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 quarterly period ended June 30, 1997.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE AT OF 1934 FOR THE TRANSITION PERIOD FROM
TO .
Commission file number 33-36775
SUMMIT SECURITIES, INC.
(Exact name of registrant as specified in its charter)
IDAHO 82-0438135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
W. 929 Sprague Avenue, Spokane, WA 99204
(Address of principal executive offices)(Zip Code)
(509)838-3111
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal
year, if changed since last report)
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: (Not Applicable)
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 / /
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.
10,000 SHARES - Common at July 31, 1997.
SUMMIT SECURITIES, INC.
Part I - Financial Information: Index to Part I
Item 1: Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1997 (unaudited)
and September 30, 1996
Condensed Consolidated Statements of Income --
Three and Nine Months Ended June 30, 1997 and
1996 (unaudited)
Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1997 and
1996 (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3: Quantative and Qualitative Disclosures about Market Risk
Not currently applicable. Pursuant to General Instructions to Item
305, disclosures are applicable to the registrant in filings with the
commission that include financial statements for fiscal years ended
after June 15, 1998.
PART I - FINANCIAL INFORMATION
SUMMIT SECURITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 7,630,092 $ 4,461,315
Investments in Affiliated Company 4,522,425 4,522,425
Trading Securities, at Market 702,650
Available-for-Sale Securities,
at Market 4,922,937 269,305
Held-to-Maturity Securities,
at Amortized Cost (Market
value: $8,177,855 and $7,622,194) 7,389,057 7,784,322
Real Estate Contracts and Mortgage
Notes and Other Receivables,
Net of Unrealized Discounts
and Allowance For Losses 113,217,696 91,796,883
Real Estate Held For Sale 2,571,110 1,191,495
Deferred Acquisition Costs, net 7,054,951 4,862,046
Other Assets, net 3,623,463 2,378,889
------------ ------------
TOTAL ASSETS $ 151,634,381 $ 117,266,680
== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Annuity Reserves $ 94,502,387 $ 62,439,855
Investment Certificates and Accrued
Interest 48,234,954 42,823,871
Debt Payable 161,669 3,850,970
Accounts Payable and Accrued Expenses 770,306 1,367,131
Deferred Income Taxes 1,400,187 1,426,079
------------ ------------
TOTAL LIABILITIES 145,069,503 111,907,906
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $10 Par Value:
2,000,000 Shares Authorized:
10,000 Shares Issued and Outstanding 100,000 100,000
Preferred Stock, $10 Par Value:
10,000,000 Shares Authorized:
50,555 and 41,312 Shares Issued and
Outstanding (Liquidation Preference
$5,055,460 and $4,131,170,
respectively) 505,546 413,117
Additional Paid-In Capital 3,050,936 2,269,137
Retained Earnings 2,886,979 2,586,654
Net Unrealized Gains (Losses)
on Investments 21,417 (10,134)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,564,878 5,358,774
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 151,634,381 $ 117,266,680
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SUMMIT SECURITIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Interest and Earned Discounts $3,355,906 $2,509,330 $9,021,656 $6,827,443
Annuity Fees and Charges 23,995 7,800 65,691 23,400
Realized Investment Gains 50,000 50,000 583
Realized Net Gains on Sales of
Receivables 9,944 297,300 392,082 297,300
Real Estate Sales 588,900 102,000 1,275,700 729,000
Dividend Income 68,494 51,920 189,998 147,196
Fees, Commissions, Service and
Other Income 671,215 788,318 2,388,762 2,277,779
--------- --------- --------- ---------
TOTAL REVENUES 4,768,454 3,756,668 13,383,889 10,302,701
--------- --------- --------- ----------
EXPENSES:
Annuity Benefits 1,361,990 942,077 3,471,262 2,705,843
Interest 1,080,033 931,816 3,183,506 2,775,150
Cost of Real Estate Sold 597,508 101,283 1,264,426 722,484
Provision for Losses on Real
Estate Contracts and Real
Estate Held 179,435 (3,268) 650,610 277,148
Salaries and Employee Benefits 529,007 383,173 1,443,554 1,231,002
