FORM 10-Q
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C.
20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31,
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 ____________
METROPOLITAN MORTGAGE & SECURITIES CO.,
INC.
(Exact name of registrant as specified in its
charter)
WASHINGTON 91-
0609840
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
601 W. 1ST AVENUE, SPOKANE, WASHINGTON 99201-
5015 (Address of principal executive
offices) (Zip Code)
Registrant's telephone number, including area code:
(509)838-3111
Former name, former address and former fiscal year,
if changed since last report: N/A.
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 for 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 / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS: N/A.
Indicate by check mark whether the registrant
has filed all documents and reports required to be
filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under
a plan confirmed by a court. Yes / / No / / N/A.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of
each of the issuer's classes of common stock, as
of the latest practicable date.
Common "A": 130 shares at April 30, 1999.
Common "B": 0 shares at April 30, 1999.
METROPOLITAN MORTGAGE &
SECURITIES
CO., INC.
INDEX
PART I - FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
As of March 31, 1999 and September 30, 1998
(unaudited)
Condensed Consolidated Statements of Income
Three and Six Months Ended March 31, 1999 and
1998
(unaudited)
Consolidated Statements of Comprehensive
Income
Three and Six Months Ended March 31,
1999 and 1998 (unaudited)
Condensed Consolidated Statements of Cash
Flows
Six Months Ended March 31, 1999 and 1998
(unaudited) Notes to Condensed
Consolidated Financial Statements
PART I - FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
September 30,
1999
1998
_____________
_____________ _
_
<S> <C>
<C>
ASSETS
Cash and Cash Equivalents $ $
15,741,942 31,733,362
Investments
Trading Securities, at market
42,520,506 55,865,875
Available-for-Sale Securities,
at
market 141,660,641 25,988,789
Held-to-Maturity Securities,
at
amortized cost (market value
$71,791,661 and $86,396,021) 72,279,667 83,036,525
Accrued Interest on Investments _____1,607,05
_____1,646,52
1 7
TOTAL CASH AND INVESTMENTS ___273,809,80
__
7 198,271,078
Real Estate Contracts and
Mortgage
Notes and Other Receivables 636,095,494 692,822,886
Real Estate Contract Securities,
pledged to NationsBanc
Mortgage Capital Corp.
122,128,970
Real Estate for Sale and
Development,
Including Foreclosed Real 89,917,850 89,713,967
Estate
_____________
_____________ _
_
Total Receivables and Real
Estate
Assets 726,013,344
904,665,823
Less Allowance for Losses
(10,716,168)
(11,000,618)
_____________
_____________ _
_
NET RECEIVABLES AND REAL
ESTATE
ASSETS 715,297,176
893,665,205
_____________
_____________ _
_
Deferred Acquisition Costs, net
68,480,936
71,262,489
Land, Building and Equipment -
net
of accumulated depreciation 26,063,582
25,889,102
Mortgage Servicing Rights, net
9,258,361
6,292,375
Other Assets, net of allowance
38,664,036
31,284,532
_____________
_____________ _
_
TOTAL ASSETS $1,131,573,89
$1,226,664,78
8 1
=============
============= =
=
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
September 30,
1999
1998
_____________
_____________ _
_
<S> <C>
<C>
LIABILITIES
Life Insurance and Annuity $ $
Reserves 805,611,113
800,848,929
Debenture Bonds
198,811,287
198,205,294
Advances under line of credit
118,342,972
Other Debt Payable
16,810,663 7,359,339
Accounts Payable and Accrued
Expenses 21,352,155 18,687,539
Deferred Income Taxes
14,512,503 22,725,052
Minority Interest in
Consolidated
Subsidiaries 2,027,097 1,738,887
_____________
_____________ _ _
TOTAL LIABILITIES
1,059,124,818
1,167,908,012
_____________
_____________ _ _
STOCKHOLDERS' EQUITY
Preferred Stock, Series A, B, C,
D,
E Cumulative with Variable
Rate,
$10 Par Value, Authorized
8,325,000
shares issued 1,938,203 and
1,945,407 shares (Liquidation 19,382,030 19,454,071
Preference $49,893,160 and
$49,200,583, respectively)
Class A Common Stock-Voting,
$2,250
par value, authorized 222
shares, 293,417
293,417
issued 130 shares
Additional Paid-In Capital
19,349,918
18,580,051
Retained Earnings
37,166,631
21,109,849
Accumulated other comprehensive
loss (3,742,916)
(680,619)
_____________
_____________ _ _
TOTAL STOCKHOLDERS' EQUITY
72,449,080
58,756,769
_____________
_____________ _ _
TOTAL LIABILITIES AND
STOCKHOLDERS' $1,131,573,89
$1,226,664,78
EQUITY 8 1
=============
============= = =
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months
Ended March 31,
March 31,
1999 1998 1999
1998
____________ ___________ ___________
___________ _
_ _
<S> <C> <C> <C>
<C>
REVENUES
Insurance Premiums Earned $ 675,000 $ $ $
700,000 1,350,000 1,400,000
Interest and Earned Discounts 21,729,174
23,706,733 44,275,602 45,930,186
Real Estate Sales 10,516,226
6,014,128 18,299,073 15,038,043
Fees, Commissions, Service and
Other 2,265,573
Income 1,667,923 4,014,508 3,448,743
Investment Gains (Losses), Net
(2,830,236) 2,309,758 (3,133,193)
6,463,234
Realized Gains on Sales of 8,021,374
Receivables 212,819 19,666,899 311,209
____________ ___________ ___________
___________ _ _ _
TOTAL REVENUES 40,377,111
34,611,361 84,472,889 72,591,415
____________ ___________ ___________
___________ _ _ _
EXPENSES
Insurance Policy and Annuity 11,734,687
Benefits 12,162,952 22,686,499 24,428,059
Interest Expense 4,973,089
5,093,247 10,724,124 9,157,889
Cost of Real Estate Sold 10,188,367
5,769,929 17,708,594 14,227,663
Provision for Losses on Real
