sale of
mortgage loans (including origination fees and related gains on originated
servicing rights), interest income on loans prior to sale, placement fees
(revenue earned relating to utilization of escrow funds) and other income. The
addition of Capital Corp. and Carbon Mesa are expected to add securitization
profits and funds management fees as sources of revenue. Through a 20% ownership
interest in COMIT, the Company also invests in structured real estate debt,
providing the Company with another source of potential income.
The Company's revenue is significantly influenced by the timing of
originations, sales and securitization of mortgage loans and is sensitive to
economic factors such as the general level of interest rates and demand for
commercial and multifamily real estate. As a result, future revenues may
fluctuate due to changes in these factors. The Company expects that as it
completes acquisitions and expands into related businesses, the sources of
revenues will change. Therefore, the Company's historical results may not be
indicative of future periods.
During the first six months of 1998, the Company originated
approximately $1.7 billion in loans. As of June 30, 1998, $319 million in
mortgage loans are held by the Company for securitization purposes. As the
Company did not previously hold loans for securitization purposes the balance of
loans held for sale and the corresponding borrowings have increased.
The following table sets forth information derived from the Company's
restated consolidated statements of operations for each of the periods
presented:
Summary Financial Information
Results of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
As Restated As Restated
(Note 2) (Note 2)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Servicing fees $3,607 $2,905 $7,301 $5,631
Gain on sale of mortgage loans, net 7,101 3,510 12,334 5,917
Interest income 4,328 1,178 5,484 2,111
Placement fee income 2,076 1,187 4,137 2,312
Other income 1,216 320 2,360 569
-----------------------------------------------------------
Total Revenues 18,328 9,100 31,616 16,540
-----------------------------------------------------------
Expenses:
Salaries and employee benefits 7,614 4,097 13,884 7,654
General and administrative 3,963 1,516 7,036 2,788
Occupancy expense 964 510 1,802 1,038
Provision for loan servicing losses 273 279 528 453
Unrealized losses on treasury short sales 6,505 - 6,505 -
Interest expense 3,280 350 3,858 603
Amortization of servicing rights 1,429 1,126 2,503 2,208
Depreciation and amortization 680 406 1,301 739
-----------------------------------------------------------
Total Expenses 24,708 8,284 37,417 15,483
-----------------------------------------------------------
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Income (loss) before income tax expense (benefit) (6,380) 816 (5,801) 1,057
Income tax expense (benefit) (2,395) 432 (2,097) 606
-----------------------------------------------------------
Net income (loss) ($3,985) $384 ($3,704) $451
===========================================================
EBITDA ($3,832) $2,550 ($1,347) $4,332
===========================================================
</TABLE>
THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1997
Restated net income (loss) was ($4.0) million and $0.4 million for the
three months ended June 30, 1998 and 1997, respectively, and ($3.7) million and
$0.5 million for the six months ended June 30, 1998 and 1997, respectively. The
decline in net income is due primarily to the unrealized loss on U.S. Treasury
short sales during the second quarter as well as increases in salaries and
general and administrative expenses resulting from start-up, integration and
support costs related to the formation of Capital Corp. and recent acquisitions.
The increase in expenses were partially offset by an increase in gain on loan
sales as the result of the Company funding loans totaling $831 and $366 million
during the three months ended June 30, 1998 and 1997, respectively, and $1.4
billion and $630 million during the six months ended June 30, 1998 and 1997,
respectively. Loan fundings exclude loan originations by WMF Capital Corp. of
$15 and $299 million during the three and six months ended June 30, 1998,
respectively. These originations will be recognized in subsequent periods upon
sale to third-parties through a securitization. Higher servicing fee and
placement fee income also contributed to partially offset the increase in
expenses as the Company's servicing portfolio balance ended the quarter at $11.5
billion, up $4.0 billion from the prior year.
The Company's earnings (loss) before non-operating interest expense,
income taxes, depreciation and amortization ("EBITDA") for the three months
ended June 30, 1998 was ($3.8) million compared with $2.6 million for the same
period of 1997, a decrease of $6.4 million or 246%. EBITDA for the six months
ended June 30, 1998 was ($1.3) million compared to $4.3 million for the same
period of 1997, a decrease of $5.6 million or 130%. The decrease in EBITDA for
the three and six months ended June 30, 1998 as compared to the same period for
1997 is due primarily to the unrealized U.S. Treasury short sale losses of $6.5
million which occurred during the second quarter as well as increases in
salaries and general and administrative expenses primarily resulting from
start-up, integration and support costs related to the formation of Capital
Corp. and recent acquisitions. This loss was offset partially by growth in
revenues as a result of gain on loan sales resulting from the Company funding
loans which totaled $1.4 billion during the first half of 1998, compared to $630
million during the same period in 1997. Higher servicing fee and placement fee
income also contributed to the revenue increase as the Company's servicing
portfolio balance ended the quarter at $11.5 billion, up $4.0 billion from the
prior year.
