UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
IXI QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
I I 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 1-9742
HARBOURTON FINANCIAL SERVICES L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 52-
1573349
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer
Identification No.)
2530 S. Parker Road, Suite 500, Aurora, CO
80014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303)
745-3661
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Preferred Units New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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
At October 14, 1996, registrant had 41,169,558 Preferred
Units outstanding.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30,
1996 (unaudited)and December 31, 1995
3
Consolidated Statements of Operations (unaudited)
for the three and nine months ended September 30, 1996 and
1995 4
Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1996 and 1995
5
Notes to Consolidated Financial Statements (unaudited)
7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
9
PART II
SIGNATURES
23
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
(Unaudited)
September 30,
December 31,
1996
1995
<S> <C> <C>
<C>
ASSETS
Cash and cash equivalents $ 38,152
$ 2,273
Mortgage loans held for sale, net 168,237
232,073
Mortgage loans held for investment, net 2,180
1,507
CMO bonds, residual interests, investment
securities and SMATs, net of accumulated 3,063
6,306
amortization of $543 and $439, respectively
Notes receivable - affiliates 587
587
Advances receivable, net 33,296
21,016
Mortgage servicing rights, net of accumulated
amortization of $31,812 and $21,979,
respectively and valuation allowances of $90 83,808
75,846
and $1,132, respectively
Deferred acquisition, transaction and loan
costs, net of accumulated amortization of 2,983
2,676
$1,577 and $1,271, respectively
Property, equipment and leasehold
improvements, net of accumulated amortization 6,066
4,176
of $4,185 and $3,283, respectively
Due from affiliates -
3,632
Investment in affiliates 96
- - -
Excess cost over identifiable tangible and
intangible assets acquired, net of accumulated 2,686
2,726
amortization of $523 and $464, respectively
Other assets 22,224
3,277
Total Assets $363,378
$356,095
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Installment purchase obligations - servicing $ 1,723
$ 9,740
Foreclosure reserves 9,620
8,142
Lines of credit 168,333
232,144
Term loans 60,200
37,215
Notes payable - affiliates 26,249
581
Due to affiliates 27,596
- - -
Accounts payable and other liabilities 11,054
13,766
Total Liabilities 304,775
301,588
Partners' Capital 58,603
54,507
Total Liabilities and Partners' Capital $363,378
$356,095
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands)
Three Months Nine
Months
Ended
Ended
September 30,
September 30,
1996 1995 1996
1995
<TABLE>
<S> <C> <C> <C>
<C>
REVENUES
Loan servicing fees $ 6,091 $5,311
$18,752 $14,656
Ancillary income 1,703 1,585
5,527 4,464
Gain on sale of defaulted loans to 167 112
678 428
affiliates
Investment income net of interest
expense on escrows 3,663 1,556
8,129 3,648
Total servicing revenue 11,624 8,564
33,086 23,196
Gain on sale of mortgage loans and
related mortgage servicing rights 5,617 3,319
15,280 5,231
Interest income, net of related 1,760 425
4,242 888
warehouse interest expense
Other production income 3,819 1,532
11,331 3,210
Total production income - gross 11,196 5,276
30,853 9,329
Other investment and interest
income 430 277
4,083 333
Total Revenue 23,250 14,117
68,022 32,858
EXPENSES
Servicing costs 2,370 1,570
7,141 4,859
Prepayment costs and interest 610 297
1,783 1,137
curtailments
Provision for foreclosure losses 1,500 1,555
5,093 2,765
Amortization of mortgage servicing
rights less net impairment recovery 3,311 2,262
8,812 5,358
Total servicing expenses 7,791 5,684
22,829 14,119
Loan production and secondary 10,312 4,552