Estate 3,482,406
Assets 932,769 5,639,808 2,698,803
Salaries and Employee Benefits 5,675,209
4,301,927 10,945,631 8,385,724
Commissions to Agents 2,132,245
2,302,027 3,334,364 4,260,157
Other Operating and Underwriting
Expenses 1,365,265
1,677,123 4,012,227 3,225,705
Decrease in Deferred Acquisition 1,157,806
Costs 242,085 2,903,705 651,187
____________ ___________ ___________
___________ _ _ _
TOTAL EXPENSES 40,709,074
32,482,059 77,954,952 67,035,187
____________ ___________ ___________
___________ _ _ _
Income (Loss) Before Income Taxes
and
Minority Interest (331,963) 2,129,302 6,517,937
5,556,228
Income taxes Benefit (Provision) 14,110,133
(733,190) 11,711,992 (1,891,772)
____________ ___________ ___________
___________ _ _ _
Income Before Minority Interest 13,778,170
1,396,112 18,229,929 3,664,456
Income of Consolidated Subsidiaries
Allocated to Minority Stockholders
(298,950) (15,860) (288,210) (45,800)
____________ ___________ ___________
___________ _ _ _
Net Income 13,479,220
1,380,252 17,941,719 3,618,656
Preferred Stock Dividends
(903,002) (929,981) (1,728,450)
(1,918,252)
____________ ___________ ___________
___________ _ _ _
INCOME APPLICABLE TO COMMON $ 12,576,218 $ $ $
STOCKHOLDERS 450,271 16,213,269 1,700,404
============ =========== ===========
=========== = = =
Basic and Diluted Income per Share
Applicable to Common Stockholders $ 96,740 $ $ $
============ 3,464 124,717 13,080
=========== ===========
=========== = = =
Weighted Average Number of shares of
Common Stock Outstanding 130
============ 130 130 130
=========== ===========
=========== = = =
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March Six Months
Ended March
31, 31,
1999 1998 1999
1998
_____________ _____________ _____________
_____________
_ _ _ _
<S> <C> <C> <C> <C>
NET INCOME $ $ $ $
13,479,220 1,380,252 17,941,719
3,618,656
_____________ _____________ _____________
_____________ _ _
_ _
OTHER COMPREHENSIVE LOSS, BEFORE
INCOME TAXES:
Change in unrealized losses on
investments
(4,450,456) (25,619) (4,659,168)
(423,883)
Less deferred income tax benefit
(1,525,909) (8,711) (1,596,871)
(144,120)
_____________ _____________ _____________
_____________ _ _
_ _
Net other comprehensive income
(loss) (2,924,547) (16,908) (3,062,297)
(279,763)
_____________ _____________ _____________
_____________ _ _
_ _
COMPREHENSIVE INCOME $ $ $ $
10,554,673 1,363,344 14,879,422
3,338,893
============= ============= =============
============= = =
= =
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended March
31,
1999 1998
_____________
_____________ _
_
<S> <C>
<C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ $
(17,432,929)
12,798,368
_____________
_____________ _
_
CASH FLOWS FROM INVESTING
ACTIVITIES
Principal Payments on Real
Estate
Contracts and Mortgage Notes
and 62,819,505 69,097,991
Other Receivables
Proceeds From Real Estate Sales
14,032,773 9,728,421
Proceeds From Investment
Maturities 23,275,139 9,113,052
Proceeds from Sale of Available-
for-
Sale Securities 2,991,773 1,769,954
Purchase of Available-for-Sale
Securities
(90,165,550) (296,213)
Proceeds From Sale of Real
Estate
Contracts and Mortgage Notes
and 418,377,092 16,173,667
Other Receivables
Acquisition of Real Estate
Contracts
and Mortgage Notes and Other
Receivables (294,048,335)
(236,203,708)
Additions to Real Estate Held
(9,291,921)
(8,317,048)
Capital Expenditures
(533,387)
(12,653,630)
_____________
_____________ _
_
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES
127,457,089
(151,587,514)
_____________
_____________ _
_
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Change in Short Term Borrowings
From Brokers and Banks
(108,795,722)
138,805,971
Receipts From Life and Annuity
Products 65,522,506 34,443,890
Withdrawals on Life and Annuity
Products
(50,680,607)
(65,394,799)
Ceding of Life and Annuity
Products to
Reinsurers, Net (30,123,015) 1,280,927
Repayment to Banks and Others
(299,720) (716,101)
Issuance of Debenture Bonds
18,192,586
34,889,197
Issuance of Preferred Stock
937,566
1,046,570
Repayment of Debenture Bonds
(18,644,497)
(29,989,189)
Cash Dividends
(1,884,937) (1,918,252)
Redemption of Capital Stock
(239,740) (728,297)
Receipt of Contingent Sale Price
for
Subsidiary Sold to Related
135,569
Party
_____________
_____________ _
_
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
(126,015,580)
111,855,486
_____________
_____________ _
_
Net Change in Cash and Cash
Equivalents (15,991,420)
(26,933,660)
Cash and Cash Equivalents at
Beginning
Of Period 31,733,362
58,924,958
_____________
_____________ _
_
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ $
15,741,942
31,991,298
=============
=============
= =
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND
SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. In the opinion of the Company, the
accompanying unaudited
condensed consolidated financial statements
contain all adjustments necessary to present
fairly the Company's financial position as of
March 31, 1999, and the results of operations
for the three and six months ended March 31,
1999 and 1998 and the cash flows for the six
months ended March 31, 1999 and 1998. The
results of operations for the three and six
month periods ended March 31, 1999 and 1998 are
not necessarily indicative of the results to be
expected for the full year. As provided for
in regulations promulgated by the Securities
and Exchange Commission, all financial
statements included herein are unaudited;
however, the condensed consolidated balance
sheet at September 30, 1998 has been derived
from the audited consolidated balance sheet.
