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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT of 1934
February 17, 1999 (February 10, 1999)
Date of Report (Date of Earliest Event Reported)
THE WMF GROUP LTD.
(Exact name of registrant as specified in its charter)
Delaware 000-22567 54-1647759
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(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
1593 Spring Hill Road
Suite 400
Vienna, Virginia 22182
(Address of principal executive offices)
(703) 610-1400
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
The information set forth in Exhibit 99.1 is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are filed herewith:
Exhibit Description
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99.1 The WMF Group, Ltd. press release dated February 10, 1999.
2
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SIGNATURE
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 hereunto duly authorized.
THE WMF GROUP LTD.
Date: February 16, 1999 By: /s/ Michael D. Ketcham
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Michael D. Ketcham
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
3
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EXHIBIT INDEX
Exhibit Description
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99.1 The WMF Group Ltd. press release dated February 10, 1999
4
<PAGE>
Exhibit 99.1
For Immediate Release: Contact: Michael D. Ketcham
Executive Vice President,
CFO and Treasurer
(703) 610-1400
Email: [email protected]
The WMF Group Reports Net Income for Fourth Quarter and
Announces New Credit Facility
VIENNA, Va., February 10, 1999 -- The WMF Group, Ltd. (the "Company") today
reported net income of $603,000 for the quarter ended December 31, 1998 or $0.11
per share, a 16% decrease from the same period in 1997. Total revenue for the
fourth quarter was $22.7 million, a $7.6 million or 50% increase over the prior
year's fourth quarter results. Loan originations totaled approximately $1.06
billion for the fourth quarter of 1998, up 63% from $655 million for the same
period in 1997.
Fourth quarter results were affected by the recognition of expenses associated
with the reorganization and recapitalization of the Company. These expenses,
totaling approximately $2.0 million, consist primarily of recapitalization,
severance, legal and other advisory costs. Also during the fourth quarter, the
Company recorded approximately $1.6 million in tax benefits due primarily to
state taxes related to the losses at WMF Capital Corp.
"Our core mortgage banking operations had an excellent fourth quarter, setting
new records in loan originations and profitability," said Shekar Narasimhan, the
Company's president and chief executive officer. He added, "We made significant
progress in implementing our previously announced recapitalization plan." In the
fourth quarter, the WMF Group raised $16.7 million through a private placement
with its principal shareholders, affiliates of Harvard Private Capital Holdings,
Inc. and Capricorn Investors II, L.P., and filed a registration statement to
raise up to $14.1 million of additional equity through a shareholder's rights
offering. All proceeds from the equity placement were used to repay a portion of
a $20 million subordinated loan held with COMIT, a REIT of which the Company
owns approximately 20%. Additionally, the Company continued implementation of
its expense reduction program, which is targeted to achieve savings of $7.5
million from previously anticipated levels in 1999.
The Company also announced today that it has entered into a $200 million
syndicated credit facility with Residential Funding Corporation, LaSalle
National Bank and Bank United. This new facility consists of a one-year $150
million revolving warehouse line of credit, a three-year $25 million revolving
credit line, and a five-year $25 million term loan.
--more--
For 1998, the Company reported a net loss of $33.3 million, or $6.38 per share,
compared to net income of $2.4 million or $0.57 per share in 1997. Total revenue
was $73.5 million in 1998, up 65% from $44.6 million for the year ended December
31, 1997. Loan originations increased 89% to $4.35 billion in 1998. According to
Narasimhan, "Our mortgage banking business had a successful year in 1998.
Unfortunately, this performance was diminished by WMF Capital Corp.
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losses, which resulted from unprecedented volatility in U.S. Treasury bond
interest rates and commercial mortgage backed security spreads during the third
quarter. Our national origination system, strategic investor relationships, and
underwriting expertise along with the capital from our previously announced
shareholder rights offering and new bank lines position the Company well in
1999."
