<PAGE>
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 June 30, 1998
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 33-20345
FIRST CHURCH FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1670677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 334-5521
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 ( )
The number of shares outstanding of the registrant's Common Stock, par
value $1.00 per share, at June 30, 1998 was 1,000 shares.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
PART I
FIRST CHURCH FINANCING CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, June 30,
1998 1997
<S> <C> <C>
Revenues:
Interest income $192,043 $242,441
Other income 21,925 11,808
Total revenues 213,968 254,249
Expenses:
Interest expense 166,138 210,422
Amortization of deferred
issuance costs 21,839 10,512
Servicing fees 7,291 9,083
Other 1,018 3,869
Total expenses 196,286 233,886
Income before income 17,682 20,363
Provision for income taxes 7,000 8,000
Net income $ 10,682 $ 12,363
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
FIRST CHURCH FINANCING CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
1998 1997
<S> <C> <C>
Revenues:
Interest income $405,778 $488,795
Other income 46,795 23,838
Total revenues 452,573 512,633
Expenses:
Interest expense 350,827 424,223
Amortization of deferred
issuance costs 47,739 24,283
Servicing fees 15,454 18,302
Other 8,934 11,828
Total expenses 422,954 478,636
Income before income taxes 29,619 33,997
Provision for income taxes 11,700 13,400
Net income $ 17,919 $ 20,597
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
FIRST CHURCH FINANCING CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 41,843 $ 4,607
Assets held by trustee 224,071 270,679
Accrued interest receivable 62,029 71,867
Mortgage loans held by trustee
(net of purchase discount of
$239,965 and $286,608,
respectively) 7,860,856 9,077,790
Deferred issuance costs 236,954 284,540
Tax refund due from Parent 6,971 16,670
Other assets - 1,256
Total assets $8,432,724 $9,727,409
LIABILITIES AND STOCKHOLDER'S
EQUITY
Accrued interest payable $ 152,115 $ 190,368
Mortgage-Backed bonds payable 7,812,000 9,086,000
Due to affiliate 233 585
Note payable to affiliate 35,000 35,000
Total liabilities 7,999,348 9,311,953
Stockholder's equity
Common stock, $1 par value;
50,000 shares authorized
1,000 shares issued and
outstanding 1,000 1,000
Additional paid-in capital 269,631 269,631
Retained earnings 162,745 144,825
Total stockholder's equity 433,376 415,456
Total liabilities and
stockholder's equity $8,432,724 $9,727,409
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these balance sheets.
<PAGE>
FIRST CHURCH FINANCING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
<S> <C> <C>
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 17,919 $ 20,597
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Gain on liquidation of mortgage loans (35,416) (10,288)
Amortization of discount on
mortgage loans (11,379) (13,550)
Amortization of deferred issuance
costs 47,739 24,283
Amortization of other deferred costs 1,256 3,768
Change in assets and liabilities:
Decrease (Increase) in -
Assets held by trustee 46,608 14,022
Accrued interest receivable 9,838 2,517
Tax refund due from Parent - 10,424
Increase (Decrease) in -
Accrued interest payable (38,253) (8,830)
Due to affiliate (353) (106)
Accrued income taxes payable 9,700 -
Net cash provided by operating activities 47,659 42,837
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from -
Principal payments received on
mortgage loans 1,263,577 324,924
Net cash provided by investing activities 1,263,577 324,924
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for -
Repayment of mortgage-backed bonds (1,274,000) (333,000)
Net repayments on notes payable
to affiliate - (30,000)
Net cash used in financing activities (1,274,000) (363,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 37,236 4,761
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 4,607 4,623
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,843 $ 9,384
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid during the period $ 389,433 $ 433,160
Income taxes paid during the period $ 2,000 $ 2,976
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1998
Note A -- Basis of Presentation
The condensed financial statements included herein have been prepared by
First Church Financing Corporation (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Management believes, however, that these condensed financial
statements reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results for the periods
presented. All such adjustments are of a normal recurring nature. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
Note B -- Mortgage-Backed Bonds
Mortgage-Backed Bonds (the "Bonds") originally issued and outstanding at
June 30, 1998, consist of the following:
<TABLE>
<CAPTION>
Outstanding
Principal
Original Amount
Date of Stated Principal at
Series Rate Bonds Maturity Amounts 6/30/98
<S> <C> <C> <C> <C> <C>
1 8.25% 3/1/93 3/10/08 $ 4,586,000 $2,016,000
2 8.75% 8/1/94 8/10/09 4,456,000 1,948,000
3 8.00% 12/1/95 12/10/10 4,223,000 3,848,000
$13,265,000 $7,812,000
</TABLE>
The stated maturity is the date by which all Bonds will be fully paid.
Mandatory redemptions will be made from principal payments on the Mortgage
Loans (the "Loans") which serve as collateral for the Bonds. The Loans
generally require regular installments of principal and interest based upon
a 15-year amortization schedule. The receipt of scheduled principal
payments will cause a substantial portion of the Bonds to have shorter
maturities.