These financial statements should be read
in conjunction with the consolidated
financial statements including notes thereto
included in the Company's fiscal 1998 Form 10-
K.
2. The principal amount of receivables as to
which payments
were in arrears more than three months was
$32,000,000 at March 31, 1999 and $34,000,000
at September 30, 1998.
3. The Company had no outstanding legal
proceedings other than
normal proceedings associated with receivable
foreclosures and/or the general business
activities of the Company.
4. Certain amounts in the prior year's condensed
consolidated
financial statements have been reclassified to
conform with the current year's presentation.
These reclassifications
had no effect on net income or retained
earnings as previously reported.
5. In November, 1998, the Company and its
subsidiary Western
United Life Assurance Company (WULA)
participated as two of the four co-sellers in a
receivable securitization sponsored by
Metropolitan Asset Funding Inc., II, an
affiliated company. Approximately $194.4
million of receivables, with $182.4 million
provided by the Company and WULA, were sold in
the securitization. The Company and WULA
recorded approximately $8.8 million in pre-
tax gains from their portion of the sale.
In December, 1998, the Company participated
as one of the two co-sellers in a structured
settlement securitization sponsored by Select
Asset Funding Corporation, an affiliated
company. Approximately $37.7 million in
structured settlements at amortized costs, with
$21.8 million provided by the Company, were
sold in the securitization. The Company
recorded approximately $1.4 million in pre-
tax gains from its portion of the sale. In
March, 1999, the Company and its subsidiary,
Western United Life Assurance Company,
participated as co-sellers in a receivable
securitization sponsored by Metropolitan Asset
Funding, Inc., II, an affiliated company.
Approximately $124.8 million of
receivables were sold in the
securitization. The Company, including its
subsidiary, recorded approximately $8.1 million
in pre-tax gains from the sale.
6. The Company's income tax provision for the
three and six
months ended March 31, 1999 reflects the income
tax benefit associated with capital losses
generated by an implemented tax strategy which
were used to offset certain tax timing
differences. The Company recorded
approximately $140
million in income tax benefits associated
with this
transaction, which reduced income taxes
previously recorded.
7. In October, 1998, Statement of Financial
Accounting
Standards No. 134, "Accounting for Mortgage-Banking
Enterprise" ("SFAS 134"), was issued.
SFAS 134 requires that after the securitization of
mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting
mortgage-backed securities
or other retained interests based on its
ability and intent to sell or hold those
investments. This statement conforms the
subsequent accounting for securities retained
after the securitization of mortgage loans by
a mortgage banking enterprise with the
subsequent accounting for securities retained
after the securitization of other types of
assets by a non-mortgage banking enterprise.
The Company adopted this statement effective
January 1, 1999.
Concurrent with
the adoption, the Company transferred $46.3
million in mortgage-backed securities from its
trading category to its available-for-sale
category.
8. The preparation of financial statements in
conformity with
generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of
contingent assets and liabilities at the
dates of the financial statements and the
reported amounts of revenues and expenses
during the reporting periods. Actual results
could differ from those estimates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
These discussions may contain forward-looking
statements. A forward-looking statement may
contain words such as "will continue to be,"
"will be," "continue to," "expect to,"
"anticipates that," "to be," or "can impact." Management
cautions that forward-looking statements are subject
to risks and uncertainties that could cause the
Company's actual results to differ materially from
those projected in forward-looking
statements.
Significant Second Quarter Transactions:
On January 1, 1999, the Company applied
Statement of Financial Accounting Standards No. 134,
"Accounting for MortgageBacked Securities Retained
after the Securitization of Mortgage Loans Held
for Sale by a Mortgage Banking Enterprise" ("SFAS
134"). The Company availed itself of the one-time
opportunity to reclassify $46.3 million of mortgage-
backed securities and other beneficial interests
from the trading category to the availablefor-sale
category.
In March 1999, the Company and its insurance
subsidiary, Western United Life Assurance Company
(WULA), participated as cosellers in a receivable
securitization sponsored by Metropolitan Asset
Funding II, Inc., an affiliated company.
Approximately $124.8 million of receivables were
sold in the securitization. The Company, including
its subsidiary, recorded approximately $8.1 million
in pre-tax gains from the sale.
In March 1999, the Company recorded the
benefits of an implemented income tax strategy.
The strategy generated capital losses, which were
used to offset certain income tax temporary
differences. The Company recorded approximately
$14.0 million in income tax benefits associated
with the transactions, which reduced deferred
income taxes previously recorded. The Company
incurred an approximate $2.6 million investment loss
associated with the transactions.
Financial Condition and Liquidity:
As of March 31, 1999, the Company had
cash or cash equivalents of $15.7 million and
liquid investments (trading or available-for-sale
securities) of $184.2 million compared to $106.9
million and $112.8 million at December 31, 1998 and
$31.7 million and $81.9 million at September 30,
1998. Management
believes that cash and cash equivalents and
other liquidity provided by investments and
available lines of credit, along with the Company's
ability to securitize real estate collateralized
receivables, are adequate to meet planned asset
additions, debt retirements or other business
operational requirements during the next twelve
months. Total cash and investments at March 31,
1999, including held-to-maturity securities, were
$273.8 million as compared to $299.5 million at
December 31, 1998 and $198.3 million at September
30, 1998. During the six month period ended March
31, 1999, approximately $17.4 million were used in
operating activities. The primary reason for the use
of funds in operating activities was the acquisition
of approximately $42.9 million of trading
securities. Funds provided by investing
activities of $127.5 million were primarily the
result of sale proceeds and collections of
receivables of $481.2 million, proceeds from the
sale of real estate of $14.0 million and sales and
maturities of investments of $26.3 million, which
exceeded the $294.0 million of new receivable
acquisitions, additions to real estate held of
$9.3 million and purchase of available-forsale
securities of $90.2 million. Funds used in
financing activities of $126.0 million were
primarily the result of
decreases in short-term borrowings of $108.8
million due principally to the completion of the
March securitization, a $0.5 million net outflow from
debenture maturities less sales, payment of cash
dividends of $1.9 million and the net ceding of
annuity products to reinsurers of $30.1 million, which
exceeded the net cash inflow of $14.8 million in
life and annuity products and the net inflow from the
issuance less redemptions of preferred stock of $0.7
million.