MORTGAGE BANKING operations (which includes corporate administration) reported
$3.6 million in earnings before non-operating interest expense and taxes for the
quarter ended December 31, 1998, an increase of $1.9 million or 120% from the
same period in 1997. Earnings before non-operating interest expense and taxes
for the year ended December 31, 1998 was $8.4 million, up $2.9 million or 52%
from the year ended December 31, 1997. Revenue for the years ended December 31,
1998 and 1997 was $67.5 million and $44.6 million, respectively, an increase of
$22.9 million, or 51%. A $2.0 million gain on the sale of servicing during the
fourth quarter of 1998 contributed to the earnings increase, but was offset by
reorganization and recapitalization costs of $1.7 million during the same
quarter. Mortgage Banking also incurred a $1.3 million loss related to an
interest rate lock agreement, which was terminated in the third quarter of 1998.
Mortgage Banking reported a $1.2 billion increase in its servicing portfolio in
1998, from $10.9 billion at December 31, 1997 to $12.1 billion at December 31,
1998.
CAPITAL MARKETS reported a $2.6 million loss before non-operating interest
expense and taxes for the quarter ended December 31, 1998, and a $56.9 million
loss for the year then ended. The loss for the quarter primarily resulted from
operating costs, unrealized losses on loan commitments and other expenses
incurred in connection with the curtailment of conduit operations at WMF Capital
Corp. Additionally, Capital Markets incurred approximately $341,000 of severance
costs associated with reorganization of the Company. These costs were partially
offset by gains resulting from the sale, and closings of related U.S. Treasury
short sales, on the remaining $279 million loan portfolio at WMF Capital Corp.
With the completion of this sale, WMF Capital Corp. no longer holds loans in
inventory for securitization and does not intend to hold such loans in the
foreseeable future.
ADVISORY SERVICES reported a $262,000 loss before non-operating interest expense
and taxes for the quarter ended December 31, 1998 and a $624,000 loss for the
year then ended. Advisory Services, which began operations in the second quarter
of 1998, reported an increase in assets under management of $69.0 million in the
fourth quarter. Assets under management totaled $138.7 million for the year
ended December 31, 1998.
The WMF Group, (NASDAQ: WMFG), headquartered in Vienna, VA., is one of the
largest commercial mortgage financial services companies in the country, as
measured by servicing portfolio size, according to a survey published by the
Mortgage Bankers Association of America. As the nation's largest originator of
Fannie Mae and FHA-
--more--
insured multifamily and health care loans, WMF Group has originated more than $9
billion in conventional and FHA-insured multifamily and commercial loans since
1993, and currently has a servicing portfolio of approximately $12.1 billion.
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Table to follow
Conference Call: The WMF Group will conduct a conference call to discuss its
fourth quarter results on Thursday, February 11, 1999, at 11:00 AM EST. To
participate on the call, please call 800-621-5170. If you are unable to do so,
you may listen to a recording of the meeting by calling 800-633-8284
(reservation number 11625703) until 1:00 PM EST, Saturday, February 13, 1999.
Note: This press release may contain "forward-looking statements" within the
meaning of federal securities law. These forward-looking statements include,
among others, statements concerning transactions currently under negotiation or
anticipated, the Company's outlook for future periods, business strategies and
their anticipated results, similar statements concerning anticipated future
events and expectations that are not historical facts. The forward-looking
statements in this press release speak only as of the date hereof and are
subject to numerous risks and uncertainties, which could cause actual results to
differ materially from those expressed in or implied by the statements. Those
influential factors include the inability to raise additional capital on
favorable terms or at all, adverse industry and economic conditions and adverse
changes in interest rates, the secondary mortgage market or in assets securing
mortgages. Additional risks are identified in the Company's filings with the
Securities and Exchange Commission, including the Company's Prospectus filed on
February 3, 1999.
