<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) September 23, 1998
------------------
UCFC Acceptance Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 333-37499 72-123-5336
- ------------------------------- ----------- -------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) ID Number)
4041 Essen Lane, Baton Rouge, Louisiana 70809
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (504) 924-6007
--------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
------------
Filing of Computational Materials and Consent of Independent Accountants.*
- ------------------------------------------------------------------------
Pursuant to Rule 424(b) under the Securities Act of 1933, as amended,
UCFC Acceptance Corporation (the "Depositor") is filing a prospectus and
prospectus supplement with the Securities and Exchange Commission relating to
its Home Equity Loan Asset-Backed Certificates, Series 1998-C.
In connection with the offering of the Home Equity Loan Asset-Backed
Certificates, Series 1998-C, Prudential Securities Incorporated prepared certain
materials (the "Computational Materials") some or all of which were distributed
by each of Prudential Securities Incorporated, First Union Capital Markets, a
division of Wheat First Securities Corp. and Salomon Smith Barney Inc. (the
"Underwriters") to their potential investors. Although the Depositor provided
the Underwriters with certain information regarding the characteristics of the
Home Equity Loans in the related portfolio, it did not participate in the
preparation of the Computational Materials. The Computational Materials are
attached hereto as Exhibit 99.1. The legends which the Underwriters, other than
Prudential Securities Incorporated, placed on the Computational Materials are
attached hereto as Exhibit 99.2.
Also included for filing as Exhibit 23.1 attached hereto is the Consent
of KPMG Peat Marwick LLP, independent auditors for Financial Guaranty Insurance
Company ("FGIC"), insurer of the Offered Certificates. The Financial Statements
of FGIC as of December 31, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997 are attached hereto as Exhibit 99.3.
The Unaudited Interim Financial Statements of FGIC for the six months ended
June 30, 1998 are attached hereto as Exhibit 99.4.
- --------
* Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Prospectus dated September 22, 1998,
and Prospectus Supplement dated September 23, 1998, of UCFC Acceptance
Corporation, relating to its Home Equity Loan Asset-Backed
Certificates, Series 1998-C.
-2-
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
23.1. Consent of KPMG Peat Marwick LLP.
99.1. Computational Materials.
99.2. Underwriters' Legends for Computational Materials.
99.3. Audited Financial Statements of Financial Guaranty Insurance
Company.
99.4. Unaudited Interim Financial Statements of Financial Guaranty
Insurance Company.
-3-
<PAGE>
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.
UCFC ACCEPTANCE CORPORATION
By: /s/ H.C. McCall, III
------------------------
Name: H.C. McCall, III
Title: President
Dated: September 23, 1998
-4-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
- ------- ----
23.1. Consent of KPMG Peat Marwick LLP.
99.1. Computational Materials.
99.2. Underwriters' Legends for Computational Materials.
99.3. Audited Financial Statements of Financial
Guaranty Insurance Company.
99.4. Unaudited Interim Financial Statements of Financial
Guaranty Insurance Company.
-5-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Financial Guaranty Insurance Company:
We consent to the use of our report dated January 23, 1998 on the financial
statements of Financial Guaranty Insurance Company as of December 31, 1997 and
December 31, 1996, and for each of the years in the three-year period ended
December 31, 1997 included in the Form 8-K of UCFC Acceptance Corporation (the
"Registrant") which is incorporated by reference in the registration statement
(No. 333-37499), and to the reference to our firm under the heading "Report of
Experts" in the Prospectus Supplement of the Registrant.
/s/ KPMG Peat Marwick LLP
----------------------------
New York, New York
September 23, 1998
<PAGE>
PRELIMINARY
BACKGROUND INFORMATION
UCFC LOAN TRUST 1998-C (fixed-rate collateral only)
---------------------------------------------------
$[156,000,000] Class A-1 FLOATING-RATE CERTIFICATES
(non-SMMEA-eligible)
$[42,000,000] Class A-2 FIXED-RATE CERTIFICATES
(non-SMMEA-eligible)
$[74,000,000] Class A-3 FIXED-RATE CERTIFICATES
(non-SMMEA-eligible)
$[23,000,000] Class A-4 FIXED-RATE CERTIFICATES
(non-SMMEA-eligible)
$[47,000,000] Class A-5 FIXED-RATE CERTIFICATES
(non-SMMEA-eligible)
$[40,500,000] Class A-6 FIXED-RATE CERTIFICATES
(non-SMMEA-eligible)
$[42,500,000] Class A-7 FIXED-RATE CERTIFICATES
Non-Accelerated Senior Bond
(non-SMMEA-eligible)
The information included herein is provided solely by Prudential Securities
Incorporated ("PSI") as underwriter for the UCFC Loan Trust 1998-C transaction,
and not by or as agent for UCFC Acceptance Corp. or any of its affiliates
(collectively, the "Depositor"). The Depositor has not prepared, reviewed or
participated in the preparation hereof, is not responsible for the accuracy
hereof and has not authorized the dissemination hereof. The analysis in this
report is accurate to the best of PSI's knowledge and is based on information
provided by the Depositor. PSI makes no representations as to the accuracy of
such information provided by the Depositor. All opinions and conclusions in this
report reflect PSI's judgment as of this date and are subject to change. All
analyses are based on certain assumptions noted herein and different assumptions
could yield substantially different results. You are cautioned that there is no
universally accepted method for analyzing financial instruments. You should
review the assumptions; there may be differences between these assumptions and
your actual business practices. Further, PSI does not guarantee any results and
there is no guarantee as to the liquidity of the instruments involved in this
analysis. The decision to adopt any strategy remains your responsibility. PSI
(or any of its affiliates) or their officers, directors, analysts or employees
may have positions in securities, commodities or derivative instruments thereon
referred to herein, and may, as principal or agent, buy or sell such securities,
commodities or derivative instruments. In addition, PSI may make a market in the
securities referred to herein. Neither the information nor the opinions
expressed shall be construed to be, or constitute, an offer to sell or buy or a
solicitation of an offer to sell or buy any securities, commodities or
derivative instruments mentioned herein. Finally, PSI has not addressed the
legal, accounting and tax implications of the analysis with respect to you and
PSI strongly urges you to seek advice from your counsel, accountant and tax
advisor.
<PAGE>
UCFC Loan Trust 1998-C -- Home Equity Loan Asset-Backed Certificates
UCFC LOAN TRUST 1998-C PRICING INFORMATION
--------------------------------------------------------
(FIXED-RATE COLLATERAL ONLY)
UCFC Loan Trust 1998-A Lead Manager: Prudential Securities Incorporated
Co-Manager: First Union Capital Markets Group
Co-Manager: Salomon Smith Barney
<TABLE>
<CAPTION>
Class: A-1 A-2 A-3 A-4 A-5
<S> <C> <C> <C> <C> <C>
Approximate
Face Amount: [156,000,000] [42,000,000] [74,000,000] [23,000,000] [47,000,000]
Coupon: 1M LIBOR + [TBD]bps [----------------------------TBD---------------------------------]
Price: [-------------------------------------TBD--------------------------------------------]
Yield: [-------------------------------------TBD--------------------------------------------]
Spread: [-------------------------------------TBD--------------------------------------------]
Exp Avg Life
to Maturity: [ 0.998 2.103 3.003 4.056 5.287]
Exp Avg Life
to 10% Call: [ 0.998 2.103 3.003 4.056 5.287]
Exp 1st Prin Pmt
(To Maturity): [ 10/15/1998 07/15/2000 02/15/2001 06/15/2002 02/15/2003]
Exp Mat: [ 07/15/2000 02/15/2001 06/15/2002 02/15/2003 04/15/2005]
Exp 1st Prin Pmt
(To Call): [ 10/15/1998 07/15/2000 02/15/2001 06/15/2002 02/15/2003]
Exp Mat to 10% Call: [ 07/15/2000 02/15/2001 06/15/2002 02/15/2003 04/15/2005]
Stated Mat: [ 01/15/2013 11/15/2013 12/15/2018 05/15/2020 06/15/2025]
Expected
Rating: AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA AAA/Aaa/AAA
Pricing Speed: [25]% HEP [25]% HEP [25]% HEP [25]% HEP [25]% HEP
Pricing Date: [------------------------------------TBD----------------------------------------]
Investor
Settle Date: 09/28/98 09/28/98 09/28/98 09/28/98 09/28/98
Pmt Delay: 0 days 14 days 14 days 14 days 14 days
Cut-off Date: 09/01/98 09/01/98 09/01/98 09/01/98 09/01/98
Dated Date: 09/25/98 09/01/98 09/01/98 09/01/98 09/01/98
Int Pmt: actual/360 30/360 30/360 30/360 30/360
Pmt Terms: Monthly Monthly Monthly Monthly Monthly
1st Int. Pmt Date: 10/15/98 10/15/98 10/15/98 10/15/98 10/15/98
Collateral Type: Fixed-Rate Fixed-Rate Fixed-Rate Fixed-Rate Fixed-Rate
SMMEA
Eligibility: non-SMMEA non-SMMEA non-SMMEA non-SMMEA non-SMMEA
</TABLE>
- --------------------------------------------------------------------------------
* The Pass-Through Rate on the Class A-1 Certificates will equal to the lesser
of:
1) One Month LIBOR + TBD bps
2) Net Funds Cap
Net Funds Cap: A rate equal to the weighted of the Mortgage Rates
on the Home Equity Loans less [0.647]% per annum for servicing
fee, trustee fee and certificate insurer premium.
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
UCFC Loan Trust 1998-C -- Home Equity Loan Asset-Backed Certificates
UCFC LOAN TRUST 1998-C PRICING INFORMATION (continued)
--------------------------------------------------------
(FIXED-RATE COLLATERAL ONLY)
Class: A-6* A-7
(NAS BOND)
Approximate
Face Amount: [40,500,000] [42,500,000]
Coupon: TBD* TBD
Price: [--------------TBD--------------------]
Yield: [--------------TBD--------------------]
Spread: [--------------TBD--------------------]
Exp Avg Life to Maturity: [10.363 6.345]
Exp Avg Life to 10% call: [7.578 6.141]
Exp 1st Prin Pmt:
(To Maturity) [04/15/2005 10/15/2001]
Exp Mat: [07/15/2028 04/15/2023]
Exp 1st Prin Pmt: [04/15/2005 10/15/2001]
(To Call)
Exp Mat to 10% call: [06/15/2006 06/15/2006]
Stated Mat: [11/15/2029 11/15/2029]
Expected Rating: AAA/Aaa/AAA AAA/Aaa/AAA
Pricing Speed: [25]% HEP [25]% HEP
Pricing Date: TBD TBD
Investor Settle Date: 09/28/98 09/28/98
Pmt Delay: 14 days 14 days
Cut-off Date: 09/01/98 09/01/98
Dated Date: 09/01/98 09/01/98
Int Pmt: 30/360 30/360
Pmt Terms: Monthly Monthly
1st Int. Pmt Date: 10/15/98 10/15/98
Collateral Type: Fixed-Rate Fixed-Rate
SMMEA Eligibility: non-SMMEA non-SMMEA
* Coupon steps up by 50 bps if optional clean-up call is not exercised.
- -------------------------------------------------------------------------------
Principal Paydown: 1) To the Class A-7 Certificateholders -- the Class A-7
Principal Distribution Amount
2) To the Class A-1 through A-6 Certificates, in
sequential order
Class A-7 Principal
Disbribution Amount: The applicable Class A-7 Principal Percentage multiplied
by the Class A-7 Principal Pro Rata Distribution Amount
for such Payment Date.
<TABLE>
<CAPTION>
THE CLASS A-7 PRINCIPAL PERCENTAGE
----------------------------------
<S> <C>
October 1998 to September 2001 equal to or greater than 0%
October 2001 to September 2003 equal to or greater than 45%
October 2003 to September 2004 equal to or greater than 80%
October 2004 to September 2005 equal to or greater than 100%
October 2005 and after equal to or greater than 300%
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
UCFC Loan Trust 1998-C -- Home Equity Loan Asset-Backed Certificates
SUMMARY OF TERMS
--------------------------
Title of Securities: UCFC Loan Trust 1998-C, Home Equity Loan Asset-Backed
Certificates Class A-1, A-2, A-3, A-4, A-5, A-6, and
A-7 Certificates.
Depositor: UCFC Acceptance Corporation.