The receivable portfolio totaled $636.1 million
at March 31, 1999 compared to $634.3 million at
December 31, 1998 and $815.0 million at September 30,
1998. During the six months ended March 31, 1999,
the decrease was primarily the result of principal
collections on receivables of $62.8 million, a
reduction for the cost basis of receivables sold of
$401.6 million and a reduction due to foreclosed
receivables of approximately $13.7 million,
exceeding the acquisition of receivables totaling
$294.0 million plus an additional $4.3 million in
loans to facilitate the sale of real estate.
Real estate held for sale and development
increased slightly to $89.9 million at March 31, 1999
and $89.9 million at December 31, 1998 from $89.7
million at September 30, 1998. For the six months
ended March 31, 1999, real estate additions of
$22.6 million, including $13.7 million of foreclosed
receivables, were offset by costs of real
estate sold of $17.7 million,
depreciation of $2.6 million and charge-offs to the
allowance for losses of $2.0 million.
Life insurance and annuity policy reserves
increased $4.8 million during the six months
ended March 31, 1999 to
approximately $805.6 million from $800.8 million at
September 30, 1998. This increase was the result of
insurance product receipts in the amount of $65.5
million and credited earnings of $20.0 million
exceeding insurance product withdrawals of $50.7
million and net reinsurance ceded of $30.1 million.
For the six months ended March 31, 1999, net
debenture bonds outstanding increased by $0.6
million to $198.8 million from $198.2 million
at September 30, 1998. Net cash outflow from
maturities less issuance of debentures was
approximately $0.5 million plus an additional $1.1
million increase in credited interest held.
Additionally, the Company had cash flow, net of
redemptions, of approximately $0.7 million from the
reinvestment of preferred stock dividends during
the six months ended March 31, 1999. During the
six month period ended March 31, 1999, the Company had
a net decrease in short-term borrowings of $108.8
million to an approximate outstanding amount of
$15.0 million on March 31, 1999. The
reduction was primarily the result of the
securitization of receivables of which portions of
the proceeds were used to payoff a line of credit
tied to the securitization.
Total assets decreased by $95.1 million to
$1,131.6 million at March 31, 1999 from $1,152.7
million at December 31, 1998 from $1,226.7 million
at September 30, 1998. During the six-month period,
the Company primarily used existing cash, cash flow
from its receivable investment portfolio and cash flow
from receivable securitizations to decrease its
short-term borrowings and to increase its
securities investment portfolio. At March 31, 1999,
the Company had net unrealized losses on securities
available-forsale in the amount of $3.7 million as
compared to unrealized losses of $681,000 at
September 30, 1998. Net unrealized losses on
securities available-for-sale is presented as a
separate component of stockholders' equity.
Results of Operations:
The Company recorded net income before
preferred dividends for the six months ended March
31, 1999 of $17.9 million compared to $3.6 million
in the prior year's period. Comparing the
current year's six month period with the prior
year's similar period, the increase in gains on the
sale of receivables and the benefits of an
implemented income tax strategy completely offset
increases in the provision for losses on real
estate assets, increases in salaries, commissions
and benefits, a decrease in the net interest
spread, a decrease in gains from the sale of real
estate, a loss on investment securities and increased
other operating expenses.
For the six-month period ended March 31, 1999,
the Company reported a positive spread on its
interest sensitive assets and liabilities of $12.2
million as compared to $13.7 million in the prior
year's period. The decrease was primarily the result
of a decrease in the receivable portfolio and the
large cash position of the Company, primarily the
result of recent securitizations. After
securitizations it often takes the Company a few
months to reinvest the proceeds in new receivable
investments. While there has been some contraction
in the portfolio investments earnings rate in the
current year's period, the Company has also
experienced reduced renewal rates on some of its life
and annuity policies and has used short-term
borrowings with a lower interest cost in an
effort to maintain its net interest spread.
Currently, the Company continues to control life
and annuity policy surrenders by maintaining
current market credited rates. Normally, the
Company's investment earnings rates are not as
sensitive to market conditions as is its life and
annuity policy rates and thus a sustained rise in
interest rates could have a negative impact on
its net interest spread as its liabilities reprice
faster than its assets.
During the six months ended March 31, 1999,
the Company realized net gains on sales of
receivables of $19.7 million as compared to
$311,000 in the prior year's period. The increase
resulted primarily from real estate receivable
securitizations in November 1998 and March
1999 and a structured settlement
securitization in December 1998. The Company did
not complete any securitizations during the prior
year's similar period.
During the six months ended March 31, 1999,
the Company realized net losses on investments of
$3.1 million, including mark-to-market adjustments
on trading securities and losses incurred to
implement its tax strategy, compared to net gains of
$6.5 million in the prior year's period. The current
period loss includes both realized gains and mark-to-
market losses, as higher interest rates and increased
spreads to treasuries have decreased the valuation
of certain trading securities. Additionally,
included in the current year's period are
approximately $2.6 million in investment loss
associated with the implementation of the tax
strategy. The prior year's gain was primarily the
result of reduced interest rates and
tightening of spreads
to
treasuries, thus increasing the value of trading
securities. Also, in the prior year, the Company
revalued some of its retained securities from
prior securitizations.
The Company
realized gains of $590,000 on sales of $18.3
million of real estate in the current year's period
compared to gains of $810,000 on sales of $15.0
million in the prior year. It is the policy of
management to actively market real estate in order to
return the investment to an earning asset.
In the six months ended March 31, 1999,
the Company made provisions for losses on
receivables and real estate assets of approximately
$5.6 million as compared to $2.7 million in the prior
year's period. The increase in reserves and
valuation
accounts was based upon updated appraisals on
delinquent
receivables and appraisals or fair market
valuations of newly acquired repossessed
properties.
