<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-23849
UNION PLANTERS MORTGAGE FINANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 62-1712370
- ------------------------------- -------------------
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
Union Planters Administrative Center
7130 Goodlett Farms Parkway
Cordova, Tennessee 38018
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 580-6000
N/A
(former name)
Indicate by check mark whether the Registrant (i) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such short period that the Registrant was
required to file such report), and (ii) has been subject to such filing
requirements for the past 90 days:
Yes [X] No [ ]
As of September 30, 1999, the latest practicable date, there were 1,000 shares
of Union Planters Mortgage Finance Corp. common stock outstanding.
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
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UNION PLANTERS MORTGAGE FINANCE CORP.
FORM 10-Q
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet September 30, 1999 and December 31, 1998.............3
Statement of Operations for the three and nine months
ended September 30, 1999 and 1998 .................................4
Statement of Changes in Shareholder's Equity
for the nine months ended September 30, 1999 and 1998 .............5
Statement of Cash Flows for the nine months
ended September 30, 1999 and 1998 .................................6
Notes to Unaudited Financial Statements............................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................8
Item 3. Quantitative and Qualitative Disclosure
about Market Risk..................................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................9
Item 5. Other Information..................................................9
Item 6. Exhibits and Reports on Form 8-K...................................9
Signatures..................................................................11
</TABLE>
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UNION PLANTERS MORTGAGE FINANCE CORP.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash............................................................... $ 520 $ 502
Deferred income taxes.............................................. 84 35
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TOTAL ASSETS............................................. $ 604 $ 537
========== ==========
Accrued expenses................................................... $ 239 $ 101
Tax and other payables to affiliates............................... 51 --
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TOTAL LIABILITIES........................................ 290 101
---------- ----------
Shareholder's equity
Common stock, par value $.01 per share,
1,000 shares authorized, issued, and outstanding.............. -- --
Additional paid-in capital....................................... 10 10
Retained earnings................................................ 304 426
---------- ----------
TOTAL SHAREHOLDER'S EQUITY............................... 314 436
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............... $ 604 $ 537
========== ==========
</TABLE>
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The accompanying notes are an integral part of these financial statements.
3
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UNION PLANTERS MORTGAGE FINANCE CORP.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1999 1998 1999 1998
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NONINTEREST INCOME
Net gain on the sale of residential mortgages...... $ -- $ -- $ 4,442 $ 17,498
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Professional fees.................................. 15 -- 15 --
Contracted clerical labor.......................... -- -- -- --
Other.............................................. -- -- -- --
---------- ---------- ---------- ----------
15 -- 15 --
---------- ---------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES........ (15) -- 4,427 17,498
Applicable income taxes.............................. (6) -- 1,549 6,124
---------- ---------- ---------- ----------
NET EARNINGS (LOSS)......................... $ (9) $ -- $ 2,878 $ 11,374
========== ========== ========== ==========
</TABLE>
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The accompanying notes are an integral part of these financial statements.
4
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UNION PLANTERS MORTGAGE FINANCE CORP.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
--------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999.......... $ -- $ 10 $ 426 $ 436
Net earnings...................... -- -- 2,878 2,878
Dividends......................... -- -- (3,000) (3,000)
--------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1999....... $ -- $ 10 $ 304 $ 314
========= ========== ========== ==========
</TABLE>
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The accompanying notes are an integral part of these financial statements.
5
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UNION PLANTERS MORTGAGE FINANCE CORP.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
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(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings.............................................. $ 2,878 $ 11,374
Deferred income tax benefit............................... (49) (202)
Gain on sale of loans..................................... (4,442) (17,498)
Net increase in tax receivable from affiliates............ -- (150)
Net increase in other liabilities......................... 189 182
---------- ----------
Net cash used by operating activities............. (1,424) (6,294)
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INVESTING ACTIVITIES
Purchase of loans from parent company..................... (132,467) (383,779)
Net proceeds from sale of loans to a trust................ 136,909 401,277
---------- ----------
Net cash provided by investing activities......... 4,442 17,498
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FINANCING ACTIVITIES
Issuance of notes payable to parent company............... 132,467 383,779
Repayment of notes payable to parent company.............. (132,467) (383,779)
Cash dividends paid....................................... (3,000) (11,000)
---------- ----------
Net cash used by financing activities............. (3,000) (11,000)
---------- ----------
Net increase in cash........................................ 18 204
Cash at beginning of period................................. 502 10
---------- ----------
Cash at end of period....................................... $ 520 $ 214
========== ==========
</TABLE>
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The accompanying notes are an integral part of these financial statements.