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Financial Highlights
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Consolidated Income Statement:
Revenues
Servicing Fees $3,728 $3,166 $14,715 $11,871
Gain on sale of mortgage loans, net 8,734 7,480 20,999 19,652
Gain on servicing sales 2,026 0 2,026 297
Structuring fees 108 0 959 0
Interest income 4,858 2,118 20,844 5,771
Placement fee income 1,787 1,461 8,470 5,330
Other income 1,431 922 5,463 1,724
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Total revenues 22,672 15,147 73,476 44,645
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Expenses:
Salaries and employee benefits 13,682 8,038 38,816 21,163
General and administrative 8,054 2,463 18,813 7,649
Occupancy 1,575 601 4,736 2,140
Provision for loan servicing losses 315 250 1,128 729
Interest 5,011 993 17,764 2,283
Loss (Gain) on hedge instruments (7,013) 0 36,653 0
Amortization of servicing rights 1,377 896 5,153 4,250
Depreciation and amortization 749 480 2,801 1,660
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Total expenses 23,750 13,721 125,864 39,874
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Income (loss) before income tax expense (1,078) 1,426 (52,388) 4,771
Income tax expense (benefit) (1,681) 709 (19,066) 2,329
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Net income (loss) $603 $717 ($33,322) $2,442
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Net income (loss) per share - Basic $0.11 $0.16 ($6.38) $0.57
============= =========== ============ =============
Weighted average shares outstanding 5,297 4,433 5,224 4,273
============= =========== ============ =============
OTHER DATA:
EBITDA: (1)
Net Income (loss) $603 $717 ($33,322) $2,442
Add: Non operating interest expense 1,765 195 3,267 758
Add: Income tax expense (benefit) (1,681) 709 (19,066) 2,329
Add: Depreciation and amortization 749 480 2,801 1,660
Add: Amortization of servicing rights 1,377 896 5,153 4,250
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EBITDA $2,813 $2,997 ($41,167) $11,439
============= =========== ============ =============
Loan sales/fundings $1,064,900 $654,784 $4,348,721 $2,306,900
Gain on originated mortgage servicing rights 2,220 1,585 5,980 3,251
Servicing portfolio (outstanding principal balance) 12,142,000 10,870,000
Assets under management 138,720 0
</TABLE>
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<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Income Statement by Operating Segment:
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Revenue
Mortgage Banking *** $23,333 $15,147 $67,567 $44,645
Capital Markets (1,026) 0 4,419 0
Advisory Services 365 0 1,490 0
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Total 22,672 15,147 73,476 44,645
Expenses (2)
Mortgage Banking *** 19,765 13,526 59,169 39,116
Capital Markets 1,593 0 61,314 0
Advisory Services 627 0 2,114 0
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Total 21,985 13,526 122,597 39,116
Earnings (loss) before non-operating interest expense and taxes
Mortgage Banking *** 3,568 1,621 8,398 5,529
Capital Markets (2,619) 0 (56,895) 0
Advisory Services (262) 0 (624) 0
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Total 687 1,621 (49,121) 5,529
Non-operating interest expense 1,765 195 3,267 758
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Pretax income (loss) (1,078) 1,426 (52,388) 4,771
Provision for (recovery of) taxes (1,681) 709 (19,066) 2,329
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Net income (loss) $603 $717 ($33,322) $2,442
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Mortgage Banking EBITDA *** $5,621 $2,997 $16,076 $11,439
Capital Markets EBITDA (2,607) 0 (56,766) 0
Advisory Services EBITDA (201) 0 (477) 0
</TABLE>
*** Mortgage Banking operations includes corporate administration.
<TABLE>
<CAPTION>
As of As of
December 31, December 31,
Selected Balance Sheet Data: 1998 1997
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<S> <C> <C>
Mortgage loans held for sale reported at fair market value $34,217 $49,431
Servicing rights 26,243 26,796
Total assets 144,677 119,331
Debt
Warehouse lines of credit 34,757 48,743
Non operating lines of credit 40,493 11,161
Subordinated Debt 3,901 --
Stockholders' equity $27,378 $38,825
</TABLE>
(1) EBITDA is a non-GAAP presentation of the Company's performance and consists
of income from operations before non-warehouse interest expense, income
taxes, depreciation and amortization. EBITDA is included because it is used
in the industry as a measure of a company's operating performance and
provides information in addition to that supplied by GAAP-based data
regarding the ability of the Company's business to generate cash, but should
not be construed as an alternative either (i) to income from operations
(determined in accordance with GAAP) as a measure
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of profitability or (ii) to cash flows from operating activities (determined
in accordance with GAAP). EBITDA does not take into account the Company's
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses. EBITDA as measured by the Company may not be comparable to EBITDA as
measured by other companies.
(2) For the three months and twelve months ended December 31, 1998, the Company
recognized reorganization and recapitalization expenses of approximately
$2.0 million with approximately $1.7 million in Mortgage Banking and
$341,000 reported in Capital Markets.