Servicer: United Companies Lending Corporation.
Originators: The Home Equity Loans were, and any Subsequent Loans
will be, originated, either directly or through
correspondents or mortgage brokers, or purchased and
re-underwritten, by United Companies and certain
subsidiaries and affiliates thereof.
Trustee: Bankers Trust Company of California, N.A.
Aggregate
Certificate Balance: $[425,000,000]
Securities Offered: 100% FGIC-guaranteed, pass-through certificates.
Offering: Public shelf offering -- a prospectus and prospectus
supplement will be distributed after pricing.
Pricing Date: TBD
Investor
Settlement Date: September 28, 1998
Form of Certificates: Book-Entry form, same-day funds through DTC, Euroclear
and CEDEL
Pass-Through Rate: 1-Month LIBOR + TBD bps on Class A-1 Certificates *
TBD % on Class A-2 Certificates
TBD % on Class A-3 Certificates
TBD % on Class A-4 Certificates
TBD % on Class A-5 Certificates
TBD % on Class A-6 Certificates **
TBD % on Class A-7 Certificates (NAS Bond)
* Subject to the Net Funds Cap.
** Coupon steps up by 50 bps if optional clean-up call
is not exercised.
Prepayment
Assumption: 25% HEP (2.5% CPR in month 1 with monthly incremental
increases of 2.5% CPR until the speed reaches 25% CPR
in month 10 based on loan seasoning.) This means that
seasoned loans will start further up on the prepayment
curve.
Distribution Date: The 15th day of each month (or, if any such date is
not a business day, the first business day thereafter)
commencing in October 1998. The payment delay will be
zero days for the Class A-1 and 14 days for the Class
A-2, A-3, A-4, A-5, A-6, and A-7 Certificates.
Interest Accrual
Period: The initial interest accrual period on the Class A-1
Certificates will be from September 25th until October
14th. In future periods, interest will accrue on the
Class A-1 Certificates at the applicable Pass-Through
Rate from the preceeding Distribution Date to and
including the day prior to the current Distribution
Date. Interest will be based on actual/360.
Interest on the Class A-2 through A-7 Certificates
will accrue from the first day of the preceeding month
until the 30th day of the preceeding month.
Optional
Cleanup Call: The Servicer will have the right to purchase the Home
Equity Loans on any Remittance Date when the aggregate
Loan Balance of the Home Equity Loans has declined to
10% or less of an amount equal to the aggregate
balances of the Home Equity Loans as of the Cut-Off
Date including the Subsequent Loans.
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
UCFC Loan Trust 1998-C -- Home Equity Loan
Asset-Backed Certificates
Pre-Funding Account:
On the closing date, approximately $[85,312,193.48]
will be deposited in a pre-funding account for the
purchase of additional fixed-rate mortgage loans. From
the closing date until [November] 15, 1998, the Trust
intends to purchase mortgage loans up to the entire
pre-funding amount. Funds remaining the pre-funding
account that total less than $100,000 after this
period will be distributed to investors in the Class
A-1 Certificates as a prepayment on [November] 15,
1998. If the funds remaining in the pre-funding
account total greater than $100,000 after this period,
the funds will be distributed on a pro-rata basis to
the investors in the Class A-1 through A-7
Certificates as a prepayment on [November] 15, 1998.
The additional mortgage loans will be subject to
certain aggregate group characteristics that will be
more fully described in the Prospectus Supplement.
Certificate Insurer: Financial Guaranty Insurance Company ("FGIC"). FGIC's
claims-paying ability is rated "AAA" by Standard &
Poor's, "Aaa" by Moody's Investors Service and "AAA"
by Fitch Investors Service, Inc.
Certificate Insurance
Policy: The Certificate Insurance Policy will provide 100%
coverage of timely interest and ultimate principal
payments due on the Certificates.
Credit Enhancement: A combination of:
(i) the use of Net Excess Cashflow to fund the
Spread Account and
(ii) the Certificate Insurance Policy from FGIC.
Note: The required maintenance levels of the Spread
Account will be sized by the surety provider.
Servicing Fee: 50 basis points per annum.
ERISA Considerations: Subject to the considerations and
conditions described in the Prospectus Supplement,
it is expected that the Certificates may be
purchased by employee benefit plans that are subject
to ERISA.
Taxation: REMIC
Legal Investment: None of the Certificates will be SMMEA-eligible.
Certificates Ratings: "AAA" by S&P, "Aaa" by Moody's, and "AAA" by Fitch for
the Class A-1, A-2, A-3, A-4, A-5, A-6, and A-7
Certificates.
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $156,000,000.00 DATED DATE: 09/25/98
CURRENT COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $156,000,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A1 DISCOUNT MARGIN ACT/360 TABLE
(TO CALL)
ASSUMED CONSTANT LIBOR-1M 5.5820
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 33.670 25.677 28.186 31.379 35.863 38.657 40.677
99-24+ 32.063 24.569 26.921 29.915 34.118 36.737 38.631
99-25 30.455 23.463 25.657 28.451 32.373 34.817 36.585
99-25+ 28.848 22.356 24.394 26.987 30.629 32.898 34.539
99-26 27.242 21.250 23.130 25.524 28.885 30.979 32.494
99-26+ 25.635 20.143 21.867 24.061 27.142 29.061 30.449
99-27 24.029 19.038 20.604 22.598 25.398 27.143 28.405
99-27+ 22.424 17.932 19.342 21.136 23.655 25.225 26.361
99-28 20.818 16.826 18.079 19.674 21.913 23.308 24.317
99-28+ 19.213 15.721 16.817 18.212 20.171 21.391 22.274
99-29 17.608 14.616 15.555 16.751 18.429 19.475 20.231
99-29+ 16.004 13.511 14.294 15.289 16.688 17.559 18.189
99-30 14.400 12.407 13.032 13.829 14.947 15.643 16.147
99-30+ 12.796 11.303 11.771 12.368 13.206 13.728 14.105
99-31 11.193 10.199 10.511 10.908 11.466 11.813 12.064
99-31+ 9.590 9.095 9.250 9.448 9.726 9.899 10.024
100-00 7.987 7.991 7.990 7.988 7.986 7.985 7.984
100-00+ 6.385 6.888 6.730 6.529 6.247 6.071 5.944
100-01 4.783 5.785 5.470 5.070 4.508 4.158 3.904
100-01+ 3.181 4.682 4.211 3.611 2.769 2.245 1.866
First Payment 0.047 0.047 0.047 0.047 0.047 0.047 0.047
Average Life 0.998 1.475 1.282 1.100 0.917 0.831 0.778
Last Payment 1.797 2.881 2.464 2.047 1.631 1.464 1.381
Accrued Interest 0.047 0.047 0.047 0.047 0.047 0.047 0.047
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $42,000,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $42,000,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A2 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 5.848 5.843 5.845 5.847 5.849 5.851 5.852
99-24+ 5.840 5.838 5.839 5.839 5.840 5.841 5.842
99-25 5.832 5.833 5.832 5.832 5.831 5.831 5.831
99-25+ 5.824 5.827 5.826 5.825 5.822 5.821 5.820
99-26 5.816 5.822 5.820 5.817 5.814 5.811 5.809
99-26+ 5.807 5.817 5.814 5.810 5.805 5.801 5.798
99-27 5.799 5.812 5.808 5.803 5.796 5.791 5.787
99-27+ 5.791 5.806 5.802 5.796 5.787 5.781 5.777
99-28 5.783 5.801 5.795 5.788 5.778 5.771 5.766
99-28+ 5.775 5.796 5.789 5.781 5.769 5.761 5.755
99-29 5.767 5.790 5.783 5.774 5.760 5.751 5.744
99-29+ 5.759 5.785 5.777 5.767 5.751 5.741 5.733
99-30 5.751 5.780 5.771 5.759 5.742 5.731 5.723
99-30+ 5.743 5.774 5.765 5.752 5.733 5.721 5.712
99-31 5.735 5.769 5.759 5.745 5.724 5.711 5.701
99-31+ 5.727 5.764 5.752 5.737 5.716 5.701 5.690
100-00 5.718 5.759 5.746 5.730 5.707 5.691 5.679
100-00+ 5.710 5.753 5.740 5.723 5.698 5.681 5.669
100-01 5.702 5.748 5.734 5.716 5.689 5.671 5.658
100-01+ 5.694 5.743 5.728 5.708 5.680 5.661 5.647
100-02 5.686 5.737 5.722 5.701 5.671 5.651 5.636
100-02+ 5.678 5.732 5.715 5.694 5.662 5.641 5.625
100-03 5.670 5.727 5.709 5.687 5.653 5.631 5.615
100-03+ 5.662 5.722 5.703 5.679 5.644 5.621 5.604
100-04 5.654 5.716 5.697 5.672 5.636 5.611 5.593
100-04+ 5.646 5.711 5.691 5.665 5.627 5.601 5.582
100-05 5.638 5.706 5.685 5.658 5.618 5.591 5.572
100-05+ 5.630 5.701 5.679 5.650 5.609 5.581 5.561
100-06 5.622 5.695 5.672 5.643 5.600 5.571 5.550
100-06+ 5.614 5.690 5.666 5.636 5.591 5.561 5.539
100-07 5.606 5.685 5.660 5.629 5.582 5.551 5.529
100-07+ 5.597 5.679 5.654 5.621 5.573 5.542 5.518
First Payment 1.797 2.881 2.464 2.047 1.631 1.464 1.381
Average Life 2.103 3.326 2.819 2.357 1.898 1.681 1.549
Last Payment 2.381 3.881 3.214 2.714 2.131 1.881 1.714
Accrued Interest 0.432 0.432 0.432 0.432 0.432 0.432 0.432
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $74,000,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $74,000,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A3 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 5.991 5.988 5.989 5.990 5.991 5.993 5.993
99-24+ 5.985 5.984 5.984 5.985 5.985 5.985 5.985
99-25 5.979 5.981 5.980 5.979 5.979 5.978 5.977
99-25+ 5.973 5.977 5.976 5.974 5.972 5.971 5.970
99-26 5.967 5.973 5.971 5.969 5.966 5.963 5.962
99-26+ 5.961 5.969 5.967 5.964 5.959 5.956 5.954
99-27 5.956 5.966 5.963 5.959 5.953 5.949 5.946
99-27+ 5.950 5.962 5.958 5.953 5.946 5.941 5.938
99-28 5.944 5.958 5.954 5.948 5.940 5.934 5.930
99-28+ 5.938 5.954 5.950 5.943 5.933 5.927 5.922
99-29 5.932 5.951 5.945 5.938 5.927 5.919 5.914
99-29+ 5.926 5.947 5.941 5.933 5.920 5.912 5.906
99-30 5.921 5.943 5.937 5.928 5.914 5.905 5.898
99-30+ 5.915 5.939 5.932 5.922 5.907 5.898 5.890
99-31 5.909 5.936 5.928 5.917 5.901 5.890 5.882
99-31+ 5.903 5.932 5.924 5.912 5.894 5.883 5.874
100-00 5.897 5.928 5.919 5.907 5.888 5.876 5.867
100-00+ 5.892 5.925 5.915 5.902 5.882 5.868 5.859
100-01 5.886 5.921 5.910 5.896 5.875 5.861 5.851
100-01+ 5.880 5.917 5.906 5.891 5.869 5.854 5.843
100-02 5.874 5.913 5.902 5.886 5.862 5.847 5.835
100-02+ 5.868 5.910 5.897 5.881 5.856 5.839 5.827
100-03 5.862 5.906 5.893 5.876 5.849 5.832 5.819
100-03+ 5.857 5.902 5.889 5.871 5.843 5.825 5.811
100-04 5.851 5.898 5.884 5.865 5.836 5.817 5.803
100-04+ 5.845 5.895 5.880 5.860 5.830 5.810 5.795
100-05 5.839 5.891 5.876 5.855 5.823 5.803 5.787
100-05+ 5.833 5.887 5.871 5.850 5.817 5.796 5.780
100-06 5.828 5.884 5.867 5.845 5.811 5.788 5.772
100-06+ 5.822 5.880 5.863 5.839 5.804 5.781 5.764
100-07 5.816 5.876 5.858 5.834 5.798 5.774 5.756
100-07+ 5.810 5.872 5.854 5.829 5.791 5.767 5.748
First Payment 2.381 3.881 3.214 2.714 2.131 1.881 1.714
Average Life 3.003 4.966 4.164 3.415 2.682 2.353 2.156
Last Payment 3.714 6.297 5.297 4.297 3.297 2.881 2.631
Accrued Interest 0.443 0.443 0.443 0.443 0.443 0.443 0.443
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $23,000,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $23,000,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A4 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 5.989 5.987 5.987 5.988 5.990 5.990 5.991