For the six months ended March 31, 1999, the
Company has incurred salary, commission and benefits
expense of $14.3 million as compared to $12.6
million in the previous year's similar period.
Increases were partially the result of
additional employees to meet servicing demands
related to the increase in managed assets from
prior securitizations. To date, the Company has
retained the servicing of all securitized assets.
Partially offsetting this expense increase has been a
$0.6 million increase in fees, service and
commission income with fees of $4.0 million in the
current year's period compared to $3.4 million in
the prior year.
In the six months ended March 31, 1999, the
Company has incurred
increases in other operating expenses, including
decreases in deferred acquisition costs related to
its insurance business. Additional depreciation and
amortization expenses of $1.3 million more than
offset other operating expense reductions resulting
in a $0.8 million increase in total other
operating expenses. Additionally, in the current
year's period, the Company experienced a larger
decrease in deferred acquisition costs related to
its insurance business as increased amortization and
reduced capitalization resulted in a $2.3 million
increase in expense.
In comparing the three months ended March 31,
1999 with the prior year's similar period, the
Company recorded net income before preferred
dividends of $13.5 million as compared to $1.4
million. The increase in net income for the
comparative three
months was primarily the result of (1) an increase
in gains on the sale of receivables and (2)
reduced income taxes from the implementation of a
tax strategy, which were partially offset by (1) a
decrease in the net interest spread, (2) increased
losses on investments, (3) an increase in the
provision for losses on real estate assets, and
(4) increases in salaries, commissions, benefits and
other operating expenses.
For the three months ended March 31, 1999, the
net interest spread was $5.7 million compared to
$7.2 million in the prior year. The reduction was
primarily the result of the Company
carrying increased balances in cash and cash
equivalents
generated from recent receivable securitizations.
Until funds
received from the securitizations can be reinvested
in similar receivables, the Company is forced
to purchase short-term investments with lower
yields. The reduction was additionally effected
by the lower interest rate market, which affected
the yield on new receivable investments.
During the three months ended March 31, 1999,
the Company realized net losses on investments of
$2.8 million and realized gains on the sale of
receivables of $8.0 million. In the prior year,
the Company recorded investment gains of $2.3 million
and gains on the sale of receivables of $0.2
million. Included in the current year's investment
losses is $2.6 million related to the
implementation of the tax strategy. The prior
year's gain was primarily the result of reduced
interest rates and the tightening of spreads to
treasuries, thus increasing the value of trading
securities.
In conjunction with the Company's evaluation
of its real estate assets, the Company provided
for loss on real estate assets of $3.5 million in
the current year's three-month period as compared
to $0.9 million in the prior year. The increase in
reserves and valuation accounts was based upon updated
appraisals on delinquent
receivables and appraisals or fair market
valuations of newly acquired repossessed properties.
New Accounting Rules:
In June 1997, Statement of Financial
Accounting Standards No. 131, "Disclosures about
Segments for an Enterprise and Related
Information" (SFAS 131) was issued. SFAS 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. This Statement
supersedes SFAS 14,
"Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to
report information about major customers. The
application of SFAS 131 is not expected to have a
material effect on the Company's consolidated
financial
statements.
In December 1997, the American Institute of
Certified Public Accountants issued Statement of
Position 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related
Assessments" ("SOP 97-3"). SOP 97-3 applies to all
entities that are subject to
guaranty-fund and other insurance-related
assessments. Assessments covered by this SOP include
any charge mandated by statute or regulatory
authority that is related directly or indirectly to
underwriting activities (including selfinsurance),
except for income taxes and premium taxes. SOP 97-3
is effective for financial statements for fiscal
years after December 15, 1998. The Company does
not believe that the application of SOP 97-3
will have a material effect on its consolidated
financial statements.
In June 1998, Statement of Financial
Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities"
("SFAS 133"), was issued. SFAS 133 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
recognize all derivatives as either assets or
liabilities in the statement of financial position
and measure those instruments at fair value. SFAS
133 is effective for all quarters of fiscal years
beginning after June 15, 1999, however, earlier
application is encouraged as of the beginning of any
fiscal quarter. The Company has not yet determined
the effect of the application of this statement on its
consolidated financial statements.
In October 1998, Statement of Financial
Accounting Standards No. 134, "Accounting for
Mortgage-Banking Enterprise" ("SFAS 134"), was
issued. SFAS 134 requires that after the
securitization of mortgage loans held for sale, an
entity engaged in mortgage banking activities
classify the resulting mortgagebacked securities or
other retained interests based on its ability and
intent to sell or hold those investments. This
statement conforms the subsequent accounting for
securities retained after the securitization of
mortgage loans by a mortgage banking enterprise with
the subsequent accounting for securities retained
after the securitization of other types of assets by
a non-mortgage banking enterprise. The Company
adopted this statement effective January 1,
1999. Concurrent with the
adoption, the Company transferred $46.3 million in
mortgagebacked securities for its trading category to
its available-for-
sale category.
Year 2000 Disclosure
The Consolidated Group (Metropolitan and its
subsidiaries) is aware of the potential effect that
the year 2000 and the new century may have on
computer hardware, computer software and
applications and embedded micro-controllers in
non-computer equipment (collectively "Information
Technology"). The problem is insuring that the
Consolidated Group is "Year 2000 Compliant" meaning
that the Information Technology is able to (i)
process date and time data accurately and (ii)
calculate, compare and sequence from, into and
between the twentieth and twenty-first centuries,
the years 1999, 2000 and leap years.
The Consolidated Group and its affiliates
share many software, hardware, facilities and other
systems. Therefore, the Consolidated Group's Year
2000 efforts are a combined and coordinated
effort among all companies within the Consolidated
Group and its affiliates. The following are
statements regarding the Year 2000 compliance of
the Consolidated Group.
The
information below has not been independently
verified by the Consolidated Group, other than
statements relating to
the
Consolidated Group.