EBITDA is widely used in the industry as a measure of a company's
operating performance, but should not be considered as an alternative either (i)
to income from continuing operations (determined in accordance with generally
accepted accounting principles) as a measure of profitability or (ii) to cash
flows from operating activities (determined in accordance with generally
accepted accounting principles). EBITDA does not take into account the Company's
debt service requirements and other commitments and accordingly is not
necessarily indicative of amounts that are available for discretionary uses.
Servicing fees were $3.6 million for the three months ended June 30,
1998, an increase of $0.7 million or 24.1% from $2.9 million for the three
months ended June 30, 1997 and $7.3 million for the six months ended June 30,
1998, an increase of $1.7 million or 30.4% from $5.6 million for the six months
ended June 30, 1997. Revenue related to mortgage servicing is based upon the
unpaid principal balance of loans serviced. The increase in servicing fees for
the three and six months ended June 30, 1998 is a result of the principal
balance of the Company's servicing portfolio increasing to $11.5 billion as of
June 30, 1998 from $7.5 billion as of June 30, 1997. The percentage increase in
servicing fee revenue is less than the percentage increase in the servicing
portfolio because the servicing fee on the added servicing, primarily that
received from insurance companies, is lower than the Company's historical
average servicing rate.
12
<PAGE> 16
Gain on sale of mortgage loans was $7.1 million for the three months
ended June 30, 1998, an increase of $3.6 million or 102.8% from $3.5 million for
the three months ended June 30, 1997 and $12.3 million for six months ended June
30, 1998, an increase of $6.4 million or 108.4% from $5.9 million for the six
months ended June 30, 1997. For the three and six months ended June 30, 1998,
the Company sold $831 million and $1.4 billion mortgage loans, respectively, as
compared to $366 million and $630 million for the three and six months ended
June 30, 1997, respectively. The increase in gain on sale of mortgage loans
primarily results from an increase in cash loan origination fees and includes
the gain on recognizing originated mortgage servicing rights in the amount of
$0.7 million related to the Company's origination of conduit mortgage loans, and
includes an increase in gain on recognizing originated mortgage servicing rights
on FHA insured loans of $1.9 million.
Interest income was $4.3 million for the three months ended June 30,
1998, an increase of $3.1 million or 258.3% from $1.2 million for the three
months ended June 30, 1997 and $5.5 million for the six months ended June 30,
1998, an increase of $3.4 million or 161.9% from $2.1 million for the six months
ended June 30, 1997. This increase was due to the increase in loan originations
and the increased balance of loans held for securitization purposes during the
three and six months ended June 30, 1998 compared to the three and six months
ended June 30, 1997.
Placement fee income was $2.1 million for the three months ended June
30, 1998, an increase of $0.9 million or 75.0% from $1.2 million for the three
months ended June 30, 1997 and $4.1 million for the six months ended June 30,
1998, an increase of $1.8 million or 78.3% from $2.3 million for the six months
ended June 30, 1997. This increase was the result of an increase in the average
investor escrow balances held by the Company.
Other income was $1.2 million for the three months ended June 30, 1998,
an increase of $0.9 million or 300.0% from $0.3 million for the three months
ended June 30, 1997 and $2.4 million for the six months ended June 30, 1998, an
increase of $1.8 million or 300% from $0.6 million for the six months ended June
30, 1997. The increase was the result of increased prepayment penalties,
termination fees and loan management fees.
The Company's total expenses consist of salaries and benefits (including
commissions), other general and administrative expenses, provision for loan
servicing losses, operating interest expense, amortization of mortgage servicing
rights, and other depreciation and amortization.
Salaries and benefits, the largest category of costs for the Company,
increased with loan production due primarily to the payment of commissions on
loan originations. Salaries and benefits increased $3.5 million, or 85.4%, from
$4.1 million for the three months ended June 30, 1997 to $7.6 million for the
three months ended June 30, 1998 and $6.2 million or 80.5%, from $7.7 million
for the six months ended June 30, 1997 to $13.9 million for the six months ended
June 30, 1998. This increase is due primarily to increased originations, the
acquisitions of WMF Askew, WMF Robert C. Wilson, WMF New York Urban and WMF
Carbon Mesa (the "Acquisitions"), and the formation of WMF Capital Corp. These
factors, combined with the Company's expansion into non-multifamily commercial
lending, contributed to the increase in the Company's number of employees from
223 as of June 30, 1997 to 402 as of June 30, 1998.