99-24+ 5.984 5.984 5.984 5.984 5.985 5.985 5.985
99-25 5.980 5.981 5.981 5.980 5.980 5.979 5.979
99-25+ 5.976 5.978 5.978 5.976 5.975 5.973 5.972
99-26 5.971 5.976 5.974 5.972 5.970 5.968 5.966
99-26+ 5.967 5.973 5.971 5.968 5.965 5.962 5.960
99-27 5.962 5.970 5.968 5.965 5.960 5.956 5.954
99-27+ 5.958 5.967 5.964 5.961 5.955 5.951 5.948
99-28 5.953 5.964 5.961 5.957 5.950 5.945 5.941
99-28+ 5.949 5.962 5.958 5.953 5.945 5.939 5.935
99-29 5.944 5.959 5.954 5.949 5.940 5.934 5.929
99-29+ 5.940 5.956 5.951 5.945 5.935 5.928 5.923
99-30 5.936 5.953 5.948 5.941 5.930 5.922 5.917
99-30+ 5.931 5.950 5.945 5.937 5.925 5.916 5.910
99-31 5.927 5.948 5.941 5.933 5.920 5.911 5.904
99-31+ 5.922 5.945 5.938 5.929 5.915 5.905 5.898
100-00 5.918 5.942 5.935 5.925 5.910 5.899 5.892
100-00+ 5.913 5.939 5.931 5.921 5.905 5.894 5.885
100-01 5.909 5.936 5.928 5.917 5.900 5.888 5.879
100-01+ 5.904 5.934 5.925 5.913 5.895 5.882 5.873
100-02 5.900 5.931 5.921 5.909 5.890 5.877 5.867
100-02+ 5.896 5.928 5.918 5.905 5.885 5.871 5.861
100-03 5.891 5.925 5.915 5.901 5.880 5.865 5.854
100-03+ 5.887 5.922 5.912 5.897 5.875 5.860 5.848
100-04 5.882 5.920 5.908 5.893 5.871 5.854 5.842
100-04+ 5.878 5.917 5.905 5.890 5.866 5.848 5.836
100-05 5.873 5.914 5.902 5.886 5.861 5.843 5.830
100-05+ 5.869 5.911 5.898 5.882 5.856 5.837 5.823
100-06 5.865 5.909 5.895 5.878 5.851 5.831 5.817
100-06+ 5.860 5.906 5.892 5.874 5.846 5.826 5.811
100-07 5.856 5.903 5.889 5.870 5.841 5.820 5.805
100-07+ 5.851 5.900 5.885 5.866 5.836 5.814 5.799
First Payment 3.714 6.297 5.297 4.297 3.297 2.881 2.631
Average Life 4.056 6.996 5.729 4.635 3.583 3.080 2.798
Last Payment 4.381 7.881 6.214 4.964 3.881 3.297 2.964
Accrued Interest 0.443 0.443 0.443 0.443 0.443 0.443 0.443
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $47,000,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $47,000,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A5 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 6.125 6.124 6.124 6.125 6.125 6.126 6.126
99-24+ 6.121 6.122 6.121 6.121 6.121 6.121 6.121
99-25 6.118 6.119 6.119 6.118 6.117 6.117 6.116
99-25+ 6.114 6.117 6.116 6.115 6.113 6.112 6.111
99-26 6.111 6.115 6.114 6.112 6.109 6.108 6.106
99-26+ 6.107 6.113 6.111 6.109 6.105 6.103 6.101
99-27 6.104 6.111 6.109 6.106 6.101 6.098 6.096
99-27+ 6.100 6.109 6.106 6.103 6.097 6.094 6.091
99-28 6.097 6.106 6.104 6.100 6.093 6.089 6.086
99-28+ 6.093 6.104 6.101 6.097 6.090 6.085 6.081
99-29 6.089 6.102 6.099 6.094 6.086 6.080 6.076
99-29+ 6.086 6.100 6.096 6.090 6.082 6.076 6.071
99-30 6.082 6.098 6.094 6.087 6.078 6.071 6.066
99-30+ 6.079 6.096 6.091 6.084 6.074 6.067 6.061
99-31 6.075 6.093 6.089 6.081 6.070 6.062 6.056
99-31+ 6.072 6.091 6.086 6.078 6.066 6.057 6.051
100-00 6.068 6.089 6.084 6.075 6.062 6.053 6.046
100-00+ 6.065 6.087 6.081 6.072 6.058 6.048 6.041
100-01 6.061 6.085 6.079 6.069 6.054 6.044 6.036
100-01+ 6.058 6.083 6.076 6.066 6.050 6.039 6.031
100-02 6.054 6.081 6.074 6.063 6.046 6.035 6.026
100-02+ 6.050 6.078 6.071 6.060 6.042 6.030 6.021
100-03 6.047 6.076 6.069 6.056 6.038 6.025 6.016
100-03+ 6.043 6.074 6.066 6.053 6.034 6.021 6.011
100-04 6.040 6.072 6.064 6.050 6.030 6.016 6.006
100-04+ 6.036 6.070 6.061 6.047 6.026 6.012 6.001
100-05 6.033 6.068 6.059 6.044 6.022 6.007 5.996
100-05+ 6.029 6.065 6.056 6.041 6.018 6.003 5.991
100-06 6.026 6.063 6.054 6.038 6.014 5.998 5.986
100-06+ 6.022 6.061 6.051 6.035 6.010 5.994 5.981
100-07 6.019 6.059 6.049 6.032 6.006 5.989 5.976
100-07+ 6.015 6.057 6.046 6.029 6.002 5.985 5.971
First Payment 4.381 7.881 6.214 4.964 3.881 3.297 2.964
Average Life 5.287 9.900 8.101 6.234 4.623 3.950 3.543
Last Payment 6.547 12.047 10.381 8.381 5.631 4.714 4.214
Accrued Interest 0.453 0.453 0.453 0.453 0.453 0.453 0.453
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $40,500,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $40,500,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A6 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 6.496 6.496 6.496 6.496 6.496 6.496 6.496
99-24+ 6.494 6.494 6.494 6.494 6.493 6.493 6.493
99-25 6.491 6.492 6.492 6.491 6.490 6.489 6.489
99-25+ 6.488 6.491 6.490 6.489 6.487 6.486 6.485
99-26 6.486 6.489 6.488 6.487 6.484 6.483 6.481
99-26+ 6.483 6.487 6.486 6.484 6.481 6.479 6.478
99-27 6.480 6.485 6.484 6.482 6.478 6.476 6.474
99-27+ 6.478 6.483 6.481 6.479 6.475 6.472 6.470
99-28 6.475 6.481 6.479 6.477 6.472 6.469 6.467
99-28+ 6.472 6.479 6.477 6.475 6.469 6.466 6.463
99-29 6.470 6.477 6.475 6.472 6.467 6.462 6.459
99-29+ 6.467 6.475 6.473 6.470 6.464 6.459 6.455
99-30 6.464 6.473 6.471 6.467 6.461 6.455 6.452
99-30+ 6.461 6.471 6.469 6.465 6.458 6.452 6.448
99-31 6.459 6.469 6.467 6.463 6.455 6.449 6.444
99-31+ 6.456 6.468 6.464 6.460 6.452 6.445 6.441
100-00 6.453 6.466 6.462 6.458 6.449 6.442 6.437
100-00+ 6.451 6.464 6.460 6.455 6.446 6.439 6.433
100-01 6.448 6.462 6.458 6.453 6.443 6.435 6.429
100-01+ 6.445 6.460 6.456 6.451 6.440 6.432 6.426
100-02 6.443 6.458 6.454 6.448 6.437 6.428 6.422
100-02+ 6.440 6.456 6.452 6.446 6.434 6.425 6.418
100-03 6.437 6.454 6.450 6.443 6.431 6.422 6.415
100-03+ 6.435 6.452 6.448 6.441 6.428 6.418 6.411
100-04 6.432 6.450 6.445 6.439 6.425 6.415 6.407
100-04+ 6.429 6.448 6.443 6.436 6.422 6.411 6.403
100-05 6.427 6.447 6.441 6.434 6.419 6.408 6.400
100-05+ 6.424 6.445 6.439 6.431 6.416 6.405 6.396
100-06 6.421 6.443 6.437 6.429 6.413 6.401 6.392
100-06+ 6.419 6.441 6.435 6.427 6.410 6.398 6.389
100-07 6.416 6.439 6.433 6.424 6.407 6.394 6.385
100-07+ 6.413 6.437 6.431 6.422 6.404 6.391 6.381
First Payment 6.547 12.047 10.381 8.381 5.631 4.714 4.214
Average Life 7.578 12.047 10.381 8.702 6.626 5.634 5.067
Last Payment 7.714 12.047 10.381 8.714 6.881 5.964 5.464
Accrued Interest 0.481 0.481 0.481 0.481 0.481 0.481 0.481
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT BALANCE: $42,500,000.00 DATED DATE: 09/01/98
COUPON: TBD FIRST PAYMENT: 10/15/98
FACTOR: 1.0000000000 TOTAL CLASSES: 7
ORIGINAL BALANCE: $42,500,000.00 YIELD TABLE DATE: 09/28/98
ucfc98c
BOND A7 BE-YIELD TABLE
(TO CALL)
PREPAYMENT SPEED
<TABLE>
<CAPTION>
PRICING SPEED
25.0% 15.00% 18.00% 22.00% 28.00% 32.00% 35.00%
PRICE HEP HEP HEP HEP HEP HEP HEP
<S> <C> <C> <C> <C> <C> <C> <C>
99-24 5.987 5.987 5.987 5.987 5.987 5.988 5.988
99-24+ 5.984 5.984 5.984 5.984 5.984 5.984 5.984
99-25 5.981 5.981 5.981 5.981 5.981 5.981 5.981
99-25+ 5.978 5.978 5.978 5.978 5.978 5.977 5.977
99-26 5.975 5.976 5.975 5.975 5.974 5.974 5.973
99-26+ 5.972 5.973 5.973 5.972 5.971 5.970 5.969
99-27 5.968 5.970 5.970 5.969 5.968 5.966 5.965
99-27+ 5.965 5.967 5.967 5.966 5.964 5.963 5.962
99-28 5.962 5.965 5.964 5.963 5.961 5.959 5.958
99-28+ 5.959 5.962 5.961 5.960 5.958 5.956 5.954
99-29 5.956 5.959 5.958 5.957 5.954 5.952 5.950
99-29+ 5.953 5.956 5.955 5.954 5.951 5.949 5.947
99-30 5.950 5.954 5.952 5.951 5.948 5.945 5.943
99-30+ 5.946 5.951 5.949 5.948 5.945 5.941 5.939
99-31 5.943 5.948 5.947 5.945 5.941 5.938 5.935
99-31+ 5.940 5.945 5.944 5.942 5.938 5.934 5.932
100-00 5.937 5.942 5.941 5.939 5.935 5.931 5.928
100-00+ 5.934 5.940 5.938 5.936 5.931 5.927 5.924
100-01 5.931 5.937 5.935 5.933 5.928 5.924 5.920
100-01+ 5.928 5.934 5.932 5.930 5.925 5.920 5.917
100-02 5.924 5.931 5.929 5.927 5.921 5.917 5.913
100-02+ 5.921 5.929 5.927 5.924 5.918 5.913 5.909
100-03 5.918 5.926 5.924 5.921 5.915 5.909 5.905
100-03+ 5.915 5.923 5.921 5.918 5.912 5.906 5.902
100-04 5.912 5.920 5.918 5.915 5.908 5.902 5.898
100-04+ 5.909 5.918 5.915 5.912 5.905 5.899 5.894
100-05 5.906 5.915 5.912 5.909 5.902 5.895 5.890
100-05+ 5.903 5.912 5.909 5.906 5.898 5.892 5.887
100-06 5.899 5.909 5.906 5.903 5.895 5.888 5.883
100-06+ 5.896 5.907 5.904 5.900 5.892 5.885 5.879
100-07 5.893 5.904 5.901 5.897 5.889 5.881 5.875
100-07+ 5.890 5.901 5.898 5.894 5.885 5.877 5.872
First Payment 3.047 3.047 3.047 3.047 3.047 3.047 3.047
Average Life 6.141 7.208 6.857 6.450 5.770 5.252 4.933
Last Payment 7.714 12.047 10.381 8.714 6.881 5.964 5.464
Accrued Interest 0.443 0.443 0.443 0.443 0.443 0.443 0.443
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
- --------------------------------------------------------------------------------
- UCFC 1998-C
- Cut Off Date of Tape is 09/01/98
- FIXED RATE COLLATERAL
- $339,687,806.52
- Home Equity Summary Report
- --------------------------------------------------------------------------------
Number of Mortgage Loans: 6,689
Aggregate Unpaid Principal Balance: $339,687,806.52
Aggregate Original Principal Balance: $340,639,136.40
Weighted Average Gross Coupon: 10.773%
Gross Coupon Range: 7.350% - 15.750%
- --------------------------------------------------------------------------------
Average Unpaid Principal Balance: $50,783.05
Average Original Principal Balance: $50,925.27
Maximum Unpaid Principal Balance: $527,200.00
Minimum Unpaid Principal Balance: $5,200.00
Maximum Original Principal Balance: $527,200.00
Minimum Original Principal Balance: $5,200.00
Weighted Avg. Stated Rem. Term (LPD to Mat/Bln Date): 257.945
Stated Rem Term Range: 48.000 - 360.000
Weighted Average Age (Original Term - Rem Term): 1.757
Age Range: 0.000 - 298.000
Weighted Average Original Term: 259.701
Original Term Range: 48.000 - 360.000
Weighted Average Note LTV: 78.846
Note LTV Range: 6.400% - 100.000%
- --------------------------------------------------------------------------------
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
State Loans Balance Balance
Alabama 42 1,611,041.71 0.47
Alaska 2 147,903.38 0.04
Arizona 62 3,830,320.51 1.13
Arkansas 171 7,121,396.15 2.10
California 200 18,179,186.28 5.35
Colorado 50 3,439,994.14 1.01
Connecticut 46 3,422,909.80 1.01
Delaware 17 1,081,738.27 0.32
Dist of Col 10 751,726.65 0.22
Florida 488 23,428,013.58 6.90
Georgia 264 13,421,582.35 3.95
Hawaii 3 404,513.04 0.12
Idaho 19 1,285,750.98 0.38
Illinois 197 11,208,821.19 3.30
Indiana 225 9,022,739.33 2.66
Iowa 58 2,835,316.83 0.83
Kansas 5 266,767.90 0.08
Kentucky 177 7,663,696.51 2.26
Louisiana 755 30,659,638.18 9.03
Maine 78 3,644,064.46 1.07
Maryland 101 7,398,418.90 2.18
Massachusetts 46 3,941,540.76 1.16
Michigan 340 13,211,116.87 3.89
Minnesota 19 840,162.94 0.25
Mississippi 334 13,635,423.79 4.01
Missouri 130 5,668,426.72 1.67
Montana 2 234,215.84 0.07
Nebraska 11 538,100.00 0.16
Nevada 17 1,308,512.12 0.39
New Hampshire 27 1,807,415.05 0.53
New Jersey 62 4,982,517.03 1.47
New Mexico 48 3,287,648.64 0.97
New York 294 19,199,865.85 5.65