State of Readiness
The Consolidated Group has established a Year
2000 task force which has developed an action plan
for addressing issues related to the Year 2000.
Management currently contemplates that the plan,
with the exception of the contingency plan, will be
substantially completed by August 1, 1999. The
contingency plan is expected to be substantially
completed by December 1, 1999, but will continue to
be revised thereafter as needed in order to maintain
an effective contingency plan. The action plan
includes the following phases:
Inventory - Identify all internal and external
systems and services that may utilize date
sensitive information.
Assessment - Determine whether each system or
service meets the Consolidated Group's
definition of Year 2000 Compliance and assess
the potential business impact of non-compliance.
Renovation - Modify and/or replace any systems
or services that do not satisfy the
Consolidated Group's definition of Year 2000
Compliance.
Certification - Obtain certification that each
system or service meets the definition of
compliance.
Training - Develop and implement any training
and procedural changes to ensure correct data-
entry.
Contingency Planning - Develop and implement
contingency plans against possible failures.
The plan includes a timeline for the completion
of each of the phases and components of the work
within each phase. Many of the different phases have
overlapping timelines and are therefore progressing
simultaneously, therefore the status of progress on
any particular phase is difficult to assess at any
point in time. The Year 2000 task force generally
meets weekly to coordinate its efforts as well as to
monitor progress.
The status of the Consolidated Group's Year 2000
efforts are
regularly monitored by the internal auditor. In
addition, during the first quarter of calendar
1999, the Consolidated Group engaged a third
party to provide an external evaluation of its Year
2000 plan and the status of the preparations
of the Consolidated Group at that time.
The Consolidated Group has begun the
testing of its internally developed and
supported software applications, hardware and
facilities systems. Testing to date has not
produced any results which were not able to be
resolved. The
testing continues to be substantially on track with
the Year 2000 action plan timeline.
The Consolidated Group is requesting vendor
documentation certifying Year 2000 compliance with
respect to third party software applications,
third party services, equipment and
facilities related systems. Certain equipment and
facilities systems which have been identified as
higher priority are also being tested for
compliance, where testing is possible. To date, the
Consolidated Group has not received any indication
from any third party that a mission critical system
or service will not be able to be certified by them
as Year 2000 compliant. The Year 2000 task
force is monitoring and tracking projected
certification dates from third party providers.
The Consolidated Group has begun the
development of a Year 2000 contingency plan to
address potential Year 2000 related failures.
There can be no assurance that this contingency plan
or that the Year 2000 action plan will be able to
prevent a material disruption of the Consolidated
Group's business.
Expected Costs of Remediation
Prior to fiscal 1998, the Consolidated Group
did not track Year 2000 related costs. The
Consolidated Group and its
affiliates had developed a Year 2000 budget of
approximately $1.3 million for the fiscal year
commencing October 1, 1998. Certain of these costs
will be charged to or reimbursed by the affiliated
companies, and certain of these costs will be
paid by the Consolidated Group with respect to
their respective costs associated with the Year
2000 action plan. The predominant components of
both past and future costs consist of soft costs
related to employee time and resource allocations
rather than direct costs such as the acquisition of
new software.
Risks
The Consolidated Group, as a financial
institution, relies heavily upon computers and
information technology systems to acquire,
service and sell Receivables as well as for
its securities and insurance sales activities.
The Consolidated Group faces extensive Year 2000
related risks. The order within which these
risks are presented is not intended as a
prioritization of the potential risks nor an
exhaustive identification of the risks. These risks
include, but are not limited to the following:
unavailability of electrical power or
telecommunication systems supplied by third
parties;
inability of obligors on the Receivables to
access their funds to make required payments;
inability of the mail systems or wire
transfer systems performed by third parties to
deliver such payments;
inability of banks to process those payments;
failure of any of the software/hardware systems
which the Consolidated Group uses to track
insurance products, securities products or
acquire, service and sell Receivables;
inability of the Consolidated Group to access
its own funds or to make wire transfers or
otherwise make payments on its obligations due
to internal or third party (generally
banking) system failures; and
inability of the Consolidated Group to
process data accurately or timely for
general business management purposes,
regulatory reporting purposes or other purposes.
Contingency Plans
The Consolidated Group has commenced the
development of a contingency plan but has not
finalized such a plan to date. Development of
contingency plans for mission critical items is the
first and top priority of the contingency planning
phase. Where appropriate and feasible, the plan
will also address alternatives for internally
developed systems as well as
externally developed ones, and will include steps
to implement transition to an alternative system.
The plan will include trigger dates for
implementing alternative solutions prior to the Year
2000, where system testing or third party
documentation indicates that a system is not and will
not be compliant. There can be no assurance that
this contingency plan, or that the Year 2000 action
plan will be able to prevent a material disruption of
the Consolidated Group's business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK
The Consolidated Group is in a "liability
sensitive" position in that it interest sensitive
liabilities reprice or mature more quickly than
do its interest sensitive assets. Consequently,
in a rising interest rate environment, the net
return from interest sensitive assets and
liabilities will tend to decrease, thus rising
interest rates will have a negative impact on
results of operations. Conversely, in a falling
interest rate environment, the net return from
interest sensitive assets and liabilities will
tend to improve, thus falling interest rates
will have a positive impact on results of
operations. As with the impact on operations from
changes in
interest rates, the Consolidated Group's Net
Present Value ("NPV") of financial assets and
liabilities is subject to fluctuations in
interest rates. The Consolidated Group
continually monitors the sensitivity of net interest
income and NPV to changes in interest rates. NPV is
calculated based on the net present value of
estimated cash flows utilizing market prepayment
assumptions and market rates of interest provided by
independent broker quotations and other public
sources. Any computation of forecasted effects of
hypothetical interest rate changes are based on
numerous assumptions, including relative levels of
market interest rates, loan prepayments and
redemptions of certificates, and should not be
relied upon as indicative of actual future results.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings or
actions pending or threatened against Metropolitan
Mortgage & Securities Co., Inc. or to which its
property is subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
On March 3, 1999, the Annual Meeting of
Stockholders was held wherein the stockholders
unanimously elected the following Directors to serve
until the next annual meeting:
C. Paul Sandifur, Jr., Bruce Blohowiak, Harold
Erfurth, Irv Marcus, Charles H. Stolz, Reuel
Swanson, John Trimble and Neal Fosseen,
Honorary Director.