Commissions to Agents 1,289,887 545,802 2,795,326 1,358,840
Other Operating and Underwriting
Expenses 501,784 444,899 1,558,365 1,229,518
Less Increase in Deferred Acquisition
Costs (1,071,887) (211,006) (2,042,158) (894,525)
--------- --------- --------- ---------
TOTAL EXPENSES 4,467,757 3,134,776 12,324,891 9,405,460
--------- --------- --------- ---------
Income Before Income Taxes 300,697 621,892 1,058,998 897,241
Provision for Income Taxes (51,080) (127,003) (181,485) (150,985)
--------- --------- --------- ---------
NET INCOME 249,617 494,889 877,513 746,256
Preferred Stock Dividends (116,122) (87,824) (327,469) (237,698)
--------- --------- --------- ---------
Income Applicable to Common
Shareholder $ 133,495 $ 407,065 $ 550,044 $ 508,558
========== ========== = ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
SUMMIT SECURITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1997 1996
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $1,341,918 $1,073,159
---------- ----------
INVESTING ACTIVITIES:
Purchase of Subsidiaries Net of Cash
Received (761,739)
Purchase of Investment in Affiliated
Company (1,500,000)
Purchase of Available-
for-Sale Securities (5,260,255) (267,428)
Purchase of Held-to-
Maturity Investments (995,469) (486,753)
Proceeds from Sale of Available-
for-Sale Securities 999,790
Proceeds from Maturities of Held-to-
Maturity Investments 1,500,000 500,000
Principal Payments on Real Estate
Contracts and Mortgage Notes
and Other Receivables 6,153,985 11,103,022
Purchase of Real Estate Contracts
and Mortgage Notes and Other
Receivables (40,814,515) (27,273,340)
Proceeds From Real Estate Sales 930,902 40,861
Additions to Real Estate Held (1,602,236) (56,351)
Proceeds from Sale of Receivables 12,711,640 7,008,862
---------- ----------
NET CASH USED BY INVESTING
ACTIVITIES (27,375,947) (10,693,076)
---------- ----------
FINANCING ACTIVITIES:
Receipts from Annuity Products 35,427,722 12,000,652
Withdrawals of Annuity Products (6,774,550) (4,584,388)
Proceeds From Sale of Investment
Certificates 9,771,879 8,707,422
Repayment of Investment Certificates (5,188,139) (6,321,526)
Decrease in short-term borrowing (3,816,050) (90,843)
Debt Issuance Costs (515,096) (421,132)
Payment of contingent purchase price
for subsidiary purchased
from related parties (249,719)
Issuance of Preferred Stock 874,228 235,437
Preferred Stock Dividends (327,469) (237,698)
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 29,202,806 9,287,924
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,168,777 (331,993)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 4,461,315 2,979,362
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $7,630,092 $2,647,369
========== ==========
NON CASH INVESTING AND FINANCING
ACTIVITIES OF THE COMPANY:
Assumption of Other Debt Payable in
Conjunction with Purchase of Real
Estate Contracts and Mortgage Notes $ 134,355 $ 26,823
Real Estate Held for Sale and
Development Acquired Through
Foreclosure 1,372,389 1,150,717
Loans to Facilitate the Sale of
Real Estate 344,798 688,139
Transfer of available-for-sale securities
to trading securities 652,650
Increase In Assets and Liabilities
Associated with Purchase of
Subsidiaries:
Investments 493,695
Other Assets 268,044
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SUMMIT SECURITIES, INC.
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 financial position as
of June 30, 1997, the results of operations for the three and
nine months ended June 30, 1997 and 1996 and changes in cash
flows for the nine months ended June 30, 1997 and 1996. The
results of operations for the nine month period ended June 30,
1997 and 1996 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, 1996 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 1996 Form 10-K.
2. The principal amount of receivables as to which payments were in
arrears more than three months was $4,200,000 at June 30, 1997
and $3,375,000 at September 30, 1996.
3. Summit Securities, Inc. is a wholly-owned subsidiary of National
Summit Corp. The Company files consolidated federal income tax
returns with its parent. The Company is allocated a current and
deferred tax provision from National Summit Corp. as if the
Company filed a separate tax return.