General and administrative expenses consist of professional fees,
travel, management information, occupancy, telephone and equipment rental, and
other expenses. General and administrative expenses were $4.0 million for the
three months ended June 30, 1998, an increase of $2.5 million or 166.7% from
$1.5 million for the three months ended June 30, 1997 and $7.0 million for the
six months ended June 30, 1998, an increase of $4.2 million or 150.0% from $2.8
million for the six months ended June 30, 1997. The increase is a result of
integration and start-up costs associated with Acquisitions and WMF Capital
Corp.
Unrealized losses on short sales of U.S. Treasury securities for the
three and six months ended June 30, 1998 were $6.5 million. These losses are
attributed to the Company's use of short sales of U.S. Treasury securities to
manage interest rate volatility. The increased losses during the second quarter
are the result of interest rate declines in U.S. Treasury securities and changes
in the global economy.
The Company's provision for loan servicing losses remained stable at
$0.3 million for the three months ended June 30, 1998 and 1997 and $0.5 for the
six months ended June 30, 1998 and 1997, respectively. The provision for losses
is the result of management's determination, as part of its ongoing assessment
of the Company's exposure related to its Fannie Mae Delegated Underwriting and
Servicing ("DUS") portfolio. The Company's principal balance of Fannie Mae DUS
loans in the servicing portfolio was $1.2 billion and $815 million as of June
30, 1998 and 1997, respectively.
13
<PAGE> 17
Warehouse interest expense was $2.8 million for the three months ended
June 30, 1998, an increase of $2.7 million from $0.1 million for the three
months ended June 30, 1997 and $3.2 million for the six months ended June 30,
1998, an increase of $2.9 million from $0.3 million for the three months ended
June 30, 1997. This increase was primarily due to the increase in WMF Capital
Corp's loans held for securitization.
Non-operating interest expense was $0.4 million for the three months
ended June 30, 1998, an increase of $0.2 million or 100.0% from $0.2 million for
the three months ended June 30, 1997. For the six months ended June 30, 1998
non-operating interest expense was $0.7 million, an increase of $0.4 million
from $0.3 million for the six months ended June 30, 1997. This increase was due
to increased borrowings related to the capitalization of WMF Capital Corp. and
recent Acquisitions.
Depreciation and amortization was $2.1 million for the three months
ended June 30, 1998, an increase of $0.6 million or 40.0% from $1.5 million for
the three months ended June 30, 1997 and the depreciation and amortization
expense of $3.8 million for the six months ended June 30, 1998 increased by $0.9
million or 31.0% from $2.9 million for the six months ended June 30, 1997. This
increase was due primarily to the amortization related to the goodwill
recognized as a result of the Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financing needs are the financing of loan
origination activities, the pursuit of new company acquisitions and the purchase
of servicing rights. To meet these needs, the Company currently utilizes
warehouse lines of credit, a secured line of credit and a revolving credit
facility. Due to increases in conduit originations, Merrill Lynch Mortgage
Capital Inc. has committed to expand its warehouse line of credit from $500
million to $1 billion. As a part of this commitment, Merrill Lynch Mortgage
Capital, Inc. will temporarily increase the warehouse line of credit by an
additional $300 million until September 30, 1998.
The Company's debt agreements require the maintenance of certain
financial ratios relating to liquidity, leverage, working capital, and net worth
among other restrictions, all of which were met at June 30, 1998.
In connection with its Fannie Mae DUS program, the Company is required
to establish a letter of credit to meet the program's requirements.
In the course of the Company's mortgage banking operations, the Company
sells to investors the mortgage loans it originates but generally retains the
right to service the loans, thereby increasing the Company's investment in loan
servicing rights. The Company views the sale of loans on a servicing-retained
basis in part as an investing activity. Significant unanticipated prepayments in
the Company's servicing portfolio could have a material adverse effect on the
Company's future operating results and liquidity.
The Company also originates mortgage loans that are held for
securitization. During the holding period the Company enters into U.S. Treasury
short sale positions to mitigate the impact of adverse changes in interest
rates. Significant fluctuations in interest rates and credit spreads could
impact the effectiveness of the hedging arrangements and consequently could have
a material adverse effect on the Company's future operating results and
liquidity. Additionally, the hedging arrangements do not mitigate the Company's
exposure to credit risk during the holding period, and thus fluctuations in the
value of the underlying properties could have a material adverse effect on the
Company's operating results and liquidity.
