<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
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 33-02105
----------------
NEWMAN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 84-1007510
(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
1801 CALIFORNIA STREET, SUITE 3700; DENVER, COLORADO
(Address of principal executive offices)
80202-2637
(Zip Code)
(303) 293-8500
(Registrant's telephone number, including area code)
Indicate by checkmark 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 of time that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
(1) Yes XX No
-- --
(2) Yes XX No
-- --
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock: 1,000 shares
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Attached as Exhibit A.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto.
BACKGROUND AND LIQUIDITY
The registrant has issued two series of its Collateralized Multifamily
Housing Bonds ("Bonds") pursuant to an Indenture ("Indenture") dated as of
July 1, 1986 between the registrant and First Interstate Bank of Denver,
National Association, as trustee ("Trustee"). On July 25, 1986, the
registrant issued $6,128,400 principal amount of its Bonds, Series 1986-A
(GNMA security) (the "Series 1986-A Bonds") pursuant to the Indenture and a
Series 1986-A Supplement. On August 26, 1986, the registrant issued
$7,380,000 principal amount of its Collateralized Multifamily Housing Bonds,
Series 1986-B (GNMA Security) (the "Series 1986-B Bonds") pursuant to the
Indenture and a Series 1986-B Supplement. The proceeds of the offerings were
used to acquire certificates ("GNMA Certificates") in the principal amount of
$6,128,400 and $7,365,000 guaranteed by the Government National Mortgage
Association. The Series 1986-A Bonds were redeemed in full on August 3, 1990.
Cash flow from payments on the GNMA Certificates, together with
reinvestment earnings thereon, is anticipated to provide cash sufficient to
make all required payments on the Bonds. Consequently, the registrant
anticipates that it will have no additional cash requirements with respect to
its outstanding Bonds.
BUSINESS ENVIRONMENT AND EVENTS
The registrant competes with the GNMA whole loan market to provide
funding for FHA insured multifamily housing project loans. During periods
when interest rate yield curves are relatively steep, the registrant has a
competitive advantage over the GNMA whole loan market because it can
structure debt as a combination of serial bonds, term bonds, and deferred
interest bonds, thereby taking advantage of lower interest rates on the "low
end" of the yield curve. Conversely, during periods when interest rate yield
curves are relatively flat, the registrant has no advantage over the GNMA
whole loan market and is actually at a disadvantage because of legal and
underwriting costs associated with issuing a series of bonds under the
Indenture.
For the past several years, the interest rate yield curve has been
relatively flat and the registrant has been unable to complete efficiently
with the GNMA whole loan market.
<PAGE>
As a consequence, the registrant has not issued Bonds since the initial two
series of Bonds in 1986.
RESULTS OF OPERATIONS AND TRENDS
Generally, revenues and expenses are relatively constant as a result of
fixed rate GNMA securities producing revenue to pay fixed rate bond interest.
Revenue for GNMA securities represents virtually 100 percent (100%) of all
revenues. Bond interest and the amortization of organization costs represent
94 percent (94%) of all expenses.
During the three months ended September 30, 1995 and 1994, the revenues
for the registrant were $169,958 and $169,017, respectively, which consisted
primarily of interest received from the GNMA Certificates, amortization of
discounts on the GNMA Certificates, and interest earned on temporary cash
investments. Payment of interest on the outstanding Bonds and the
amortization of organization costs were the major sources of costs and
expenses. Costs and expenses increased three percent (3%) during the three
months ended September 30, 1995 and 1994.
The registrant's ongoing costs and expenses will be paid from interest
income from the remaining GNMA Certificate and interest earnings thereon
after payment of amounts required to be deposited into the Collection Account
for the Series 1986-B Bonds. The registrant anticipates that amounts not
required to be deposited into the Collection Account will be sufficient to
pay costs and expenses of the Trustee and other related expenses of the Bonds
if the interest income from the GNMA Certificate can be invested at a rate of
not less than three percent (3%) per year during the term of the Bonds. In
addition, amounts released to the registrant from the lien of the Indenture
and not distributed to its shareholder will be available to pay unanticipated
expenses in connection with the administration of the Bonds and other
expenses incurred by the registrant and taxes, as needed or required.
<PAGE>
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Indenture dated as of July 1, 1986 (the "Indenture") between the
Company and First Interstate Bank of Denver National Association, as
Trustee (the "Trustee"), previously filed as Exhibit 4.1 to the
Company's Post-Effective Amendment No. 1 to Form S-11, Registration
No. 33-02105 and incorporated by reference.
Series Supplement to the Indenture, dated as of July 1, 1986,
relating to Series 1986-A Bonds, previously filed as Exhibit 4 to
the Company's Form 8-K filed on August 6, 1986 and incorporated
by reference.
Series Supplement to the Indenture, dated as of August 1, 1986,
relating to Series 1986-B Bonds, previously filed as Exhibit 4 to the
Company's Form 8-K filed on September 3, 1986 and incorporated by
reference.