4. Summit Securities, Inc. had no outstanding material legal
proceedings other than normal proceedings associated with
receivable foreclosures.
5. Certain amounts in the prior years' condensed consolidated
financial statements have been reclassified to conform with the
current years' presentation. These reclassifications had no
effect on net income or retained earnings as previously
presented.
6. In November 1996, Summit and Old Standard Life Insurance Company
(OSL) participated as two of the four co-sellers in a receivable
securitization sponsored by Metropolitan Asset Funding, Inc., an
affiliated company. Approximately $126.7 million of
receivables, with $11.2 million from Summit and OSL, were sold
in the securitization with proceeds, after costs, of
approximately $121.1 million, with $10.8 million allocated to
Summit and OSL. With an amortized carrying value of
approximately $10.5 million in the receivables sold in the
securitization, Summit and OSL recorded approximately $.3
million in pre-tax gains from their portion of the sale.
Metropolitan Asset Funding, Inc. sold in a public offering
approximately $113.4 million in varying classes of mortgage
pass-through certificates. In addition to the certificates sold
in the public offering, approximately $13.3 million in
subordinate class certificates and residual class certificates
were returned to the various co-sellers of the collateral
included in the securitization. Summit and OSL received
approximately $9.6 million, after costs, from the securitization
and also received approximately $1.2 million in subordinate
class and residual class certificates.
7. In 1995, the Company acquired OSL from Metropolitan Mortgage &
Securities Co., Inc. (Metropolitan), an affiliated company
through common control. In connection with the purchase, the
Company agreed to pay a contingent purchase price consideration
to Metropolitan based upon the earnings of OSL. During the
quarter ended March 31, 1997, the Company paid approximately
$250,000 of contingent purchase price to Metropolitan. Due to
the affiliated nature of these companies, the payment was
recorded as if it was a dividend to Metropolitan.
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.
9. During the quarter ended June 30, 1997, the Company transferred
the previously described retained subordinate and residual class
certificates from available-for-sale to trading as required by
SFAS No. 115. SFAS 115 establishes that trading securities are to
be measured at fair value with unrealized gains and losses
included in net earnings. In the quarter ended June 30, 1997,
$50,000 of unrealized gains on trading securities are included in
net earnings.
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussions may contain some 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 Transactions:
In November 1996, Summit Securities, Inc. (Summit) and Old
Standard Life Insurance Company (OSL) participated as two of the four
co-sellers in a receivable securitization sponsored by Metropolitan
Asset Funding, Inc., an affiliated company. Approximately $126.7
million of receivables, with $11.2 million from Summit and OSL, were
sold in the securitization with proceeds, after costs, of
approximately $121.1 million, with $10.8 million allocated to Summit
and OSL. With an amortized carrying value of approximately $10.5
million in the receivables sold in the securitization, Summit and OSL
recorded approximately $.3 million in pre-tax gains from their
portion of the sale. Metropolitan Asset Funding, Inc. sold in a
public offering approximately $113.4 million in varying classes of
mortgage pass-through certificates. In addition to the certificates
sold in the public offering, approximately $13.3 million in support
class certificates and residual class certificates were returned to
the various co-sellers of the collateral included in the
securitization. Summit and OSL received approximately $9.6 million,
after costs, from the securitization and also received approximately
$1.2 million in support class and residual class certificates.
On January 31, 1995, the Company consummated an agreement with
Metropolitan Mortgage & Securities Co., Inc. (Metropolitan), the
Company's former parent company, whereby it acquired Metropolitan
Investment Securities, Inc. (MIS) effective January 31, 1995, at a
purchase price of $288,950, which approximated the book value of MIS
at date of purchase. On May 31, 1995, the Company consummated an
agreement with Metropolitan, whereby it acquired OSL effective May
31, 1995, at a purchase price of $2,722,000, which approximated the
current book value of OSL at date of purchase, with future
contingency payments based on the earnings of OSL. The purchase
price plus estimated future contingency payments approximate the
actuarial appraised valuation of OSL. During the three months ended
March 31, 1997, the Company paid approximately $250,000 contingent
consideration to Metropolitan.
