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, 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 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, 1999 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,
1999 1998
<S> <C> <C>
Revenues:
Interest income $111,364 $192,044
Gain on liquidation of mortgage loans 17,067 16,621
Other income 3,071 5,303
Total revenues 131,502 213,968
Expenses:
Interest expense 92,650 166,138
Amortization of deferred
issuance costs 20,060 21,839
Servicing fees 4,293 7,291
Other 3,368 1,018
Total expenses 120,371 196,286
Income before income 11,131 17,682
Provision for income taxes 4,400 7,000
Net income $ 6,731 $ 10,682
</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,
1999 1998
<S> <C> <C>
Revenues:
Interest income $235,974 $405,778
Gain on liquidation of mortgage loans 19,142 35,416
Other income 6,513 11,379
Total revenues 261,629 452,573
Expenses:
Interest expense 195,958 350,827
Amortization of deferred
issuance costs 26,442 47,739
Servicing fees 8,940 15,454
Other 7,714 8,934
Total expenses 239,054 422,954
Income before income taxes 22,575 29,619
Provision for income taxes 8,900 11,700
Net income $ 13,675 $ 17,919
</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,
1999 1998
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 20,102 $ 5,523
Assets held by trustee 182,040 224,603
Accrued interest receivable 35,972 40,864
Mortgage loans held by trustee
(net of purchase discount of
$123,719 and $149,374,
respectively) 4,558,706 5,180,944
Deferred issuance costs 118,409 144,851
Tax refund due from Parent 17,508 -
Total assets $4,932,737 $5,596,785
LIABILITIES AND STOCKHOLDER'S
EQUITY
Accrued interest payable $ 95,561 $ 102,955
Mortgage-Backed bonds payable 4,376,000 5,046,000
Accrued income tax - 329
Total liabilities 4,471,561 5,149,284
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 190,545 176,870
Total stockholder's equity 461,176 447,501
Total liabilities and
stockholder's equity $4,932,737 $5,596,785
</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,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 13,675 $ 17,919
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Gain on liquidation of mortgage loans (19,142) (35,416)
Amortization of discount on
mortgage loans (6,513) (11,379)
Amortization of deferred issuance
costs 26,442 47,739
Amortization of other deferred costs - 1,256
Change in assets and liabilities:
Decrease (Increase) in -
Assets held by trustee 42,563 46,608
Accrued interest receivable 4,892 9,838
Tax refund due from Parent (17,508) -
Increase (Decrease) in -
Accrued interest payable (7,394) (38,253)
Due to affiliate - (353)
Accrued income taxes payable (329) 9,700
Net cash provided by operating activities 36,686 47,659
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from -
Principal payments received on
mortgage loans 647,893 1,263,577
Net cash provided by investing activities 647,893 1,263,577
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for -
Repayment of mortgage-backed bonds (670,000) (1,274,000)
Net cash used in financing activities (670,000) (1,274,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,579 37,236
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,523 4,607
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,102 $ 41,843
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid during the period $203,000 $ 389,000
Income taxes paid during the period $ 28,000 $ 2,000
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1999
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, 1999, consist of the following:
<TABLE>
<CAPTION>
Outstanding
Principal
Original Amount
Date of Stated Principal at
Series Rate Bonds Maturity Amounts 6/30/99
<S> <C> <C> <C> <C> <C>
1 8.25% 3/1/93 3/10/08 $ 4,586,000 $1,422,000
2 8.75% 8/1/94 8/10/09 4,456,000 1,234,000
3 8.00% 12/1/95 12/10/10 4,223,000 1,720,000
$13,265,000 $4,376,000
</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, 1999 and 1998
The Company issued no new Bonds during the second quarter of 1999 or
1998. A total of $551,000 of Bonds were repaid during the second quarter
of 1999 compared to $541,000 in the second quarter of 1998. 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 $132,000 in the
second quarter of 1999 compared to $214,000 in the second quarter of 1998.
Total expenses, consisting primarily of interest, were $120,000 in the
second quarter of 1999 compared to $196,000 in the second quarter of 1998.
The decreases in revenues and expenses for the second quarter of 1999
compared to the second quarter of 1998 are due to loan repayments and bond
redemptions during and between such periods. Net income for the second
quarter of 1999 was $7,000 compared to $11,000 in the second quarter of
1998.
Results of Operations - Six Months Ended
June 30, 1999 and 1998
The Company issued no new series of Bonds in the first six months of
1999 or 1998. A total of $670,000 of Bonds were repaid during the first
six months of 1999 compared to $1,274,000 in the first six months of 1998.
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 $262,000 in
1999 compared to $453,000 in 1998. Total expenses, consisting primarily of
interest expense, were $239,000 in 1999 compared to $423,000 in 1998. The
decreases in revenues and expenses for the first six months of 1999
compared to the first six months of 1998 are due to loan repayments and
bond redemptions during and between such periods. Net income for the first
six months of 1999 was $14,000 compared to $18,000 for the first six months
of 1998.
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 received on
the Loans were $648,000 in the first six months of 1999 compared to
$1,264,000 in the first six months of 1998. 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, 1999, there
were $4,376,000 of Bonds outstanding collateralized by $4,682,000 of Loans
at maturity value.
The Company's computer systems are Year 2000 compliant. 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>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk arises from exposure to changes in interest rates,
exchange rates, commodity prices and other relevant market rate or price
risk which impact an instrument's financial value. The Company would be
exposed to market risk from changes in interest rates, except that the
structured nature of the Company's activities minimizes this risk. The
cash flows from principal payments on the Mortgage Loans are used to retire
the principal of the Mortgage-Backed Bonds Payable.
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates, which include
mortgage loans and bonds payable. The table presents principal cash flows
and related weighted average interest rates by expected maturity dates.
The principal payments on the Mortgage Loans are the result of normal
amortization. The table assumes that an equal amount of Mortgage-Backed
Bonds Payable will be redeemed, as required by the indenture. Quoted
market prices were utilized by the Company where readily available. If
quoted market prices were not available, fair values were based on
estimates using present value or other valuation techniques.
<TABLE>
<CAPTION>
Expected Maturity Dates
(In US dollars)
ASSETS 1999-2003 Thereafter Total Fair Value
<S> <C> <C> <C> <C>
Mortgage Loans (1) $1,626,221 $3,056,203 $4,682,424 $4,558,705
Weighted average
interest rate 9.22%
LIABILITIES
Mortgage-Backed Bonds
Payable (1) 1,626,000 2,750,000 4,376,000 4,376,000
Weighted average
interest rate 8.29%
</TABLE>
(1) Assumes no prepayments.
<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 13, 1999 By /s/ Scott D. Rolfs
Scott D. Rolfs
President
Dated: August 13, 1999 By /s/ Gary P. Engle
Gary P. Engle
Secretary and 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 20,102
<SECURITIES> 0
<RECEIVABLES> 4,558,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,932,736
<CURRENT-LIABILITIES> 0
<BONDS> 4,376,000
0
0
<COMMON> 1,000
<OTHER-SE> 460,175
<TOTAL-LIABILITY-AND-EQUITY> 4,932,736
<SALES> 0
<TOTAL-REVENUES> 261,629
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195,958
<INCOME-PRETAX> 22,575
<INCOME-TAX> 8,900
<INCOME-CONTINUING> 13,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,675
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