6
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UNION PLANTERS MORTGAGE FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The accounting and reporting policies of Union Planters
Mortgage Finance Corp. (the "Company") conform with generally accepted
accounting principles and general practice within the financial services
industry. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes; actual results could differ from these estimates.
BASIS OF PRESENTATION. The financial statements include the accounts of
the Company. The Company was established September 5, 1997 as a wholly owned,
limited-purpose finance subsidiary of Union Planters Bank, National Association
(the "Bank"), which in turn is a subsidiary of Union Planters Corporation
("UPC"). The Company was organized to facilitate the securitization of loans and
other assets through the issuance and sale of collateralized bonds and
pass-through securities through trusts established by the Company. Securities
issued through trusts will be secured primarily by residential mortgage loans
and mortgage-backed certificates of various types. These financial statements do
not include the accounts of the trusts established to carry out the issuance and
sale of collateralized bonds and pass-through securities.
NOTE 2. SALE OF LOANS
In February 1999 and May 1998, the Company securitized approximately $132
million and $381 million, respectively, in principal amount of previously
defaulted FHA insured and VA guaranteed mortgage loans serviced by the Bank. The
transactions were accounted for as a sale in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfer and Servicing of Financial Assets and Extinguishment of Liabilities."
The following summarizes the gains:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
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<S> <C> <C>
Proceeds from sale of loans................ $ 137,817 $ 401,277
Principal balance of loans................. (132,467) (381,173)
---------- ----------
Gain............................. 5,350 20,104
Costs...................................... (908) (2,606)
---------- ----------
Net gain on the sale of loans ... $ 4,442 $ 17,498
========== ==========
</TABLE>
NOTE 3. INCOME TAXES
Income taxes are computed on a separate company basis. The Company files a
consolidated federal income tax return with the Bank and UPC. Deferred income
taxes are provided in accordance with SFAS No. 109, "Accounting for Income
Taxes." The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
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<S> <C> <C>
Current.............................. $ 1,598 $ 6,326
Deferred............................. (49) (202)
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Total income tax expense... $ 1,549 $ 6,124
========== ==========
</TABLE>
The deferred tax asset is composed of accrued expenses that have not been
paid. The Company's effective tax rate does not differ from the federal
statutory rate of 35%.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
UNION PLANTERS MORTGAGE FINANCE CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and related notes thereto.
GENERAL
Union Planters Mortgage Finance Corp. (the "Company") was established
September 5, 1997 as a wholly owned, limited purpose, finance subsidiary of
Union Planters Bank, National Association (the "Bank"), which in turn is a
subsidiary of Union Planters Corporation. There was essentially no business
activity on the part of the Company until May 1998. The Company was organized to
facilitate the securitization of loans and other assets through the issuance and
sale of collateralized bonds and pass-through securities. Securities issued will
be secured primarily by residential mortgage loans and mortgage-backed
certificates of various types. In the future, the Company may finance other
types of loans and assets.
In February 1999, the Company securitized approximately $132 million in
principal amount of previously defaulted FHA-insured and VA-guaranteed mortgage
loans serviced by the Bank. The loans securitized had a weighted-average
maturity of 222 months and a weighted-average interest rate of 9.67% per annum.
The loans will continue to be serviced by the Bank for a one percent fee.
Affiliates of the Company purchased all of the subordinated securities issued in
this transaction, with an approximate market value of $9.3 million. This
securitization, treated as a sale, resulted in a total gain of approximately
$5.4 million before costs and expenses. Securitization costs and expenses
accrued by the Company were approximately $954,000 and the balance of the
accrual was $240,000 at September 30, 1999. Securitization costs and expenses
included underwriting costs, legal and accounting fees, as well as cost to
prepare, record and deliver loan documents and files. Credit losses not covered
by insurance or guarantees are absorbed by subordinated security holders or, in
limited circumstances, the Bank as servicer. Therefore, the Company carries no
loan loss reserves. Excess cash resulting primarily from the net gain of $4.4
million resulted in declaration of a dividend payment to the Bank of $3.0
million.
In May 1998, the Company securitized approximately $381 million in
principal amount of previously defaulted FHA-insured and VA-guaranteed mortgage
loans serviced by the Bank. The loans securitized had a weighted-average
maturity of 218 months and a weighted-average interest rate of 9.87% per annum.