The Bonds will be redeemed, without premium or penalty, to the extent
funds are available in the interest and principal payment accounts
maintained by the trustee. Redemptions from such available funds (other
than funds from prepayments of Loans) commence six months from the date of
issue of a Bond series and continue on a semiannual basis thereafter.
All interest and principal collected on the Loans, less a servicing fee
paid to Ziegler Financing Corporation, a related entity, is to be deposited
with the trustee of the Bonds. Any amounts deposited with the trustee in
excess of amounts required for payment of interest on and principal of the
Bonds and an amount to be maintained in an interest reserve fund will be
returned to the Company.
The Bonds of any series may be redeemed in whole by the Company at such
time as the aggregate principal amount of the outstanding Bonds for the
series is 20% or less of the aggregate principal amount of the Bonds
originally issued for that series. Redemptions will also be made from
unscheduled prepayments on the Loans, if such prepayments should occur.
Prepayments over and above the regular principal installments may be made
by the mortgagor from borrowed funds on a monthly or quarterly basis
commencing one year after the issue of a Bond series and from unborrowed
funds on a monthly or quarterly basis after the issue of a Bond series.
Redemptions from such prepayments may be made after the same periods of
time.
<PAGE>
MANAGEMENT'S NARRATIVE ANALYSIS OF
RESULTS OF OPERATIONS
Results of Operations - Three Months Ended
June 30, 1998 and 1997
The Company issued no new Bonds during the second quarter of 1998 or
1997. A total of $541,000 of Bonds were repaid during the second quarter
of 1998 compared to $112,000 in the second quarter of 1997. The difference
in Bond repayments during each of the second quarter periods is primarily
due to different prepayment amounts received on the Loans.
Revenues, consisting primarily of interest, were $214,000 in the
second quarter of 1998 compared to $254,000 in the second quarter of 1997.
Total expenses, consisting primarily of interest, were $196,000 in the
second quarter of 1998 compared to $234,000 in the second quarter of 1997.
The decreases in revenues and expenses for the second quarter of 1998
compared to the second quarter of 1997 are due to loan repayments and bond
redemptions during and between such periods. Net income for the second
quarter of 1998 was $11,000 compared to $12,000 in the second quarter of
1997.
Results of Operations - Six Months Ended
June 30, 1998 and 1997
The Company issued no new series of Bonds in the first six months of
1998 or 1997. A total of $1,274,000 of Bonds were repaid during the first
six months of 1998 compared to $333,000 in the first six months of 1997.
The difference in Bond repayments during each period is primarily due to
different prepayment amounts received on the Loans.
Revenues, consisting primarily of interest income, were $453,000 in
1998 compared to $513,000 in 1997. Total expenses, consisting primarily of
interest expense, were $423,000 in 1998 compared to $479,000 in 1997. The
decreases in revenues and expenses for the first six months of 1998
compared to the first six months of 1997 are due to loan repayments and
bond redemptions during and between such periods. Net income for the first
six months of 1998 was $18,000 compared to $21,000 for the first six months
of 1997.
Each series of Bonds is structured in a manner such that funds to be
received from the Loans are sufficient to fund interest and principal
payments on the Bonds as well as all other expenses of the Company. All
payments of principal and interest on the Loans securing the Bonds have
been received by the Company as scheduled. Principal payments including
any prepayments received on the Loans were $1,264,000 in the first six
months of 1998 compared to $333,000 in the first six months of 1997.
Ziegler Financing Corporation, a related corporation, acts as servicer for
the Loans for which it receives a fee. The fee is equal to 0.292% of the
average outstanding principal balance of the Loans during the preceding
month. At June 30, 1998, there were $7,812,000 of Bonds outstanding
collateralized by $8,101,000 of Loans at maturity value.
The Company expects to have its primary computer systems Year 2000
compliant by the second quarter of 1999. The trustee of the issuer has
indicated that its systems were either Year 2000 compliant when designed
and programmed or have been reprogrammed to be Year 2000 compliant.
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
27 Financial Data Schedule
(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 its behalf by
the undersigned thereunto duly authorized.
FIRST CHURCH FINANCING CORPORATION
Dated: August 12, 1998 By /s/ Scott D. Rolfs
Scott D. Rolfs
President
Dated: August 12, 1998 By /s/ D. Wallestad
Dennis A. Wallestad
Secretary & Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from First Church
Financing Corporation financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 41,843
<SECURITIES> 0
<RECEIVABLES> 7,860,856<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,432,724
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 7,812,000
0
0
<COMMON> 1,000
<OTHER-SE> 432,376
<TOTAL-LIABILITY-AND-EQUITY> 8,432,724
<SALES> 0
<TOTAL-REVENUES> 452,573
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 72,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350,827
<INCOME-PRETAX> 29,619
<INCOME-TAX> 11,700
<INCOME-CONTINUING> 17,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,919
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0<F3>
<FN>
<F1>Mortgage loans net of purchase discount
<F2>Registrant has an unclassified balance sheet
<F3>Not applicable
</FN>
</TABLE>