On December 28, 1995, Summit and ILA Financial Services Inc.
(ILA) completed a purchase/sale transaction whereby 100% of the
outstanding common stock of Arizona Life Insurance Company, (AZL), an
insurance company domiciled in Arizona, was sold to a wholly owned
subsidiary of Summit. The cash purchase price was approximately $1.2
million, which approximated the book value of AZL at the date of
purchase. AZL held licenses to engage in insurance sales in seven
states and the purchase price included approximately $268,000 in
value assigned to these state licenses. AZL is in the business of
acquiring receivables using funds derived from the sale of annuities
and funds derived from receivable cash flows. At date of purchase,
AZL had no outstanding insurance business or other liabilities. The
addition of AZL had no affect on total assets or liabilities of
Summit.
On February 21, 1997, OSL entered into a reinsurance agreement
with Western United Life Assurance Company (WULA), a subsidiary of
Metropolitan, whereby OSL agreed to reinsure 75% of certain single
premium deferred annuity contracts underwritten by WULA. The amount
of deferred annuity contracts coinsured by OSL totaled approximately
$21.3 million at June 30, 1997.
Financial Condition and Liquidity:
As of June 30, 1997, the Company had cash or cash equivalents of
approximately $7.6 million and liquid investments (trading or
available-for-sale securities) of $5.6 million compared to $8.2
million in cash and cash equivalents and $1.5 million in liquid
investments at March 31, 1997, $7.6 million in cash and cash
equivalents and $1.5 million in liquid investments at December 31,
1996 and $4.5 million in cash and cash equivalents and $269,000 in
liquid investments at September 30, 1996. Management anticipates that
cash, cash equivalents and liquidity provided by other investments
are adequate to meet planned asset additions, required debt
retirements or other business requirements during the next twelve
months. At June 30, 1997, total cash and investments, including held
to maturity securities and investments in affiliates, were $25.2
million compared to $22.5 million at March 31, 1997, $22.0 million at
December 31, 1996 and $17.0 million at September 30, 1996. During the
nine months ended June 30, 1997, funds generated by operating
activities totaled $1.3 million. Funds provided by financing
activities were $29.2 million, which included a $4.9 million net cash
inflow from the sale of preferred stock and investment certificates,
less repayments, and net cash inflow from annuity products of $28.7
million which were offset by repayments to banks and others of $4.1
million and payment of preferred stock dividends of $327,000. Funds
used in investing activities of $27.4 million, which included $1.5
million net cash inflow from investment maturities, $18.9 million net
cash inflow from sales proceeds and collections of receivables and
$931,000 net cash inflow from real estate sales were used to purchase
investment securities of $6.3 million, fund new receivable quisitions
of $41.0 million, and additions to real estate held of $1.6 million.
The receivable portfolio totaled $113.2 million at June 30, 1997
compared to $100.7 million at March 31, 1997, $88.3 million at
December 31, 1996 and $91.8 million at September 30, 1996. During the
nine months ended June 30, 1997, the change resulted from the
acquisition of receivables totaling $41.0 million plus an additional
$345,000 in loans to facilitate the sale of real estate being
partially offset by sale proceeds and collections of principal of
$18.9 million and $1.5 million in reductions due to foreclosed
receivables. Real estate held for sale totaled $2.6 million at June
30, 1997, compared to $2.5 million at March 31, 1997, $2.4 million at
December 30, 1996 and $1.2 million at September 30, 1996.
Insurance annuity reserves totaled $94.5 million at June 30,
1997 as compared to $76.0 million at March 31, 1997, $64.6 million at
December 31, 1996 and $62.4 million at September 30, 1996. The
increase of $32.1 million for the nine months ended June 30, 1997
resulted from credited earnings of $3.4 million, and a $28.7 net cash
inflow as receipts from the sales and reinsurance of annuity products
of $35.4 million exceeded the withdrawals of $6.7 million. The
Company had outstanding investment certificate liabilities of $48.2
million at June 30, 1997, compared to $47.3 million at March 31,
1997, $45.1 million at December 31, 1996 and $42.8 million at
September 30, 1996. For the nine months ended June 30, 1997, net cash
inflow from issuance less maturities of debentures was $4.6 million
plus an additional $827,000 decrease in credited interest held.