The loans are serviced by the Bank for a one percent fee. Affiliates of the
Company purchased all of the subordinated securities issued in this transaction,
with an approximate market value of $17.4 million. This securitization, treated
as a sale, resulted in a total gain of approximately $17.5 million. Credit
losses not covered by insurance or guarantees are absorbed by subordinated
security holders or, in limited circumstances, the Bank as servicer. Therefore,
the Company carries no loan reserves. The Company has incurred and will continue
to incur expenses associated with preparation and maintenance of loan files and
recordation of loan documents. Excess cash resulting largely from a net gain of
$17.5 million resulted in declaration of a dividend payment to the Bank of $11.0
million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The disclosures required by this item are not applicable to the Company.
8
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UNION PLANTERS MORTGAGE FINANCE CORP.
PART II - OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
None.
ITEM 5 -- OTHER INFORMATION
None.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Certificate of Incorporation of the Registrant (Incorporated herein
by reference to the Exhibits to Registrant's Registration Statement
No. 333-35471 on Form S-3, filed September 12, 1997).
3.2 Amended and Restated Bylaws of the Registrant (Incorporated herein by
reference to the Exhibits to Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement No. 333-35471 on Form S-3, filed
January 16, 1998).
4.1 Standard Terms to Pooling and Servicing Agreement (January 1998
Edition) (Incorporated herein by reference to the Exhibits to
Pre-Effective Amendment No. 3 to the Registrant's Registration
Statement No. 333-35471 on Form S-3, filed January 16, 1998).
4.2 Form of Indenture between Registrant and Trustee (Incorporated herein
by reference to the Exhibits to Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement No. 333-35471 on Form S-3, filed
January 16, 1998).
4.3 Form of Trust Agreement between Registrant and Trustee (Incorporated
herein by reference to the Exhibits to Pre-Effective Amendment No. 3
to the Registrant's Registration Statement No. 333-35471 on Form S-3,
filed January 16, 1998).
4.4 Form of Deposit Trust Agreement between Registrant and Trustee
(Incorporated herein by reference to the Exhibits to Pre-Effective
Amendment No. 3 to the Registrant's Registration Statement No.
333-35471 on Form S-3, filed January 16, 1998).
4.5 Standard Terms to Pooling and Servicing Agreement (May 1998 Edition)
(Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K , filed June 11, 1998).
4.6 Copy of the Series 1998-1 Pooling and Servicing Agreement, dated as
of May 1, 1998, by and among the Registrant, Union Planters Bank,
N.A., as Master Servicer, The Bank of New York, as Contract of
Insurance Holder, and The Bank of New York, as Trustee (Incorporated
herein by reference to Exhibit to the Registrant's Current Report on
Form 8-K , filed June 11, 1998).
4.7 Copy of Series 1999-1 Pooling and Servicing Agreement, dated as of
February 1, 1999, by and among the Registrant, Union Planters Bank,
N.A., as Master Servicer, and Contract of Insurance Holder, and The
Bank of New York, as Trustee (Incorporated herein by reference to
Exhibit to the Registrant's Current Report on Form 8-K, filed
March 2, 1999).
27 Financial Data Schedule (for SEC use only)
9
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99.1 Form of Sales Agreement between the Registrant, as Purchaser, and the
Seller (Incorporated herein by reference to the Exhibits to
Pre-Effective Amendment No. 3 to the Registrant's Registration
Statement No. 333-35471 on Form S-3, filed January 16, 1998).
99.2 Form of Supplemental Servicing Agreement (Incorporated herein by
reference to the Exhibits to Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement No. 333-35471 on Form S-3, filed
January 16, 1998).
(b) REPORTS ON FORM 8-K
None.
10
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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.
UNION PLANTERS MORTGAGE FINANCE CORP.
(REGISTRANT)
Date: October 15, 1999 By: /s/ Joel R. Katz
---------------- ----------------------------------
Joel R. Katz
President and
Chief Executive Officer
By: /s/ Mark Mosteller
----------------------------------
Mark Mosteller
Vice President
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNION PLANTERS MORTGAGE FINANCE CORPORATION FOR THE NINE
MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 520
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 604
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 314
<TOTAL-LIABILITIES-AND-EQUITY> 604
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 4,442
<INCOME-PRE-EXTRAORDINARY> 2,878
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,878
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