28,540 9,591
marketing costs
General and administrative costs 1,633 1,874
4,845 4,772
Interest expense - term loans 1,014 695
2,542 1,649
Other interest expense 276 207
1,073 505
Other interest expense-affiliates,
net of interest income-affiliates 694 230
1,778 498
Other amortization and depreciation 599 431
1,500 1,370
Total Expenses 22,319 13,673
63,107 32,504
Net Income Before Equity in Earnings of
Affiliates and Gain on Bulk Sale of
Originated Servicing 931 444
4,915 354
Equity in earnings of affiliates (9) -
(4) (254)
Gain on bulk sale of servicing 220 -
220 9,148
Net Income $ 1,142 $ 444 $
5,131 $ 9,248
Net Income per Preferred Unit based
on 41,169,558; 31,689,230; $ .03 $ .01 $
.12 $ .26
41,495,484; 35,778,744 Preferred
Units, respectively
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
Nine Months
Ended
September 30,
September 30,
1996
1995
<TABLE>
<S> <C>
<C>
Cash Flows From Operating Activities:
Net Income $ 5,131
$ 9,248
Adjustments to reconcile net income to net cash
flows from operating activities:
(Gain) loss on sale of CMO bonds, (2,486)
- - -
residual interests and SMATs
Unrealized (gain) loss on CMO bonds, (1,043)
245
residual interests and SMATs
Gain on sale of defaulted loans (678)
(428)
Gain on bulk sale of originated servicing (220)
(9,148)
Mortgage servicing rights valuation (1,042)
- - -
recovery
Amortization and depreciation 11,354
6,728
Provision for foreclosure losses 5,093
2,765
Equity in earnings from affiliates 4
254
Changes in operating assets and
liabilities:
Mortgage loans held for sale and 63,163
(122,441)
investment, net
Advances receivable (11,987)
3,685
Other assets (18,638)
2,992
Due to/from affiliates 31,228
1,074
Accounts payable and other liabilities (5,942)
17
Net Cash Flows From Operating Activities 73,937
(105,009)
Net Cash Flows From Investing Activities:
Proceeds from sale of CMO bonds, residual 5,550
- - -
interests and SMATs
Capitalized originated mortgage (20,363)
(5,583)
servicing rights
Purchases of property and equipment (3,025)
(1,087)
Funding of deferred acquisition and (226)
(1,775)
transaction costs
Investment in subsidiary (100)
- - -
Amortization of CMO bonds, residual 1,222
680
interests and investment securities
Proceeds from bulk sale of originated 3,546
9,148
servicing
Net acquisition of mortgage servicing rights -
(4,870)
Purchase of short-term investments -
(10,000)
Increase in notes receivable - affiliates -
32
Increase in restricted cash -
(110)
Cash acquired in purchase transaction -
2,715
Net Cash Flows From Investing Activities (13,396)
(10,850)
Cash Flows From Financing Activities:
Net borrowings (payments) on lines of (63,811)
103,743
credit and short term borrowings
Term debt advances 71,658
41,350
Settlement of installment purchase (8,017)
- - -
obligations
Funding of deferred loan costs (387)
- - -
Redemption of Preferred Units (1,100)
- - -
Principal payments on term loans (48,673)
(31,602)
Net borrowings from notes payable -
affiliates 25,668
7,873
Payment on partner notes receivable -
300
Net Cash Flows From Financing Activities (24,662)
121,664
Increase in cash and cash equivalents 35,879
5,805
Cash and cash equivalents, excluding 2,273
1,670
restricted cash, at beginning of period
Cash and cash equivalents, excluding $ 38,152
$ 7,475
restricted cash, at end of period
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 38152
<SECURITIES> 3063
<RECEIVABLES> 35852
<ALLOWANCES> 1969
<INVENTORY> 0
<CURRENT-ASSETS> 208569
<PP&E> 10251
<DEPRECIATION> 4185
<TOTAL-ASSETS> 363378
<CURRENT-LIABILITIES> 304775
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 58603
<TOTAL-LIABILITY-AND-EQUITY> 363378
<SALES> 0
<TOTAL-REVENUES> 68238
<CGS> 0
<TOTAL-COSTS> 51369
<OTHER-EXPENSES> 6345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5393
<INCOME-PRETAX> 5131
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<NET-INCOME> 5131
<EPS-PRIMARY> .12
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</TABLE>