North Carolina 390 20,725,627.54 6.10
Ohio 383 18,585,521.72 5.47
Oklahoma 177 7,041,681.80 2.07
Oregon 23 2,191,682.80 0.65
Pennsylvania 216 10,051,562.30 2.96
Rhode Island 8 787,684.67 0.23
South Carolina 245 11,589,864.70 3.41
Tennessee 334 17,128,819.46 5.04
Texas 209 8,602,753.01 2.53
Utah 21 1,110,272.54 0.33
Vermont 7 374,161.12 0.11
Virginia 86 5,723,422.76 1.68
Washington 40 2,979,946.44 0.88
West Virgina 56 2,619,225.63 0.77
Wisconsin 193 10,676,694.28 3.14
Wyoming 1 18,400.00 0.01
- --------------------------------------------------------------------------
Total............... 6689 $ 339,687,806.52 100.00%
==========================================================================
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
NOTE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Note Number of Unpaid Aggregate
Loan-To-Value Mortgage Principal Principal
Ratio Loans Balance Balance
<S> <C> <C> <C>
5.000 Less than Note LTV less than or equal to 10.000 6 71,040.52 0.02
10.000 Less than Note LTV less than or equal to 15.000 14 227,651.40 0.07
15.000 Less than Note LTV less than or equal to 20.000 35 650,325.77 0.19
20.000 Less than Note LTV less than or equal to 25.000 39 784,446.64 0.23
25.000 Less than Note LTV less than or equal to 30.000 41 976,720.17 0.29
30.000 Less than Note LTV less than or equal to 35.000 68 1,825,848.88 0.54
35.000 Less than Note LTV less than or equal to 40.000 79 2,042,060.88 0.60
40.000 Less than Note LTV less than or equal to 45.000 127 3,959,947.39 1.17
45.000 Less than Note LTV less than or equal to 50.000 151 4,931,802.50 1.45
50.000 Less than Note LTV less than or equal to 55.000 164 6,613,916.47 1.95
55.000 Less than Note LTV less than or equal to 60.000 235 9,032,178.49 2.66
60.000 Less than Note LTV less than or equal to 65.000 308 12,640,477.81 3.72
65.000 Less than Note LTV less than or equal to 70.000 473 23,250,514.57 6.84
70.000 Less than Note LTV less than or equal to 75.000 819 40,319,561.49 11.87
75.000 Less than Note LTV less than or equal to 80.000 1485 81,657,905.13 24.04
80.000 Less than Note LTV less than or equal to 85.000 919 48,629,237.65 14.32
85.000 Less than Note LTV less than or equal to 90.000 777 43,177,723.27 12.71
90.000 Less than Note LTV less than or equal to 95.000 416 26,786,061.19 7.89
95.000 Less than Note LTV less than or equal to 100.000 533 32,110,386.30 9.45
- --------------------------------------------------------------------------------------------------
Total................................................... 6689 $339,687,806.52 100.00%
==================================================================================================
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
GROSS MORTGAGE INTEREST RATE RANGE
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Gross Mortgage Number of Unpaid Aggregate
Interest Rate Mortgage Principal Principal
Range Loans Balance Balance
<S> <C> <C> <C>
7.00% Less than Gross Coupon less than or equal to 7.50% 3 205,744.38 0.06
7.50% Less than Gross Coupon less than or equal to 7.75% 5 398,622.16 0.12
7.75% Less than Gross Coupon less than or equal to 8.00% 17 1,198,639.62 0.35
8.00% Less than Gross Coupon less than or equal to 8.25% 20 1,598,987.67 0.47
8.25% Less than Gross Coupon less than or equal to 8.50% 100 9,548,152.41 2.81
8.50% Less than Gross Coupon less than or equal to 8.75% 82 6,738,577.71 1.98
8.75% Less than Gross Coupon less than or equal to 9.00% 172 13,005,310.44 3.83
9.00% Less than Gross Coupon less than or equal to 9.25% 112 9,433,250.59 2.78
9.25% Less than Gross Coupon less than or equal to 9.50% 241 15,686,845.79 4.62
9.50% Less than Gross Coupon less than or equal to 9.75% 274 18,771,430.82 5.53
9.75% Less than Gross Coupon less than or equal to 10.00% 511 30,206,981.41 8.89
10.00% Less than Gross Coupon less than or equal to 10.25% 346 19,895,492.74 5.86
10.25% Less than Gross Coupon less than or equal to 10.50% 436 24,732,338.20 7.28
10.50% Less than Gross Coupon less than or equal to 10.75% 471 27,069,800.15 7.97
10.75% Less than Gross Coupon less than or equal to 11.00% 535 29,204,036.31 8.60
11.00% Less than Gross Coupon less than or equal to 11.25% 562 24,670,728.38 7.26
11.25% Less than Gross Coupon less than or equal to 11.50% 504 22,129,571.07 6.51
11.50% Less than Gross Coupon less than or equal to 11.75% 478 21,817,353.85 6.42
11.75% Less than Gross Coupon less than or equal to 12.00% 239 9,844,784.28 2.90
12.00% Less than Gross Coupon less than or equal to 12.25% 520 16,438,615.35 4.84
12.25% Less than Gross Coupon less than or equal to 12.50% 393 13,900,427.62 4.09
12.50% Less than Gross Coupon less than or equal to 12.75% 90 3,153,303.38 0.93
12.75% Less than Gross Coupon less than or equal to 13.00% 207 8,341,837.04 2.46
13.00% Less than Gross Coupon less than or equal to 13.25% 96 3,289,904.19 0.97
13.25% Less than Gross Coupon less than or equal to 13.50% 55 2,330,637.04 0.69
13.50% Less than Gross Coupon less than or equal to 13.75% 43 1,260,158.34 0.37
13.75% Less than Gross Coupon less than or equal to 14.00% 29 767,140.02 0.23
14.00% Less than Gross Coupon less than or equal to 14.25% 47 1,359,825.86 0.40
14.25% Less than Gross Coupon less than or equal to 14.50% 35 760,386.80 0.22
14.50% Less than Gross Coupon less than or equal to 14.75% 15 443,240.00 0.13
14.75% Less than Gross Coupon less than or equal to 15.00% 47 1,390,782.90 0.41
15.00% Less than Gross Coupon less than or equal to 15.25% 3 77,000.00 0.02
15.50% Less than Gross Coupon less than or equal to 15.75% 1 17,900.00 0.01
- --------------------------------------------------------------------------------------------------------
Total..................................................... 6689 $339,687,806.52 100.00%
========================================================================================================
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
CURRENT MORTGAGE LOAN AMOUNTS
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Current Number of Unpaid Aggregate
Mortgage Loan Mortgage Principal Principal
Principal Balance Loans Balance Balance
<S> <C> <C> <C>
Balance less than or equal to 25,000 1,494 26,963,918.80 7.94
25,000 Less than Balance less than or equal to 50,000 2,671 98,164,016.99 28.90
50,000 Less than Balance less than or equal to 75,000 1,456 88,121,899.61 25.94
75,000 Less than Balance less than or equal to 100,000 514 44,351,643.07 13.06
100,000 Less than Balance less than or equal to 150,000 376 45,169,249.89 13.30
150,000 Less than Balance less than or equal to 175,000 78 12,643,889.99 3.72
175,000 Less than Balance less than or equal to 200,000 23 4,370,816.77 1.29
200,000 Less than Balance less than or equal to 250,000 47 10,453,015.00 3.08
250,000 Less than Balance less than or equal to 300,000 17 4,714,413.96 1.39
300,000 Less than Balance less than or equal to 350,000 7 2,255,930.06 0.66
350,000 Less than Balance less than or equal to 400,000 3 1,105,322.23 0.33
400,000 Less than Balance less than or equal to 450,000 2 846,490.15 0.25
500,000 Less than Balance less than or equal to 600,000 1 527,200.00 0.16
- --------------------------------------------------------------------------------------------------------
Total..................................................... 6689 $339,687,806.52 100.00%
========================================================================================================
</TABLE>
LOAN SUMMARY STRATIFIED BY
OWNER OCCUPANCY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Owner Occupied, 1st Mtg 5393 296,910,987.99 87.41
Part-Owner Occupied, 1st Mtg 1 45,500.00 0.01
Non-Owner Occupied, 1st Mtg 533 23,398,540.55 6.89
Second Home, 1st Mtg 9 665,621.01 0.20
Owner Occupied, 2nd Mtg 744 17,968,250.77 5.29
Non-Owner Occupied, 2nd Mtg 1 19,745.68 0.01
Multiple Properties, 1st Mtgs 8 679,160.52 0.20
- --------------------------------------------------------------------------
Total........................ 6689 $339,687,806.52 100.00%
==========================================================================
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
AGE OF LOAN
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Age Loans Balance Balance
<S> <C> <C> <C>
Age equal to 0 4,691 223,844,874.29 65.90%
0 Less than Age less than or equal to 12 1,898 109,264,907.94 32.17%
12 Less than Age less than or equal to 24 20 1,404,525.78 0.41%
24 Less than Age less than or equal to 36 24 2,440,255.65 0.72%
36 Less than Age less than or equal to 48 8 469,347.65 0.14%
48 Less than Age less than or equal to 60 4 147,063.41 0.04%
72 Less than Age less than or equal to 84 9 799,759.55 0.24%
84 Less than Age less than or equal to 96 6 347,916.94 0.10%
96 Less than Age less than or equal to 108 4 67,013.53 0.02%
108 Less than Age less than or equal to 120 4 114,702.38 0.03%
120 Less than Age less than or equal to 132 2 72,301.34 0.02%
132 Less than Age less than or equal to 144 1 86,314.31 0.03%
144 Less than Age less than or equal to 156 1 48,152.99 0.01%
156 Less than Age less than or equal to 168 1 42,952.55 0.01%
168 Less than Age less than or equal to 180 1 39,999.53 0.01%
180 Less than Age less than or equal to 192 3 121,833.31 0.04%
204 Less than Age less than or equal to 216 1 35,834.03 0.01%
216 Less than Age less than or equal to 228 1 101,220.45 0.03%
228 Less than Age less than or equal to 240 1 27,291.27 0.01%
240 Less than Age less than or equal to 252 1 72,109.72 0.02%
252 Less than Age less than or equal to 264 2 27,493.59 0.01%
264 Less than Age less than or equal to 276 4 83,078.42 0.02%
276 Less than Age less than or equal to 288 1 17,638.12 0.01%
288 Less than Age less than or equal to 300 1 11,219.77 0.00%
- -----------------------------------------------------------------------------------------------
Total...................................... 6,689 $339,687,806.52 100.00%
===============================================================================================
</TABLE>
MORTGAGED PROPERTIES
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Deminimus PUD 1 21,000.00 0.01
Duplex 185 10,969,265.27 3.23
Triplex 39 3,056,021.95 0.90
Fourplex or Quadplex 30 2,126,829.59 0.63
RowHouse 37 1,118,880.82 0.33
Modular Housing 4 336,751.41 0.10
Manufactured Housing 20 1,179,678.54 0.35
Man.Housing/Moveble/Own Land 5 217,812.06 0.06
Man.House/Perm/Own Land 910 35,600,422.47 10.48
Semi-Detached 3 152,392.26 0.04
PUD 19 1,713,857.45 0.50
Unimprov Land/Comm. 2 134,074.12 0.04