During the nine months ended June 30, 1997, the Company decreased the
short term borrowing portion of its debt payable by $3.8 million
leaving $162,000 in debt payable as of June 30, 1997.
Total assets were $151.6 million at June 30, 1997 as compared to
$132.6 million at March 31, 1997, $118.6 million at December 30, 1996
and $117.3 million at September 30, 1996. Total liabilities were
$145.1 million at June 30, 1997 compared to $126.5 million at March
31, 1997, $112.5 million at December 30, 1996 and $111.9 million at
September 30, 1996. Total stockholders' equity was $6.6 million or
4.3% of total assets at June 30, 1997, as compared to $6.1 million or
4.6% of total assets at March 31, 1997, $6.1 million or 5.1% of
total assets at December 31, 1996 and $5.4 million or 4.6% of total
assets at September 30, 1996.
Results of Operations:
Net income was $878,000 on revenues of approximately $13.4
million for the nine months ended June 30, 1997. For the similar
period in the prior year, the Company reported net income of $746,000
on revenues of approximately $10.3 million.
Net income for the comparative nine month periods has increased
as result of improvements from (1) an increased spread between
interest sensitive income and interest sensitive expense, due
principally to the increased investment in the receivable portfolio,
(2) unrealized holding gains on trading securities that were
transferred from the available-for-sale portfolio in the current
quarter, (3) an increase in overall gains from the sale of
investments, receivables and real estate, and (4) an increase in
fees, commissions and service revenues; which were only partially
offset by (1) an increase in other operating expenses and (2) an
increase in the provision for loss on receivables and other real
estate assets.
For the nine months ended June 30, 1997, the net interest spread
was $2.4 million while in the prior year's period the spread was $1.4
million. The increase of $1.0 million is the result of additional
investments in the receivable portfolio coupled with a slight
decrease in the weighted average interest rate on the outstanding
Investment Certificates issued by the Company and the lower cost of
insurance annuity funds generated by OSL.
During the nine months ended June 30, 1997, the Company realized
gains on the sale of real estate of $11,300 and gains on the sale of
receivables of $392,100 for a total of $403,400. In the prior
year's period, the Company realized gains from the sales of real
estate and investments of $7,100 and gains from the sale of
receivables of $297,300. The current year's gain on the sale of
receivables is primarily from Summit's and OSL's participation as co-
sellers in a securitization sponsored by Metropolitan Asset Funding,
Inc., while the prior year's gain was primarily from Summit's and
OSL's participation as co-sellers in a securitization sponsored by
Tryon Mortgage Funding, Inc.
During the nine months ended June 30, 1997, the Company received
approximately $190,000 in dividends from its investments in
affiliated companies compared to approximately $147,000 in the prior
year's period. In the current year's period, approximately $155,300
were dividends on its preferred stock investment in Metropolitan, its
former parent, and $34,700 were dividends on its common stock
investment in Consumers Group Holding Company, Inc. In the prior
year, $147,000 were from dividends on its preferred stock investment
in Metropolitan Mortgage & Securities Co., Inc.
Commencing January 31, 1995, with the purchase of MIS and the
creation of a property development subsidiary, the Company began to
generate significant fee revenues along with increased operating
expenses associated with these revenues. Additionally, commencing
May 28, 1995, with the purchase of OSL, and December 28, 1995, with
the purchase of AZL, and February 21, 1997, with a new reinsurance
agreement with WULA, the Company began to incur significant operating
expense relative to its insurance operations. During the nine months
ended June 30, 1997, the Company generated approximately $2.4 million
of fee revenues while incurring $3.8 million in salaries, commissions
and other operating expenses less increases in deferred acquisition
costs. In the prior year, the Company realized $2.3 million of fee
revenues offset by $2.9 million of other costs. This increased net
cost, of approximately $800,000, is primarily the result of costs
associated with its insurance operations, which were only partially
offset by an increase in fees generated by its property development
subsidiary. In the future, FAS 131 will require segment disclosure
in 10-Q's.