No other matters were submitted to a vote
of security holders during the reporting period.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a). Restated Articles of
Incorporation, as amended, dated
November 30, 1987 (Exhibit 3(a)
to Metropolitan's Annual Report
on
Form 10-K for fiscal 1987).
3(b). Amendment to Articles of
Incorporation
dated November 5, 1991 (Exhibit
3(c) to Registration No. 33-
40220).
3(c). Amendment to Articles of
Incorporation
dated September 20, 1992
(Exhibit 3(c) to Metropolitan's
Annual Report on Form 10-K for
fiscal 1992).
3(d). Restated Bylaws as amended to
December 26, 1995 (Exhibit 3(e)
to Metropolitan's Annual Report
on Form 10-K for fiscal 1995).
4(a). Indenture, dated as of July 6,
1979,
between Metropolitan and
Seattle-First National Bank,
Trustee (Exhibit 3 to
Metropolitan's Annual Report on
Form 10-K for fiscal 1979).
4(b). First Supplemental Indenture,
dated as of October 3, 1980,
between Metropolitan and
Seattle-First National Bank,
Trustee (Exhibit 4 to
Metropolitan's Annual Report on
Form 10-K for fiscal 1980).
4(c). Second Supplemental Indenture,
dated as of November 12, 1984,
between Metropolitan and
Seattle-First National Bank,
Trustee
(Exhibit 4(d) to Registration No. 2-95146).
4(d). Third Supplemental Indenture, dated as of
December 31, 1997 between Metropolitan and
First Trust (Exhibit 4(d)) to Form 10-K
filed January 8, 1998).
4(e). Amended Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series C (Exhibit 4(g) to
Registration No. 33-2699).
4(f). Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series D (Exhibit 4(a) to
Registration No. 33-25702).
4(g). Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series E-1 (Exhibit 4(a) to
Registration No. 33-19238).
4(h). Amended Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series E-2 (Exhibit 4(a) to
Registration No. 33-25702).
4(i). Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series E-3 (Exhibit 4(a) to
Registration No. 33-32586).
4(j). Statement of Rights, Designations and
Preferences of Variable Rate Cumulative
Preferred Stock, Series E-4 (Exhibit 4(h) to
Registration No. 33-40221).
4(k). Form of Statement of Rights, Designations and
Preferences of Variable Rate Preferred
Stock, Series E-5 (Exhibit 4(i) to
Registration No. 33-57396).
4(l). Statement of Rights, Designations and
Preferences of Variable Rate Cumulative
Preferred Stock, Series E-6 (Exhibit 4(1) to
Registration No. 333-19755).
4(m). Statement of Rights, Designations and
Preferences of Variable Rate Cumulative
Preferred Stock, Series E-7 (Exhibit 4(d) to
Amendment 1 to Registration No. 33319755).
10(a). Employment Agreement between Metropolitan
Mortgage and Securities Co., Inc. and Bruce
Blohowiak (Exhibit 10(a) to Form 10-K filed
January 8, 1998).
10(b). Employment Agreement between Metropolitan
Mortgage and Securities Co., Inc. and
Michael Kirk (Exhibit 10(b) to Form 10-K
filed January 8, 1998).
10(c). Employment Agreement between Metropolitan
Mortgage and Securities Co., Inc. and Jon
McCreary (Exhibit 10(c) to Form 10-K filed
January 8, 1998).
10(d). Reinsurance Agreement between Western
United Life Assurance Company and Old
Standard Life Insurance Company (Exhibit
10(d) for the fiscal year ended September 30,
1998.)
*10(e).Employment Agreement between Metropolitan
Mortgage and Securities Co., Inc. and William
D. Snider.
11. Statement indicating Computation of PerShare
Earnings (see Condensed Consolidated
Financial Statements).
*27. Financial Data Schedule
*Filed herewith.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on this 19th day of May, 1999 on its behalf by the undersigned,
thereunto duly authorized.
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
/s/ BRUCE J. BLOHOWIAK
______________________________________________
Bruce J. Blohowiak
Executive Vice President, Chief Operating Officer and
Director
/s/ STEVEN CROOKS
______________________________________________
Steven Crooks
Vice President, Principal Accounting Officer
Metropolitan Mortgage & Securities Co., Inc.
LONG TERM INCENTIVE PAY AGREEMENT
Long Term Incentive Pay Agreement, hereinafter referred to as
Agreement, dated February 4, 1999 between Metropolitan Mortgage &
Securities Co., Inc., hereinafter referred to as Company and
William D. Snider, hereinafter referred to as Employee. Company
and Employee mutually agree on the terms and conditions set forth
below in consideration for employee's continued employment with
Company and the promises set forth herein.
1. Term of agreement. Subject to the provisions for employment
at will stated in paragraph 8 below, as stated in Company
policies, and as agreed as part of the Employee Confirmation
Form, incorporated herein, this agreement will begin on
February 16, 1999, and will end on February 15, 2004.
2. Deferred Compensation. If Employee is employed continuously
until February 15, 2004, he shall be entitled to receive
$431,315.24, without interest, provided that Company remains
solvent. Within 5 days of the end of the term of this
agreement period, Employee will receive full payment of the
deferred compensation. Other payment arrangements may be
made if agreed to between Company and Employee in writing at
least 90 days prior to the end of the term of the agreement.
Both parties recognize that the payment(s) are, according to
IRS rulings, subject to Federal Insurance Contribution Act
(FICA) and Federal Income Tax (IRS) withholding and,
therefore, Company will withhold applicable FICA and IRS
contributions when making payment(s) to Employee and will
also contribute the appropriate amount itself for its share
of FICA payments.