Townhouses 14 753,289.14 0.22
Condominiums 88 4,830,758.15 1.42
Single Family Detached 5332 277,476,773.29 81.69
- --------------------------------------------------------------------------
Total....................... 6689 $339,687,806.52 100.00%
==========================================================================
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Remaining Term Loans Balance Balance
<S> <C> <C> <C>
36 Less than Rem Term less than or equal to 48 3 36,000.00 0.01%
48 Less than Rem Term less than or equal to 60 84 1,306,579.01 0.38%
60 Less than Rem Term less than or equal to 72 14 204,344.22 0.06%
72 Less than Rem Term less than or equal to 84 53 1,183,947.87 0.35%
84 Less than Rem Term less than or equal to 96 25 569,842.99 0.17%
96 Less than Rem Term less than or equal to 108 12 288,363.05 0.08%
108 Less than Rem Term less than or equal to 120 625 15,397,872.16 4.53%
120 Less than Rem Term less than or equal to 132 9 339,218.80 0.10%
132 Less than Rem Term less than or equal to 144 296 8,781,229.76 2.59%
144 Less than Rem Term less than or equal to 156 13 645,785.58 0.19%
156 Less than Rem Term less than or equal to 168 12 611,058.95 0.18%
168 Less than Rem Term less than or equal to 180 2,723 123,483,711.53 36.35%
180 Less than Rem Term less than or equal to 192 2 52,800.00 0.02%
192 Less than Rem Term less than or equal to 204 7 291,710.49 0.09%
204 Less than Rem Term less than or equal to 216 5 461,413.83 0.14%
216 Less than Rem Term less than or equal to 228 7 386,272.50 0.11%
228 Less than Rem Term less than or equal to 240 763 38,437,542.27 11.32%
240 Less than Rem Term less than or equal to 252 1 26,161.84 0.01%
252 Less than Rem Term less than or equal to 264 1 86,000.00 0.03%
264 Less than Rem Term less than or equal to 276 5 385,623.78 0.11%
276 Less than Rem Term less than or equal to 288 8 653,403.15 0.19%
288 Less than Rem Term less than or equal to 300 82 5,024,721.96 1.48%
300 Less than Rem Term less than or equal to 312 2 148,077.56 0.04%
312 Less than Rem Term less than or equal to 324 8 557,540.01 0.16%
324 Less than Rem Term less than or equal to 336 30 2,761,812.70 0.81%
336 Less than Rem Term less than or equal to 348 10 699,852.19 0.21%
348 Less than Rem Term less than or equal to 360 1,889 136,866,920.32 40.29%
- -----------------------------------------------------------------------------------------------
Total........................................... 6,689 $339,687,806.52 100.00%
===============================================================================================
</TABLE>
ORIGINAL TERM
<TABLE>
<CAPTION>
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Original Term Loans Balance Balance
<S> <C> <C> <C>
36 Less than Orig. Term less than or equal to 48 3 36,000.00 0.01%
48 Less than Orig. Term less than or equal to 60 83 1,272,626.19 0.37%
60 Less than Orig. Term less than or equal to 72 11 172,619.09 0.05%
72 Less than Orig. Term less than or equal to 84 46 1,065,158.45 0.31%
84 Less than Orig. Term less than or equal to 96 21 406,098.90 0.12%
96 Less than Orig. Term less than or equal to 108 9 177,315.26 0.05%
108 Less than Orig. Term less than or equal to 120 625 15,358,863.96 4.52%
120 Less than Orig. Term less than or equal to 132 6 183,000.00 0.05%
132 Less than Orig. Term less than or equal to 144 291 8,530,742.94 2.51%
144 Less than Orig. Term less than or equal to 156 10 280,037.52 0.08%
156 Less than Orig. Term less than or equal to 168 7 282,680.31 0.08%
168 Less than Orig. Term less than or equal to 180 2,739 124,490,325.20 36.65%
180 Less than Orig. Term less than or equal to 192 2 52,800.00 0.02%
192 Less than Orig. Term less than or equal to 204 6 248,757.94 0.07%
204 Less than Orig. Term less than or equal to 216 4 413,260.84 0.12%
216 Less than Orig. Term less than or equal to 228 1 81,900.61 0.02%
228 Less than Orig. Term less than or equal to 240 766 38,561,912.42 11.35%
252 Less than Orig. Term less than or equal to 264 2 117,479.82 0.03%
276 Less than Orig. Term less than or equal to 288 1 45,074.98 0.01%
288 Less than Orig. Term less than or equal to 300 82 5,024,721.96 1.48%
300 Less than Orig. Term less than or equal to 312 1 92,900.00 0.03%
312 Less than Orig. Term less than or equal to 324 4 302,861.38 0.09%
324 Less than Orig. Term less than or equal to 336 6 415,300.00 0.12%
336 Less than Orig. Term less than or equal to 348 7 290,978.50 0.09%
348 Less than Orig. Term less than or equal to 360 1,956 141,784,390.25 41.74%
- ------------------------------------------------------------------------------------------------------
Total............................................. 6,689 $ 339,687,806.52 100.00%
======================================================================================================
</TABLE>
THIS COLLATERAL TERMSHEET SUPERSEDES ANY PREVIOUS COLLATERAL
TERMSHEETS, AND WILL BE SUPERSEDED BY THE COLLATERAL INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE
SUCH A DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES
INCORPORATED FINANCIAL ADVISOR IMMEDIATELY.
<PAGE>
Salomon Smith Barney
- --------------------------------------------------------------------------------
[Disclaimer for the Front Cover]
Neither the Issuer of the Certificates nor any of its affiliates make any
representation as to the accuracy or completeness of the information herein. The
information herein is preliminary, and will be superseded by the applicable
Prospectus Supplement and by any other information subsequently filed with the
Securities and Exchange Commission. The information addresses only certain
aspects of the applicable security's characteristics and thus does not provide a
complete assessment. As such, the information may not reflect the impact of all
structural characteristics of the security. The assumptions underlying the
information, including structure and collateral, may be modified from time to
time to reflect changed circumstances. The attached term sheet is not intended
to be a Prospectus and any investment decision with respect to the Certificates
should be made by you based solely upon all of the information contained in the
final Prospectus. Under no circumstances shall the information presented
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction. The securities may not be sold
nor may an offer to buy be accepted prior to the delivery of a final Prospectus
relating to the securities. All information described herein is preliminary,
limited in nature and subject to completion or amendment. No representation is
made that the above referenced securities will actually perform as described in
any scenario presented. The Depositor has not prepared, reviewed or participated
in the preparation hereof, is not responsible for the accuracy hereof and has
not authorized its dissemination. A final Prospectus and Prospectus supplement
may be obtained by contacting Salomon Smith Barney Syndicate Desk at (212)
783-3727.
- --------------------------------------------------------------------------------
[Footer of each page]
This page must be accompanied by the disclaimer included on the cover of these
materials. If you did not receive such a disclaimer please contact your Salomon
Smith Barney Financial Advisor immediately.
<PAGE>
UCFC Loan Trust 1998-C
Home Equity Loan Asset-Backed Certificates
The attached Marketing Memorandum (the "Marketing Memorandum") is privileged and
confidential and is intended for use by the addressee only. This Marketing
Memorandum is furnished to you solely by Prudential Securities Inc., First Union
Capital Markets, a division of Wheat First Securities, Inc., and Salomon Smith
Barney (the "Underwriters") and not by the issuer of the certificates identified
above (the "Certificates") or any other party. The Marketing Memorandum is based
upon information made available to the Underwriters. Neither the Underwriters,
the issuer of the Offered Certificates, nor any other party makes any
representation as to the accuracy or completeness of the information therein.
The information herein is preliminary, and will be superseded by the applicable
prospectus supplement and by any other information subsequently filed with the
Securities and Exchange Commission. The information herein may not be provided
to any third party other than the addressee's legal, tax, financial and/or
accounting advisors for the purpose of evaluating such information.
No assurance can be given as to the accuracy, appropriateness or completeness of
the Marketing Memorandum in any particular context; or as to whether the
Marketing Memorandum reflects future performance. This Marketing Memorandum
should not be construed as either a prediction or as legal, tax, and financial
or accounting advice.
Any yields or weighted average lives shown in the Marketing Memorandum are based
on prepayment and other assumptions and actual experience may dramatically
affect such yields or weighted average lives. The principal amount and
designation of any security described in the term sheet are subject to change
prior to issuance.
Although a registration statement (including the prospectus) relating to the
Offered Certificates has been filed with the Securities and Exchange Commission
and is effective, the final prospectus supplement relating to the Offered
Certificates has not been filed with the Securities and Exchange Commission.
This communication shall not constitute an offer to sell or a solicitation of an
offer to buy nor shall there be any sale of the Offered Certificates in any
state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Prospective purchasers are referred to the final prospectus and prospectus
supplement relating to the Offered Certificates for definitive terms of the
Offered Certificates and the collateral.
Please be advised that Offered Certificates may not be appropriate for all
investors. Potential investors must be willing to assume, among other things,
market price volatility, prepayments, yield curve and interest rate risks.
Investors should fully consider the risk of an investment in these Offered
Certificates.
If you have received this communication in error, please notify the sending
party immediately by telephone and return the original to such party by mail.
[FIRST UNION CAPITAL MARKETS LOGO]
This page must be accompanied by the disclaimer included on the cover of these
materials. If you did not receive such a disclaimer please contact your Salomon
Smith Barney Financial Advisor immediately.