In conjunction with increased investments in its receivable
portfolio, along with the valuation of foreclosed real estate, the
Company provided for loss on receivables and real estate assets of
$651,000 in the current year's period as compared to $277,000 in the
prior year's period.
In comparing the three months ended June 30, 1997 with the prior
year's similar period, net income was $250,000 on revenues of $4.8
million as compared to net income of $495,000 on revenues of
approximately $3.8 million.
Net income for the comparative three month periods has decreased
as result of (1) a net increase in expenses, including salaries,
commissions and other operating expenses, (2) an increase in the
provision for loss on receivables and other real estate assets, (3) a
decrease in fees, commissions and service income, and (4) last years
participation by Summit and OSL as co-sellers in a securitization
sponsored by Tryon Mortgage Funding, Inc.; all of which were only
partially offset by (1) an increased spread between interest
sensitive income and interest sensitive expense, due principally to
the increased investment in the receivable portfolio, (2) an increase
in dividends received from affiliated company investments, and (3)
unrealized holding gains on trading securities that were transferred
from available-for-sale in the current quarter.
For the three months ended June 30, 1997, the net interest
spread was $938,000 compared to $643,000 in the prior year's similar
period. The increase of $295,000 was primarily the result of
additional investments in the receivable portfolio coupled with a
slight decrease in the weighted average cost of funds on Investment
Certificates issued by the Company and the lower cost of insurance
annuity funds generated by the insurance subsidiaries.
During the three months ended June 30, 1997, the Company
realized losses on the sale of real estate of $9,000 and gains on the
sale of receivables of $10,000 for a net gain of $1,000. In the
prior year, the Company realized gains on the sale of real estate of
$700 and had $297,000 in gains on sale of receivables due primarily
to Summit and OSL's participation as co-sellers in a securitization
sponsored by Tryon Mortgage Funding, Inc. The Company recognized
$50,000 in unrealized holding gains on their trading securities in
the current quarter ended June 30, 1997 with no similar gain in the
prior year.
During the three months ended June 30, 1997, the Company
received approximately $68,000 in dividends from its investments in
affiliated companies compared to $52,000 in the prior year's period.
The current year increase was primarily the result of $16,000 in
dividends on its stock investment in Consumers Group Holding Company,
Inc.
During the three months ended June 30, 1997, the Company
generated approximately $671,000 of fee revenues while incurring $1.2
million in salaries, commissions and other operating expenses less
increases in deferred acquisition costs. In the prior year's period,
the Company realized $788,000 of fee revenues offset by $1.2 million
of other costs. The decrease in fees resulted primarily from a
decrease in broker/dealer activity of MIS.
In conjunction with increased investments in its receivable
portfolio, along with the valuation of foreclosed real estate, the
Company provided for loss on receivables and real estate assets of
$179,000 during the three months ended June 30, 1997 as compared to a
$3,000 recapture of loss reserves in the prior year's period. The
increase in reserves is due primarily to the increased investment in
the receivable portfolio.
New Accounting Rules:
In February 1997, Statement of Financial Accounting Standards
No. 128 (SFAS 128), "Earnings per Share" was issued. SFAS 128
establishes standards for computing and presenting earnings per share
(EPS) and simplifies the existing standards. This standard replaces
the presentation of primary EPS with a presentation of basic EPS. It
also requires the dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective
for financial statements issued for periods ending after December 15,
1997, including interim periods and requires restatement of all
prior-period EPS data presented. The Company does not believe that
the application of this standard will have a material effect on the
presentation of its earnings per share disclosures.
In June 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 130, "Comprehensive Income" (SFAS No. 130). SFAS No.
130 becomes effective in 1998 and requires reclassification of
earlier financial statements for comparative purposes. SFAS No. 130
requires that amounts of certain items, including foreign currency
translation adjustments and gains and losses on certain securities,
be included in comprehensive income in the financial statements.