3. Employee to devote full-time to Company. Employee will
devote his entire working time, attention, and energies to
the business of Company, and, during employment, will not
engage in any other business activity, regardless of whether
such activity is pursued for profit, gain, or other
pecuniary advantage, except by the expressed permission of
Company. However, Employee is not prohibited from making
personal investments in any other business, as long as those
investments do not require participation in the operation of
said businesses.
4. Restriction on post-employment competition. For two years
following the end of his employment, Employee will not,
within the United States of America, own, manage, operate,
control or be employed by, or assist, any business that
directly competes with Company and its business groups.
Employee also agrees not to solicit Company's employees or
its customers for employment or sales purposes. Company may,
without waiving the protections of this provision, grant
Employee the right to engage in business otherwise barred by
this provision. Any such permission must be in writing and
approved by an authorized representative of Company in order
to be effective. If Employee violates the terms of this
restriction, Employer shall be relieved from the duty to
make payments under paragraph two of this agreement, and if
Employee has
already received payment, Company shall be entitled to
receive a full refund of any payments made, including
associated attorney and court fees incurred by Company to
recover said payments
5. Confidentiality. Employee acknowledges that, during the
course of his employment, he will become aware of
confidential business information, including trade secrets,
that are not generally known to the public and which have
commercial value from their limited publication. Employee
will not, at any time, during or after his employment with
Company, reveal any such confidential information or trade
secrets to any person, or use such confidential information,
except as required in the course of his duties with Company
or at Company's request and direction.
6. Property rights. All materials, products, processes, and
ideas developed, established, used, or marketed during the
course of the employment contract will be the property of
Company and its business groups.
7. Death/Total and Permanent Disability benefit. In the event
Employee dies during the term of the agreement, Company will
pay to Employee's estate or beneficiary a pro-rated amount
of the deferred compensation rounded to the nearest month of
Employee's death. In the event Employee dies following the
term of agreement, but before the completion of payment(s),
Company will continue payment(s) to Employee's estate or
beneficiary. In the event Employee becomes fully and
permanently disabled from carrying out his job duties during
the term of the agreement, Company will pay to Employee a
pro-rated amount of the deferred compensation rounded to the
nearest month of Employee's total and permanent disability.
8. Termination of Agreement. The duties imposed upon Company
under paragraph two and seven of this agreement shall be
discharged if employee terminates his employment (by
resignation, abandonment or otherwise) or if employee is
terminated for Cause. Cause shall include, gross misconduct
or gross mismanagement of the business of Company,
insubordination, repeated failure to meet reasonable
expectations of his supervisor, violation of existing
Company policies or hereafter as amended and adopted,
willful falsification of any information that Employee gives
to any officer or director of Company, Employee's
intentional violation of any federal, state, or local law or
regulation, a determination by a court of competent
jurisdiction that Employee is prohibited for any reason from
performing Employee's duties under this agreement, and/or
any fraud, theft, or dishonesty by Employee adversely
affecting Company, or its business groups, or its respective
directors, officers or shareholders. In the case of
termination for cause due to insubordination, failure to
meet reasonable expectations of his supervisor, or violation
of Company policies, employee shall not be terminated unless
he has received a written warning and a reasonable
opportunity (not to exceed thirty days) to correct the
identified problem.
In the event Company terminates Employee at its own
discretion and without Cause, Employee will receive a pro
rated amount of the deferred compensation up to and
including the date Employee's employment is terminated.
9. Successors, Waiver and Assignment. This agreement shall be
binding upon Company's successors and assigns. Any waiver
of a portion of this contract by either party shall not
constitute a waiver of any other portion of the contract,
nor shall a failure to seek redress for a breach of the
contract constitute a waiver of the right to enforce any
other portion of the contract. Employee shall have no
rights or power to assign this agreement, or any of
Employee's rights and duties hereunder and any attempted
assignment of the same by Employee shall be null and void.
10. Law and Venue. This contract is to be construed in
accordance with the laws of the State of Washington. Any
legal action to enforce this contract or for breach of this
contract, shall be filed in the Superior Court of Spokane
County, Washington. Both parties hereby consent to
jurisdiction and venue in that court.
11. Severability. If any provision of this contract shall be
found to be unenforceable, all other provisions shall remain
in effect as if the unenforceable provision had never been
included in the contract at all.
12. Entire agreement. This agreement supersedes and replaces
all prior discussions, understandings, and oral agreements
between the parties and contains the entire understanding
and agreement between them on the matters set forth herein.
Moreover, this agreement cannot be modified by the parties
except by an instrument that is signed by the party or
parties against whom such modification is sought to be
enforced.
IN WITNESS WHEREOF, the parties have caused this agreement to be
signed and validly executed to be effective as of the date set
forth above.
Metropolitan Mortgage & Securities Co., Inc.
/s/ C. PAUL SANDIFUR, JR.
By: ____________________________________ Date: 2/4/1999
C. Paul Sandifur, President and CEO
/S/ William D. Snider
By: ___________________________________ Date: 2/4/1999
William D. Snider
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> MAR-31-1999
<CASH> 15,742
<SECURITIES> 258,068
<RECEIVABLES> 636,095
<ALLOWANCES> 10,716
<INVENTORY> 0
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<PP&E> 38,758
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<TOTAL-ASSETS> 1,131,574 <CURRENT-
LIABILITIES> 0
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<COMMON> 293
0
19,382
<OTHER-SE> 52,774
<TOTAL-LIABILITY-AND-EQUITY> 1,131,574
<SALES> 0
<TOTAL-REVENUES> 84,473
<CGS> 0
<TOTAL-COSTS> 61,591
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 10,724
<INCOME-PRETAX> 6,518
<INCOME-TAX> 11,712
<INCOME-CONTINUING> 18,230
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<CHANGES> 0
<NET-INCOME> 17,942
<EPS-PRIMARY> 124,717.00
<EPS-DILUTED> 124,717.00
</TABLE>