Cash Flows
Operating Activities: In the six months ended June 30, 1998, the
Company's operating activities used cash of approximately $313 million primarily
to increase its mortgage loans held for securitization purposes. These are
viewed as short-term assets and are generally financed with short-term
borrowings as discussed under "Financing Activities".
Investing Activities: The primary investing activity for which cash was
used during the six months ended June 30, 1998 was the acquisition of Carbon
Mesa and the lending and Treasury short sale activities of Capital Corp.
14
<PAGE> 18
Financing Activities: Net cash provided by financing activities amounted
to $320 million for the six months ended June 30, 1998. The increase primarily
reflects increased borrowings used to capitalize Capital Corp. as well as to
finance the increase in mortgage loans held for securitization as discussed
under "Operating Activities".
During the six months ended June 30, 1998, the Company's net working
capital deficit increased $8.1 million from a deficit of $1.3 million as of
December 31, 1997 to a deficit of $9.4 million as of June 30, 1998. The increase
in the deficit is a result of integration and start-up costs associated with
Acquisitions and Capital Corp. as well as losses due to Capital Corp.'s U.S.
Treasury short sale positions. The Company believes it will need additional
capital resources to meet its operating needs and believes it will have access
to such capital through additional financing arrangements.
YEAR 2000 COMPLIANCE
The Company has developed a plan to deal with the Year 2000 problem and
has begun converting its computer systems to a Year 2000 compliant system. The
plan provides for the conversion efforts to be completed before December 31,
1999. The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. The Company
currently uses vendor-supported software, which is being adjusted to be Year
2000 compliant. Other costs of becoming compliant will be funded through
operating cash flows. Such costs are not currently expected to be material to
the Company's financial condition or results from operations.
15
<PAGE> 19
PART II.
OTHER INFORMATION
Item 1: Legal Proceedings.
The Company is involved in litigation related to the normal course of
its business. Management is of the opinion that the litigation will not
have a material adverse impact on the Company's financial position or
operating results.
Item 2: Changes in Securities.
None
Item 3: Defaults upon Senior Securities.
None
Item 4: Submission of Matter to a Vote of Security Holders.
(a) The Company held its Annual Meeting of Stockholders on Tuesday,
June 16, 1998 at 10.00 a.m.
(b) All the existing directors were nominated for re-election. All the
nominated directors were elected at the annual meeting. The
directors elected were as follows: J. Roderick Heller III, Shekar
Narasimhan, Mohammed A. Al-Tuwaijri, Michael R. Eisenson, Tim R.
Palmer, John D. Reilly and Herbert S. Winokur, Jr.
(c) Besides the election of directors, there were two other matters
that were voted upon at the annual meeting. The first matter was
to approve the Employee Stock Purchase Plan. The vote count was as
follows:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstentions Non-votes
--- -------- ----------- ---------
<S> <C> <C> <C>
4,183,005 2,914 2,667 697,842
</TABLE>
The second matter was ratification of the selection of KPMG Peat
Marwick LLP as the Company's independent public accountants. The
vote count was as follows:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstentions Non-votes
--- -------- ----------- ---------
<S> <C> <C> <C>
4,883,764 1,401 1,273 -
</TABLE>
The following is the tabulation with respect to each nominee:
<TABLE>
<CAPTION>
Total Vote Total Vote Withheld
Each Director Each Director
------------- -------------
<S> <C> <C>
J. Roderick Heller III 4,877,290 9,148
Shekar Narasimhan 4,877,290 9,148
Mohammed A. Al-Tuwaijri 4,735,929 150,509
Michael R. Eisenson 4,877,290 9,148
Tim R. Palmer 4,877,290 9,148
John D. Reilly 4,877,290 9,148
Herbert S. Winokur, Jr. 4,877,290 9,148
</TABLE>
16
<PAGE> 20
Item 5: Other Information.