SFAS No. 130 does not require a specific format for the financial
statement in which comprehensive income is reported, but does require
that an amount representing total comprehensive income be reported in
that statement. Management has not yet determined the effects, if
any, of SFAS No. 130 on the consolidated financial statements.
Also, in June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments for an Enterprise and Related Information" (SFAS No.
131). This Statement will change the way public companies report
information about segments of their business in their annual
financial statements and requires them to report selected segment
information in their quarterly reports issues to shareholders. It
also requires entity-wide disclosures about the products and services
an entity provides, the material countries in which it holds assets
and reports revenues, and its major customers. The Statement is
effective for fiscal years beginning after December 15, 1997.
Management has not yet determined the effect, if any, of SFAS No. 131
on the consolidated financial statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings or actions pending or
threatened against Summit Securities, Inc., or to which its property
is subject.
Item 2. Changes in Securities
N/A
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submission of Matters to a Vote of Security Holders
A. There were no matters submitted to a vote of Security Holders
during the reporting period.
Item 5. Other Information
N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. Articles of Incorporation of the Company. (Exhibit 3(a)
to (Registration No. 33-36775).
3(b). Bylaws of the Company. (Exhibit 3(b) to Registration
No. 33-36775).
4(a). Indenture dated as of November 15, 1990 between Summit
and West One Bank, Idaho, N.A., Trustee. (Exhibit 4(a)
to Registration No. 33-36775).
4(b). Amendment to Indenture dated as of November 15, 1990
between Summit and West One Bank, Idaho, N.A., Trustee.
(Exhibit 4(b) to Registration No. 33-36775).
4(c). Tri-Party Agreement dated as of April 24, 1996 between
West One Bank, First Trust and Summit, appointing First
Trust as successor Trustee. (Exhibit 4.c to
Registration No. 333-19787).
4(d). Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-1.
(Exhibit 4.c to Registration No. 33-57619)
4(e). Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-2.
(Exhibit 4.c to Registration No. 333-115)
4(f). Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-RP.
(Exhibit 4.f to Form 10-K filed January 13, 1997)
4.(g) Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-3.
(Exhibit 4.d to Amendment No. 3 to Registration No. 333-
19787)
10(a). Receivable Management, Acquisition and Service Agreement
between Summit Securities, Inc. and Metropolitan
Mortgage & Securities Co., Inc. dated September 9, 1994.
(Exhibit 10.(a) to registration No. 33-57619).
10(b). Receivable Management, Acquisition and Service Agreement
between Old Standard Life Insurance Company and
Metropolitan Mortgage & Securities Co., Inc. dated
December 31, 1994. (Exhibit 10(b) to Registration No.
33-57619).
10(c). Receivable Management, Acquisition and Service Agreement
between Arizona Life Insurance Company and Metropolitan
Mortgage & Securities Co., Inc. dated October 10, 1996.
(Exhibit 10(d) to Registration No. 333-19787)
11. Statement Re Computation of Earnings Per Common Share.
(See Financial Statements.)
*27. Financial Data Schedule
*Filed herewith
(b) There have been no reports on Form 8-K filed during the
quarter for which this report is filed.
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.
SUMMIT SECURITIES, INC.
(Registrant)
/S/TOM TURNER
Date: August ___, 1997 ____________________________________
Tom Turner
President/Director
/S/ STEVE CROOKS
Date: August ___, 1997
Steve Crooks
Principal Accounting Officer
Principal Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUNE-30-1997
<CASH> 7,630
<SECURITIES> 17,537
<RECEIVABLES> 114,384
<ALLOWANCES> 1,166
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 151,634
<CURRENT-LIABILITIES> 0
<BONDS> 48,235
<COMMON> 100
0
506
<OTHER-SE> 5,959
<TOTAL-LIABILITY-AND-EQUITY> 151,634
<SALES> 0
<TOTAL-REVENUES> 13,384
<CGS> 0
<TOTAL-COSTS> 8,490
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 651
<INTEREST-EXPENSE> 3,184
<INCOME-PRETAX> 1,059
<INCOME-TAX> 181
<INCOME-CONTINUING> 878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 878
<EPS-PRIMARY> 55.00
<EPS-DILUTED> 55.00
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