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1997
<TABLE>
<S> <C>
Report of Independent Auditors............................................................................. A-1
Balance Sheets............................................................................................. A-2
Statements of Income....................................................................................... A-3
Statements of Stockholder's Equity......................................................................... A-4
Statements of Cash Flows................................................................................... A-5
Notes to Financial Statements.............................................................................. A-6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Financial Guaranty Insurance Company:
We have audited the accompanying balance sheets of Financial Guaranty Insurance
Company as of December 31, 1997 and 1996, and the related statements of income,
stockholder's equity, and cash flows for each of the years in the three year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Financial Guaranty Insurance
Company as of December 31, 1997 and 1996 and the results of its operations and
its cash flows for each of the years in the three year period then ended in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
January 23, 1998
A-1
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Fixed maturity securities available-for-sale (amortized cost of $2,313,458 in 1997
and $2,190,303 in 1996)............................................................ $2,443,746 $2,250,549
Short-term investments, at cost, which approximates market........................... 76,039 73,839
Cash................................................................................. 802 860
Accrued investment income............................................................ 38,927 37,655
Reinsurance recoverable.............................................................. 8,220 7,015
Prepaid reinsurance premiums......................................................... 154,208 167,683
Deferred policy acquisition costs.................................................... 86,286 91,945
Property and equipment, net of accumulated depreciation ($17,346 in 1997 and $15,333
in 1996)........................................................................... 3,142 4,696
Receivable for securities sold....................................................... -- 379
Prepaid expenses and other assets.................................................... 21,002 19,520
------------ ------------
Total assets.................................................................... $2,832,372 $2,654,141
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Unearned premiums.................................................................. $ 628,553 $ 681,816
Loss and loss adjustment expenses.................................................. 76,926 72,616
Ceded reinsurance balances payable................................................. 3,932 10,561
Accounts payable and accrued expenses.............................................. 26,352 54,165
Payable to Parent.................................................................. -- 1,791
Current federal income taxes payable............................................... 19,335 52,016
Deferred federal income taxes...................................................... 118,522 91,805
Payable for securities purchased................................................... 5,811 4,937
------------ ------------
Total liabilities............................................................... 879,431 969,707
------------ ------------
------------ ------------
Stockholder's Equity:
Common stock, par value $1,500 per share; 10,000 shares authorized, issued and
outstanding..................................................................... 15,000 15,000
Additional paid-in capital......................................................... 383,511 334,011
Net unrealized gains on fixed maturity securities available-for-sale, net of tax... 84,687 39,160
Foreign currency translation adjustment, net of tax................................ (752) (429)
Retained earnings.................................................................. 1,470,495 1,296,692
------------ ------------
Total stockholder's equity...................................................... 1,952,941 1,684,434
------------ ------------
Total liabilities and stockholder's equity...................................... $2,832,372 $2,654,141
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
A-2
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Gross premiums written....................................................... $ 95,995 $ 97,027 $ 97,288
Ceded premiums............................................................... (19,780) (29,376) (19,319)
-------- -------- --------
Net premiums written....................................................... 76,215 67,651 77,969
Decrease in net unearned premiums............................................ 39,788 51,314 27,309
-------- -------- --------
Net premiums earned........................................................ 116,003 118,965 105,278
Net investment income........................................................ 127,773 124,635 120,398
Net realized gains........................................................... 16,700 15,022 30,762
-------- -------- --------
Total revenues............................................................. 260,476 258,622 256,438
EXPENSES:
Loss and loss adjustment expenses............................................ 12,539 2,389 (8,426)
Policy acquisition costs..................................................... 12,936 16,327 13,072
Decrease (Increase) in deferred policy acquisition costs..................... 5,659 2,923 (3,940)
Other underwriting expenses.................................................. 14,691 12,508 19,100
-------- -------- --------
Total expenses............................................................. 45,825 34,147 19,806
-------- -------- --------
Income before provision for Federal income taxes............................. 214,651 224,475 236,632
-------- -------- --------
Federal income tax expense:
Current.................................................................... 39,133 41,548 28,913
Deferred................................................................... 1,715 5,318 19,841
-------- -------- --------
Total Federal income tax expense........................................... 40,848 46,866 48,754
-------- -------- --------
Net income................................................................. $173,803 $177,609 $187,878
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to financial statements.
A-3
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET UNREALIZED
GAINS (LOSSES) FOREIGN
ON FIXED MATURITY CURRENCY
ADDITIONAL SECURITIES TRANSLATION
COMMON PAID-IN AVAILABLE- ADJUSTMENT, RETAINED
STOCK CAPITAL FOR-SALE, NET OF TAX NET OF TAX EARNINGS
------- ---------- -------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995........................... $15,000 $334,011 $(41,773) $(1,221) $ 973,706
Net income......................................... -- -- -- -- 187,878
Dividend paid...................................... -- -- -- -- (25,000)
Change in fixed maturity securities available for
sale, net of tax of $56,839...................... -- -- 105,558 -- --
Foreign currency translation adjustment............ -- -- -- (278) --
------- ---------- ---------- ----------- ----------
Balance, December 31, 1995......................... 15,000 334,011 63,785 (1,499) 1,136,584
------- ---------- ---------- ----------- ----------
Net Income......................................... -- -- -- -- 177,609
Dividend paid...................................... -- -- -- -- (17,500)
Change in fixed maturity securities available for
sale, net of tax of ($13,260).................... -- -- (24,625) -- --
Foreign currency translation adjustment............ -- -- -- 1,070 --
------- ---------- ---------- ----------- ----------
Balance at December 31, 1996....................... 15,000 334,011 39,160 (429) 1,296,692
------- ---------- ---------- ----------- ----------
Net Income......................................... -- -- -- -- 173,803
Capital contribution............................... -- 49,500 -- -- --
Change in fixed maturity securities available for
sale, net of tax of $24,516...................... -- -- 45,527 -- --
Foreign currency translation adjustment............ -- -- -- (323) --
------- ---------- ---------- ----------- ----------
Balance at December 31, 1997....................... $15,000 $383,511 $ 84,687 ($ 752) $1,470,495
------- ---------- ---------- ----------- ----------
------- ---------- ---------- ----------- ----------
</TABLE>
See accompanying notes to financial statements.
A-4
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................ $ 173,803 $ 177,609 $ 187,878
Adjustments to reconcile net income to net cash provided by operating
activities:
Change in unearned premiums............................................. (53,263) (45,719) (29,890)
Change in loss and loss adjustment expense reserves..................... 4,310 (5,192) (20,938)
Depreciation of property and equipment.................................. 2,013 2,472 2,348
Change in reinsurance receivable........................................ (1,205) 657 6,800
Change in prepaid reinsurance premiums.................................. 13,475 (5,596) 2,581
Change in foreign currency translation adjustment....................... (497) 1,646 (427)
Policy acquisition costs deferred....................................... (12,936) (16,327) (16,219)
Amortization of deferred policy acquisition costs....................... 18,595 19,250 12,279
Change in accrued investment income, and prepaid expenses and other
assets............................................................... (2,754) (7,201) 2,906
Change in other liabilities............................................. (36,233) 30,117 (12,946)
Change in deferred income taxes......................................... 1,715 5,318 19,841
Amortization of fixed maturity securities............................... 2,698 792 1,922
Change in current income taxes payable.................................. (32,681) 720 (30,827)
Net realized gains on investments....................................... (16,700) (15,022) (30,762)
---------- ---------- ---------
Net cash provided by operating activities............................... 60,340 143,524 94,546
---------- ---------- ---------
INVESTING ACTIVITIES:
Sales and maturities of fixed maturity securities......................... 741,604 891,643 836,103
Purchases of fixed maturity securities.................................... (848,843) (1,033,345) (891,108)
Purchases, sales and maturities of short-term investments, net............ (2,200) 17,193 (15,358)
Purchases of property and equipment, net.................................. (459) (854) (750)
---------- ---------- ---------
Net cash used in investing activities..................................... (109,898) (125,363) (71,113)
---------- ---------- ---------
FINANCING ACTIVITIES:
Capital Contributions..................................................... 49,500 -- --
Dividends paid............................................................ -- (17,500) (25,000)
---------- ---------- ---------
Net cash provided by financing activities................................. 49,500 (17,500) (25,000)
---------- ---------- ---------
(Decrease) Increase in cash............................................... (58) 661 (1,567)
Cash at beginning of year................................................. 860 199 1,766
---------- ---------- ---------
Cash at end of year....................................................... $ 802 $ 860 $ 199
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes to financial statements.
A-5
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
Financial Guaranty Insurance Company (the 'Company') is a wholly-owned
insurance subsidiary of FGIC Corporation (the 'Parent'). The Parent is owned
approximately ninety-nine percent by General Electric Capital Corporation ('GE
Capital') and approximately one percent by Sumitomo Marine and Fire Insurance
Company, Ltd. The Company provides financial guaranty insurance on newly issued
municipal bonds and municipal bonds trading in the secondary market, the latter
including bonds held by unit investment trusts and mutual funds. The Company
also insures structured debt issues outside the municipal market. Approximately
86% of the business written since inception by the Company has been municipal
bond insurance.
The Company insures only those securities that, in its judgment, are of
investment grade quality. Municipal bond insurance written by the Company
insures the full and timely payment of principal and interest when due on
scheduled maturity, sinking fund or other mandatory redemption and interest
payment dates to the holders of municipal securities. The Company's insurance
policies do not provide for accelerated payment of the principal of, or interest
on, the bond insured in the case of a payment default. If the issuer of a
Company-insured bond defaults on its obligation to pay debt service, the Company
will make scheduled interest and principal payments as due and is subrogated to
the rights of bondholders to the extent of payments made by it.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared on the basis of
generally accepted accounting principles ('GAAP') which differ in certain
respects from the accounting practices prescribed or permitted by regulatory
authorities (see Note 3). The prior years financial statements have been
reclassified to conform to the 1997 presentation. Significant accounting
policies are as follows:
Investments
The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards No. 115 ('SFAS 115'), 'Accounting for Certain
Investments in Debt and Equity Securities.' The Statement defines three
categories for classification of debt securities and the related accounting
treatment for each respective category. The Company has determined that its
fixed maturity securities portfolio should be classified as available-for-sale.
Under SFAS 115, securities held as available-for-sale are recorded at fair value
and unrealized holding gains/losses are recorded as a separate component of
stockholder's equity, net of applicable income taxes.
Short-term investments are carried at cost, which approximates fair value.
Bond discounts and premiums are amortized over the remaining terms of the
securities. Realized gains or losses on the sale of investments are determined
on the basis of specific identification.
Premium Revenue Recognition
Premiums for policies where premiums are collected in a single payment at
policy inception are earned over the period at risk, based on the total exposure
outstanding at any point in time. Financial guaranty insurance policies exposure
generally declines according to predetermined schedules. For policies with
premiums that are collected periodically, premiums are reflected in income pro
rata over the period covered by the premium payment.
A-6
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Policy Acquisition Costs
Policy acquisition costs include only those expenses that relate directly
to premium production. Such costs include compensation of employees involved in
underwriting, marketing and policy issuance functions, rating agency fees, state
premium taxes and certain other underwriting expenses, offset by ceding
commission income on premiums ceded to reinsurers (see Note 6). Net acquisition
costs are deferred and amortized over the period in which the related premiums
are earned. Anticipated loss and loss adjustment expenses are considered in
determining the recoverability of acquisition costs.
Loss and Loss Adjustment Expenses
Provision for loss and loss adjustment expenses is made in an amount equal
to the present value of unpaid principal and interest and other payments due
under insured risks at the balance sheet date for which, in management's
judgment, the likelihood of default is probable. Such reserves amounted to $76.9
million and $72.6 million at December 31, 1997 and 1996, respectively. As of
December 31, 1997 and 1996, such reserves included $35.1 million and $28.9
million, respectively, established based on an evaluation of the insured
portfolio in light of current economic conditions and other relevant factors. As
of December 31, 1997 and 1996, case-basis loss and loss adjustment expense
reserves were $41.8 million and $43.7 million, respectively. Loss and loss
adjustment expenses include amounts discounted at an interest rate between 5.9%
and 6.0% in 1997 and between 6.5% and 6.6% in 1996. The discount rate used is
based upon the risk free rate for the average maturity of the applicable bond
sector. The reserve for loss and loss adjustment expenses is necessarily based
upon estimates, however, in management's opinion the reserves for loss and loss
adjustment expenses is adequate. However, actual results will likely differ from
those estimates.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. These temporary differences relate principally to unrealized gains
(losses) on fixed maturity securities available-for-sale, premium revenue
recognition, deferred acquisition costs and deferred compensation. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Financial guaranty insurance companies are permitted to deduct from taxable
income, subject to certain limitations, amounts added to statutory contingency
reserves (see Note 3). The amounts deducted must be included in taxable income
upon their release from the reserves or upon earlier release of such amounts
from such reserves to cover excess losses as permitted by insurance regulators.