None
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Restated Certificate of Incorporation of The WMF
Group, Ltd. (the "Company") (1)
3.2 Amendment to the Company's Restated Certificate of
Incorporation (2)
3.3 Amended and restated by-laws of The WMF Group, Ltd.(5)
10.1 Mortgage Selling and Servicing Contract between Fannie
Mae and the Company, dated December 21, 1990. (1)
10.2 Delegated Underwriting and Servicing Addendum to
Mortgage Selling and Servicing Contract between Fannie
Mae and the Company, dated as of March 1, 1994. (1)
10.3 Delegated Underwriting and Servicing Master Loss
Sharing Agreement between Fannie Mae and the Company,
dated as of March 1, 1994. (1)
10.4 Delegated Underwriting and Servicing Reserve Agreement
among Fannie Mae, State Street Bank and Trust Company
and the Company, dated as of June 4, 1996. (1)
10.5 Term Loan Promissory Note between the Company,
WMF/Huntoon, Paige Associates Limited and Residential
Funding Corporation, dated June 14, 1996. (1)
10.6 Servicing Facility Promissory Note between the
Company, WMF/Huntoon, Paige Associates Limited and
Residential Funding Corporation, dated June 14, 1996.
(1)
10.7 Letter Agreement dated October 25, 1996 between
Washington Mortgage Financing Group and Michael D.
Ketcham.(1)
10.8 Key Employee Incentive Plan.(2)
10.9 Key Employee Incentive Award Agreement.(2)
10.10 Key Employee Deferral Compensation Plan.(2)
10.11 Employee Stock Purchase Plan.(2)
10.12 Stock Purchase Agreement dated as of October 31, 1997
between Washington Mortgage Financial Group, Ltd. and
The Robert C. Wilson Company (3)
10.13 Asset Purchase Agreement dated as of December 16, 1997
between Washington Mortgage Financial Group, Ltd. and
NY Urban West Inc. (4)
10.14 Master Repurchase Agreement dated as of March 5, 1998
between WMF Capital Corp. and Merrill Lynch Mortgage
Capital Inc. (portions have been omitted pursuant to a
request for confidentiality treatment)
11 Statement re restated computation of per share
earnings *
21 Subsidiaries of the registrant (4)
27 Financial data schedule *
(b) Report on Form 8-K.
None
- -------------------------
(1) Incorporated by reference to the registration statement on Form 10
previously filed by the Company on August 4, 1997.
(2) Incorporated by reference to the registration statement on Form S-1
filed by the Company on October 30, 1997.
(3) Incorporated by reference to the Form 8-K previously filed by the
Company on November 20, 1997.
(4) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1997 filed on March 31, 1998.
(5) Incorporated by reference to the Company's Form 10-Q for the quarter
ended March 31, 1998 filed on May 15, 1998.
* Filed herewith
17
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE WMF GROUP, LTD.
Date: December 21, 1998 By: /s/ Shekar Narasimhan
-------------------------
Shekar Narasimhan
Director, President and Chief
Executive Officer
Date: December 21, 1998 By: /s/ Michael D. Ketcham
-------------------------
Michael D. Ketcham
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
18
<PAGE> 1
THE WMF GROUP, LTD.
(dollars in thousands, except per share data)
EXHIBIT 11
Statement re restated computation of per share earnings
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
--------------------------------------------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
(LOSS) ------ ------ ------ ------ ------
------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS ($3,985) 5,250 ($0.76) $384 4,217 $0.09
Effect of
dilutive
securities:
Options - - - - - -
---- ---- ---- ---- ---- ----
DILUTED EPS ($3,985) 5,250 ($0.76) $384 4,217 $ 0.09
-------- ----- ------- ---- ----- ------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
-------------------------------------------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
(LOSS) ------ ------ ------ ------ --------
------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS ($3,704) 5,163 ($0.71) $451 4,217 $ 0.11
Effect of
dilutive
securities:
Options - - - - - -
---- ---- ---- --- ---- -----
DILUTED EPS ($3,704) 5,163 ($0.71) $451 4,217 $0.11
-------- ----- ------- ---- ------ ------
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,280
<SECURITIES> 3,829
<RECEIVABLES> 3,058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 862,022
<PP&E> 4907
<DEPRECIATION> 1233
<TOTAL-ASSETS> 921,172
<CURRENT-LIABILITIES> 871,441
<BONDS> 0
53
0
<COMMON> 0
<OTHER-SE> 39245
<TOTAL-LIABILITY-AND-EQUITY> 921,172
<SALES> 0
<TOTAL-REVENUES> 31,616
<CGS> 0
<TOTAL-COSTS> 29227
<OTHER-EXPENSES> 3804
<LOSS-PROVISION> 528
<INTEREST-EXPENSE> 3858
<INCOME-PRETAX> (5801)
<INCOME-TAX> (2097)
<INCOME-CONTINUING> (3704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3704)
<EPS-PRIMARY> (0.71)
<EPS-DILUTED> (0.71)
</TABLE>