27 Financial Data Schedule
b. Reports on Form 8-K. The registrant has not filed any Form 8-K
during the quarter ended September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Newman Financial Corporation
(Registrant)
Dated: November 13, 1995
By: /s/ David W. Curtiss
-------------------------------
David W. Curtiss, Treasurer
and Principal Financial Officer
<PAGE>
Exhibit A to Form 10-Q
for Quarter Ended September 30, 1995
NEWMAN FINANCIAL CORPORATION
INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
<PAGE>
NEWMAN FINANCIAL CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 JUNE 30,1995
------------------ ------------
<S> <C> <C>
ASSETS
Cash $ 1,044 $ 4,240
Restricted assets
Cash and temporary cash investments 68,081 244,409
Investment in government securities,
net of discount of $122,707 and $123,890
at September 30, and June 30 respectively 6,871,393 6,885,247
Accrued interest receivable 74,283 53,734
---------- ----------
7,013,757 7,183,390
Organization costs, net of accumulated
amortization 3,268 3,300
---------- ----------
$7,018,069 $7,190,930
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable $ 5,390 $ 4,144
Payable to parent company 38,910 16,936
Accrued interest payable 3,000 23,000
Bonds payable, including accrued interest
of $3,531,893 and $3,392,846 at
September 30 and June 30, net of discount
of $87,393 and $88,238 at September 30 and
June 30 respectively 6,706,289 6,881,397
---------- ----------
Total liabilities 6,753,589 6,925,477
Stockholder's equity
Common stock-authorized, 5,000 shares of
$.10 par value, issued and outstanding,
1,000 shares 100 100
Capital in excess of par value 254,343 254,343
Retained earnings 26,592 27,565
---------- ----------
281,035 282,008
Less note receivable-parent company (16,555) (16,555)
---------- ----------
264,480 265,453
---------- ----------
$7,018,069 $7,190,930
========== ==========
</TABLE>
The accompanying notes are an integral part of these interim statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Revenues
Interest income $169,958 $169,017
-------- --------
Costs and expenses
Interest expense 161,386 161,203
Amortization of organization costs 32 32
General/administrative expenses 10,013 4,998
-------- --------
171,431 166,233
Earnings (loss) before income taxes (1,473) 2,784
Income tax expense (benefit) (500) 1,100
-------- --------
Net earnings (loss) $ (973) $ 1,684
======== ========
Net earnings (loss) per common share $ (.97) $ 1.69
======== ========
Weighted average number of common shares
outstanding 1,000 1,000
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (973) $ 1,684
Adjustments required to reconcile net earnings
(loss) to net cash provided by operating activities:
Amortization of GNMA discounts (1,183) (1,184)
Amortization of organization costs 32 32
Amortization of bond discount 845 ---
Increase in accrued interest receivable (20,549) (56)
Increase (decrease) in accounts payable 1,246 (2,366)
Increase in accrued interest payable 119,047 95,076
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Net cash provided by operating activities 98,465 93,186
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Cash flows from investing activities:
Net decrease in restricted cash 176,328 178,288
Principal payments on GNMA securities 15,037 13,679
Net advances from parent 21,974 4,850
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Net cash provided by investing activities 213,339 196,817
--------- ---------
Cash flows from financing activities:
Payment of bond principal (315,000) (290,000)
--------- ---------
Net cash used in financing activities (315,000) (290,000)
--------- ---------
NET INCREASE (DECREASE) IN UNRESTRICTED CASH (3,196) 3
Unrestricted cash at beginning of period 4,240 710
--------- ---------
Unrestricted cash at end of period $ 1,044 $ 713
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
NOTES A--GENERAL
1. ORGANIZATION
Newman Financial Corporation (the Company) was incorporated in the
State of Delaware on August 30, 1985 and is a wholly owned subsidiary of
Newman Financial Services, Inc. (NFSI). The Company was organized for the
sole purpose of issuing and selling bonds, notes, and other obligations
which would be collateralized by certain mortgage collateral guaranteed by
the Government National Mortgage Association (GNMA) or mortgage notes that
are insured by the United States Department of Housing and Urban
Development acting through the Federal Housing Administration pursuant to
the National Housing Act, as amended, together with certain funds and other
collateral. In June 1986, a shelf registration statement filed with the
Securities and Exchange Commission became effective authorizing the Company
to issue up to $250,000,000 in Collateralized Multifamily Housing Bonds.
2. INTERIM FINANCIAL INFORMATION
The financial information contained herein is unaudited but includes
all normal and recurring adjustments which, in the opinion of management,
are necessary to present fairly the information set forth. The financial
statements should be read in conjunction with the Notes to Financial
Statements which are included in the Company's Form 10-K dated September 9,
1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF SEPTEMBER 30, 1995 AND STATEMENT OF OPERATION FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,044
<SECURITIES> 6,871,393
<RECEIVABLES> 74,283
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,018,069
<CURRENT-LIABILITIES> 0
<BONDS> 6,706,289
<COMMON> 100
0
0
<OTHER-SE> 264,380
<TOTAL-LIABILITY-AND-EQUITY> 7,018,069
<SALES> 0
<TOTAL-REVENUES> 169,958
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,386
<INCOME-PRETAX> (1,473)
<INCOME-TAX> (500)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (973)
<EPS-PRIMARY> (.97)
<EPS-DILUTED> 0
</TABLE>