The amounts deducted are allowed as deductions from taxable income only to the
extent that U.S. government non-interest bearing tax and loss bonds are
purchased and held in an amount equal to the tax benefit attributable to such
deductions.
Property and Equipment
Property and equipment consists of furniture, fixtures, equipment and
leasehold improvements which are recorded at cost and are charged to income over
their estimated service lives. Office furniture and equipment are depreciated
straight-line over five years. Leasehold improvements are amortized over their
estimated service life or over the life of the lease, whichever is shorter.
Computer equipment and software are depreciated over three years. Maintenance
and repairs are charged to expense as incurred.
A-7
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Foreign Currency Translation
The Company has established foreign branches in France and the United
Kingdom and determined that the functional currencies of these branches are
local currencies. Accordingly, the assets and liabilities of these foreign
branches are translated into U.S. dollars at the rates of exchange existing at
December 31, 1997 and 1996 and revenues and expenses are translated at average
monthly exchange rates. The cumulative translation loss at December 31, 1997 and
1996 was $0.7 million and $0.4 million, respectively, net of tax, and is
reported as a separate component of stockholder's equity.
3. STATUTORY ACCOUNTING PRACTICES
The financial statements are prepared on the basis of GAAP, which differs
in certain respects from accounting practices prescribed or permitted by state
insurance regulatory authorities. The following are the significant ways in
which statutory-basis accounting practices differ from GAAP:
(a) premiums are earned directly in proportion to the scheduled
principal and interest payments rather than in proportion to the total
exposure outstanding at any point in time.
(b) policy acquisition costs are charged to current operations as
incurred rather than as related premiums are earned;
(c) a contingency reserve is computed on the basis of statutory
requirements for the security of all policyholders, regardless of whether
loss contingencies actually exist, whereas under GAAP, a reserve is
established based on an ultimate estimate of exposure;
(d) certain assets designated as non-admitted assets are charged
directly against surplus but are reflected as assets under GAAP, if
recoverable;
(e) federal income taxes are only provided with respect to taxable
income for which income taxes are currently payable, while under GAAP taxes
are also provided for differences between the financial reporting and the
tax bases of assets and liabilities;
(f) purchases of tax and loss bonds are reflected as admitted assets,
while under GAAP they are recorded as federal income tax payments; and
(g) all fixed income investments are carried at amortized cost rather
than at fair value for securities classified as available-for-sale under
GAAP.
A-8
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of net income and stockholder's equity
presented on a GAAP basis to the corresponding amounts reported on a
statutory-basis for the periods indicated below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1997 1996 1995
------------------------- ------------------------- -------------------------
NET STOCKHOLDER'S NET STOCKHOLDER'S NET STOCKHOLDER'S
INCOME EQUITY INCOME EQUITY INCOME EQUITY
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
GAAP basis amount........................ $173,803 $ 1,952,941 $177,609 $ 1,684,434 $187,878 $ 1,547,881
Premium revenue recognition.............. (4,924) (181,209) (9,358) (176,285) (22,555) (166,927)
Deferral of acquisition costs............ 5,659 (86,286) 2,923 (91,945) (3,940) (94,868)
Contingency reserve...................... -- (540,677) -- (460,973) -- (386,564)
Contingency reserve tax deduction (see
Note 2)................................ -- 95,185 -- 85,176 -- 78,196
Non-admitted assets...................... -- (2,593) -- (3,879) -- (5,731)
Case basis loss reserves................. 1,377 (1,872) (3,197) (3,249) 4,048 (52)
Portfolio loss reserves.................. 5,000 29,000 -- 24,000 (22,100) 24,000
Deferral of income taxes................. 1,715 72,260 5,317 70,719 19,842 64,825
Unrealized (gains) on fixed maturity
securities held at fair value, net of
tax.................................... -- (84,687) -- (39,160) -- (63,785)
Recognition of profit commission......... (1,203) (7,388) (441) (6,185) 3,096 (5,744)
Allocation of tax benefits due to
Parent's net operating loss to the
Company (see Note 5)................... 313 10,916 313 10,603 (637) 10,290
-------- ------------- -------- ------------- -------- -------------
Statutory-basis amount.............. $181,740 $ 1,255,590 $173,166 $ 1,093,256 $166,906 $ 1,001,521
-------- ------------- -------- ------------- -------- -------------
-------- ------------- -------- ------------- -------- -------------
</TABLE>
A-9
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENTS
Investments in fixed maturity securities carried at fair value of $3.1
million and $3.1 million as of December 31, 1997 and 1996, respectively, were on
deposit with various regulatory authorities as required by law.
The amortized cost and fair values of short-term investments and of
investments in fixed maturity securities classified as available-for-sale are as
follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
1997 COST GAINS LOSSES VALUE
- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $ 11,539 $ 185 $ -- $ 11,724
Obligations of states and political subdivisions............. 2,272,225 130,183 655 2,401,753
Debt securities issued by foreign governments................ 29,694 603 28 30,269
---------- ---------- ---------- ----------
Investments available-for-sale............................... 2,313,458 130,971 683 2,443,746
Short-term investments....................................... 76,039 -- -- 76,039
---------- ---------- ---------- ----------
Total........................................................ $2,389,497 $ 130,971 $683 $2,519,785
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The amortized cost and fair values of short-term investments and of
investments in fixed maturity securities available-for-sale at December 31,
1997, by contractual maturity date, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
1997 COST VALUE
- ---- ---------- ----------
<S> <C> <C>
Due in one year or less........................................... $ 85,199 $ 85,395
Due after one year through five years............................. 61,168 62,955
Due after five years through ten years............................ 589,772 619,972
Due after ten years through twenty years.......................... 1,604,167 1,700,193
Due after twenty years............................................ 49,191 51,270
---------- ----------
Total............................................................. $2,389,497 $2,519,785
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
1996 COST GAINS LOSSES VALUE
- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $ 57,987 $ 373 $ 1 $ 58,359
Obligations of states and political subdivisions............. 2,098,486 65,254 4,854 2,158,886
Debt securities issued by foreign governments................ 33,830 -- 526 33,304
---------- ---------- ---------- ----------
Investments available-for-sale............................... 2,190,303 65,627 5,381 2,250,549
Short-term investments....................................... 73,839 -- -- 73,839
---------- ---------- ---------- ----------
Total........................................................ $2,264,142 $ 65,627 $5,381 $2,324,388
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
In 1997, 1996 and 1995, proceeds from sales and maturities of investments
in fixed maturity securities available-for-sale carried at fair value were
$741.6 million, $891.6 million, and $836.1 million, respectively. For 1997, 1996
and 1995 gross gains of $19.1 million, $19.8 million and $36.3 million
respectively, and gross losses of $2.4 million, $4.8 million and $5.5 million
respectively, were realized on such sales.
A-10
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENTS--(CONTINUED)
Net investment income of the Company is derived from the following sources
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income from fixed maturity securities $122,372 $119,290 $112,684
Income from short-term investments........................................... 6,366 6,423 8,450
-------- -------- --------
Total investment income...................................................... 128,738 125,713 121,134
Investment expenses.......................................................... 965 1,078 736
-------- -------- --------
Net investment income........................................................ $127,773 $124,635 $120,398
-------- -------- --------
-------- -------- --------
</TABLE>
As of December 31, 1997, the Company did not have more than 10% of its
investment portfolio concentrated in a single issuer or industry.
5. INCOME TAXES
The Company files a federal tax return as part of the consolidated return
of General Electric Capital Corporation ('GE Capital'). Under a tax sharing
agreement with GE Capital, taxes are allocated to the Company and the Parent
based upon their respective contributions to consolidated net income. The
Company also has a separate tax sharing agreement with its Parent. Under this
agreement the Company can utilize its Parent's net operating loss to offset
taxable income on a stand-alone basis. The Company's effective federal corporate
tax rate (19.0 percent in 1997, 20.8 percent in 1996 and 20.6 percent in 1995)
is less than the corporate tax rate on ordinary income of 35 percent in 1997,
1996 and 1995.
Federal income tax expense relating to operations of the Company for 1997,
1996 and 1995 is comprised of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current tax expense.......................................................... $ 39,133 $ 41,548 $ 28,913
Deferred tax expense......................................................... 1,715 5,318 19,841
-------- -------- --------
Federal income tax expense................................................... $ 40,848 $ 46,866 $ 48,754
-------- -------- --------
-------- -------- --------
</TABLE>
The following is a reconciliation of federal income taxes computed at the
statutory rate and the provision for federal income taxes (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income taxes computed on income before provision for federal income taxes, at
the statutory rate......................................................... $ 75,128 $ 78,566 $ 82,821
Tax effect of:
Tax-exempt interest........................................................ (34,508) (32,609) (30,630)
Other, net................................................................. 228 909 (3,437)
-------- -------- --------
Provision for income taxes................................................... $ 40,848 $ 46,866 $ 48,754
-------- -------- --------
-------- -------- --------
</TABLE>
A-11
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax liability or asset at December 31, 1997 and
1996 are presented below (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Loss reserves................................................................. $ 10,999 $ 9,249
Deferred compensation......................................................... 2,242 2,531
Tax over book capital gains................................................... 2,996 2,144
Other......................................................................... 2,260 2,601
-------- --------
Total gross deferred tax assets................................................. 18,497 16,525
-------- --------
Deferred tax liabilities:
Unrealized gains on fixed maturity securities, available-for-sale............. 45,601 21,086
Deferred acquisition costs.................................................... 30,200 32,181
Premium revenue recognition................................................... 40,103 37,159
Rate differential on tax and loss bonds....................................... 9,454 9,454
Other......................................................................... 11,661 8,450
-------- --------
Total gross deferred tax liabilities............................................ 137,019 108,330
-------- --------
Net deferred tax liability...................................................... $118,522 $ 91,805
-------- --------
-------- --------
</TABLE>
Based upon the level of historical taxable income, projections of future
taxable income over the periods in which the deferred tax assets are deductible
and the estimated reversal of future taxable temporary differences, the Company
believes it is more likely than not that it will realize the benefits of these
deductible differences and has not established a valuation allowance at December
31, 1997 and 1996. The Company anticipates that the related deferred tax asset
will be realized based on future profitable business.
Total federal income tax payments during 1997, 1996 and 1995 were $71.8
million, $33.9 million, and $59.8 million, respectively.
6. REINSURANCE
The Company reinsures portions of its risk with other insurance companies
through quota share reinsurance treaties and, where warranted, on a facultative
basis. This process serves to limit the Company's exposure on risks
underwritten. In the event that any or all of the reinsuring companies were
unable to meet their obligations, the Company would be liable for such defaulted
amounts. The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from activities or economic
characteristics of the reinsurers to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under reinsurance
agreements in the form of letters of credit and trust agreements in various
amounts with various reinsurers totaling $37.0 million that can be drawn on in
the event of default.
Net premiums earned are presented net of ceded earned premiums of $33.3
million, $23.7 million and $21.9 million for the years ended December 31, 1997,
1996 and 1995, respectively. Loss and loss adjustment expenses incurred are
presented net of ceded losses of $0.2 million, $(0.8) million and $1.1 million
for the years ended December 31, 1997, 1996 and 1995, respectively.
A-12
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. LOSS AND LOSS ADJUSTMENT EXPENSES
Activity in the reserve for loss and loss adjustment expenses is summarized
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1,........................................................ $ 72,616 $ 77,808 $ 98,746
Less reinsurance recoverable............................................... 7,015 (7,672) 14,472
-------- -------- --------
Net balance at January 1,.................................................. 65,601 70,136 84,274
Incurred related to:
Current year................................................................. 1,047 -- 26,681
Prior years.................................................................. 6,492 2,389 (1,207)
Portfolio reserves........................................................... 5,000 -- (33,900)
-------- -------- --------
Total Incurred............................................................... 12,539 2,389 (8,426)
-------- -------- --------
Paid related to:
Current year................................................................. (1,047) -- (197)
Prior years.................................................................. (8,387) (6,924) (5,515)
-------- -------- --------
Total Paid................................................................... (9,434) (6,924) (5,712)
-------- -------- --------
Net balance at December 31,.................................................. 68,706 65,601 70,136
Plus reinsurance recoverable................................................. 8,220 7,015 7,672
-------- -------- --------
Balance at December 31,...................................................... $ 76,926 $ 72,616 $ 77,808
-------- -------- --------
-------- -------- --------
</TABLE>
The changes in incurred portfolio and case reserves principally relates to
business written in prior years. The changes are based upon an evaluation of the
insured portfolio in light of current economic conditions and other relevant
factors.
8. RELATED PARTY TRANSACTIONS
The Company has various agreements with subsidiaries of General Electric
Company ('GE') and GE Capital. These business transactions include appraisal
fees and due diligence costs associated with underwriting structured finance
mortgage-backed security business; payroll and office expenses incurred by the
Company's international branch offices but processed by a GE subsidiary;
investment fees pertaining to the management of the Company's investment
portfolio; and telecommunication service charges. Approximately $4.9 million,
$8.1 million and $3.2 million in expenses were incurred in 1997, 1996 and 1995,
respectively, related to such transactions.
The Company also insured certain non-municipal issues with GE Capital
involvement as sponsor of the insured securitization and/or servicer of the
underlying assets. For some of these issues, GE Capital also provides first loss
protection in the event of default. Gross premiums written on these issues
amounted to $0.5 million in 1997, $0.6 million in 1996, and $1.3 million in
1995. As of December 31, 1997, par outstanding on these deals before reinsurance
was $112.9 million.
The Company insures bond issues and securities in trusts that were
sponsored by affiliates of GE (approximately 1 percent of gross premiums
written) in 1997, 1996 and 1995.
9. COMPENSATION PLANS
Officers and other key employees of the Company participate in the Parent's
incentive compensation, deferred compensation and profit sharing plans. Expenses
incurred by the Company under compensation plans and bonuses amounted to $5.0
million, $4.5 million and $7.5 million in 1997, 1996 and 1995, respectively,
before deduction for related tax benefits.
A-13
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. DIVIDENDS
Under New York insurance law, the Company may pay a dividend only from
earned surplus subject to the following limitations: (a) statutory surplus after
such dividend may not be less than the minimum required paid-in capital, which
was $66.4 million in 1997 and 1996, and (b) dividends may not exceed the lesser
of 10 percent of its surplus or 100 percent of adjusted net investment income,
as defined by New York insurance law, for the 12 month period ending on the
preceding December 31, without the prior approval of the Superintendent of the
New York State Insurance Department. At December 31, 1997 and 1996, the amount
of the Company's surplus available for dividends was approximately $124.6
million and $91.8 million, respectively.
During 1997, 1996 and 1995, the Company paid dividends of $0.0, $17.5
million and $25.0 million, respectively.
11. CAPITAL CONTRIBUTION
During 1997, the Parent made a capital contribution of $49.5 million to the
Company.
12. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments:
Fixed Maturity Securities: Fair values for fixed maturity securities
are based on quoted market prices, if available. If a quoted market price
is not available, fair values is estimated using quoted market prices for
similar securities. Fair value disclosure for fixed maturity securities is
included in the balance sheets and in Note 4.
Short-Term Investments: Short-term investments are carried at cost,
which approximates fair value.
Cash, Receivable for Securities Sold, and Payable for Securities
Purchased: The carrying amounts of these items approximate their fair
values.
The estimated fair values of the Company's financial instruments at
December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial Assets
Cash On hand and in demand accounts.......... $ 802 $ 802 $ 860 $ 860
Short-term investments....................... $ 76,039 $ 76,039 $ 73,839 $ 73,839
Fixed maturity securities.................... $2,443,746 $2,443,746 $2,250,549 $2,250,549
</TABLE>
Financial Guaranties: The carrying value of the Company's financial
guaranties is represented by the unearned premium reserve, net of deferred
acquisition costs, and loss and loss adjustment expense reserves. Estimated fair
values of these guaranties are based on amounts currently charged to enter into
similar agreements (net of applicable ceding commissions), discounted cash flows
considering contractual revenues to be received adjusted for expected
prepayments, the present value of future obligations and estimated losses, and
current interest rates. The estimated fair values of such financial guaranties
range between $355.7 million and $382.6 million compared to a carrying value of
$456.8 million as of December 31, 1997 and between $358.7 million and $387.4
million compared to a carrying value of $487.8 million as of December 31, 1996.
A-14
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. FINANCIAL INSTRUMENTS--(CONTINUED)
Concentrations of Credit Risk
The Company considers its role in providing insurance to be credit
enhancement rather than credit substitution. The Company insures only those
securities that, in its judgment, are of investment grade quality. The Company
has established and maintains its own underwriting standards that are based on
those aspects of credit that the Company deems important for the particular
category of obligations considered for insurance. Credit criteria include
economic and social trends, debt management, financial management and legal and
administrative factors, the adequacy of anticipated cash flows, including the
historical and expected performance of assets pledged for payment of securities
under varying economic scenarios and underlying levels of protection such as
insurance or overcollateralization.
In connection with underwriting new issues, the Company sometimes requires,
as a condition to insuring an issue, that collateral be pledged or, in some
instances, that a third-party guarantee be provided for a term of the obligation
insured by a party of acceptable credit quality obligated to make payment prior
to any payment by the Company. The types and extent of collateral pledged
varies, but may include residential and commercial mortgages, corporate debt,
government debt and consumer receivables.
As of December 31, 1997, the Company's total insured principal exposure to
credit loss in the event of default by bond issuers was $108.4 billion, net of
reinsurance of $31.6 billion. The Company's insured portfolio as of December 31,
1997 was broadly diversified by geography and bond market sector with no single
debt issuer representing more than 1% of the Company's principal exposure
outstanding, net of reinsurance.
As of December 31, 1997, the composition of principal exposure by type of
issue, net of reinsurance, was as follows (in millions):
<TABLE>
<CAPTION>
NET
PRINCIPAL
OUTSTANDING
-----------
<S> <C>
Municipal:
General obligation...................................................................... $ 57,244.4
Special revenue......................................................................... 35,526.8
Industrial revenue...................................................................... 405.7
Non-municipal........................................................................... 15,268.7
-----------
Total..................................................................................... $ 108,445.6
-----------
-----------
</TABLE>
The Company's gross and net exposure outstanding was $254,441.1 million and
$193,612.9 million, respectively, as of December 31, 1997.
As of December 31, 1997, the composition of principal exposure ceded to
reinsurers was as follows (in millions):
<TABLE>
<CAPTION>
CEDED
PRINCIPAL
OUTSTANDING
-----------
<S> <C>
Reinsurer:
Capital Re............................................................................... $14,909.1
Enhance Re............................................................................... 8,431.7
Other.................................................................................... 8,290.7
-----------
Total................................................................................. $31,631.5
-----------
-----------
</TABLE>
A-15
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. FINANCIAL INSTRUMENTS--(CONTINUED)
The Company is authorized to do business in 50 states, the District of
Columbia, and in the United Kingdom and France. Principal exposure outstanding
at December 31, 1997 by state, net of reinsurance, was as follows (in millions):
<TABLE>
<CAPTION>
NET
PRINCIPAL
OUTSTANDING
-----------
<S> <C>
California................................................................................ $ 12,308.1
Pennsylvania.............................................................................. 10,277.8
Florida................................................................................... 10,181.7
New York.................................................................................. 8,945.5
Illinois.................................................................................. 7,203.8
Texas..................................................................................... 6,072.4
Michigan.................................................................................. 4,526.3
New Jersey................................................................................ 4,476.2
Arizona................................................................................... 3,109.2
Ohio...................................................................................... 2,616.1
-----------
Sub-total................................................................................. 69,717.1
Other states.............................................................................. 38,421.7
International............................................................................. 306.8
-----------
Total..................................................................................... $ 108,445.6
-----------
-----------
</TABLE>
13. COMMITMENTS
Total rent expense was $2.4 million, $2.8 million and $2.2 million in 1997,
1996 and 1995, respectively. For each of the next five years and in the
aggregate as of December 31, 1997, the minimum future rental payments under
noncancellable operating leases having remaining terms in excess of one year
approximate (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------------------- -------
<S> <C>
1998......................................................................................... $ 2,909
1999......................................................................................... 2,909
2000......................................................................................... 2,909
2001......................................................................................... 2,911
2002......................................................................................... --
-------
Total minimum future rental payments......................................................... $11,638
-------
-------
</TABLE>
A-16
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
UNAUDITED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1998
<TABLE>
<S> <C>
Balance Sheets.............................................................................................. B-1
Statements of Income........................................................................................ B-2
Statements of Cash Flows.................................................................................... B-3
Notes to Unaudited Interim Financial Statements............................................................. B-4
</TABLE>
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Fixed maturity securities, available for sale, at fair value (amortized cost of
$2,439,765 in 1998 and $2,313,458 in 1997)......................................... $ 2,538,259 $2,443,746
Short-term investments, at cost, which approximates market........................... 74,599 76,039
Cash................................................................................. 1,068 802
Accrued investment income............................................................ 38,593 38,927
Reinsurance receivable............................................................... 7,581 8,220
Deferred policy acquisition costs.................................................... 84,225 86,286
Property, plant and equipment net of accumulated depreciation of $6,904 in 1998 and
$17,346 in 1997.................................................................... 2,469 3,142
Prepaid reinsurance premiums......................................................... 146,578 154,208
Prepaid expenses and other assets.................................................... 7,617 21,002
----------- ----------
Total assets.................................................................... $ 2,900,989 $2,832,372
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Unearned premiums.................................................................. $ 604,325 $ 628,553
Losses and loss adjustment expenses................................................ 61,170 76,926
Ceded reinsurance payable.......................................................... 1,178 3,932
Accounts payable and accrued expenses.............................................. 42,395 26,352
Current federal income taxes payable............................................... 49,114 19,335
Deferred federal income taxes payable.............................................. 108,190 118,522
Payable for securities purchased................................................... 29,213 5,811
----------- ----------
Total liabilities............................................................... 895,585 879,431
----------- ----------
Stockholder's Equity:
Common stock, par value $1,500 per share at June 30, 1998 and at December 31, 1997:
10,000 shares authorized, issued and outstanding................................ 15,000 15,000
Additional paid-in capital......................................................... 383,511 383,511
Accumulated other comprehensive income, net of tax................................. 63,517 83,935
Retained earnings.................................................................. 1,543,376 1,470,495
----------- ----------
Total stockholder's equity...................................................... 2,005,404 1,952,941
----------- ----------
Total liabilities and stockholder's equity...................................... $ 2,900,989 $2,832,372
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to unaudited interim financial statements
B-1
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
1998
------------------------
(UNAUDITED)
<S> <C>
REVENUES
Gross premiums written............................................................... $ 46,221
Ceded premiums....................................................................... (4,818)
--------
Net premiums written............................................................... 41,403
Decrease in net unearned premiums.................................................... 16,654
--------
Net premiums earned................................................................ 58,057
Net investment income................................................................ 66,023
Net realized gains................................................................... 25,773
--------
Total revenues..................................................................... 149,853
--------
EXPENSES
Losses and loss adjustment expenses.................................................. 3,381
Policy acquisition costs............................................................. 10,576
Other underwriting expenses.......................................................... 9,426
--------
Total expenses..................................................................... 23,383
--------
Income before provision for federal income taxes..................................... 126,470
Provision for federal income taxes................................................... 28,589
--------
Net income......................................................................... $ 97,881
--------
--------
<CAPTION>
1997
------------------------
(UNAUDITED)
<S> <C>
REVENUES
Gross premiums written............................................................... $ 46,339
Ceded premiums....................................................................... (11,668)
--------
Net premiums written............................................................... 34,671
Decrease in net unearned premiums.................................................... 23,982
--------
Net premiums earned................................................................ 58,653
Net investment income................................................................ 63,518
Net realized gains................................................................... 9,127
--------
Total revenues..................................................................... 131,298
--------
EXPENSES
Losses and loss adjustment expenses.................................................. 1,063
Policy acquisition costs............................................................. 7,525
Other underwriting expenses.......................................................... 7,949
--------
Total expenses..................................................................... 16,537
--------
Income before provision for federal income taxes..................................... 114,761
Provision for federal income taxes................................................... 24,733
--------
Net income......................................................................... $ 90,028
--------
--------
</TABLE>
See accompanying notes to unaudited interim financial statements
B-2
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1998 1997
-------------------------------
(UNAUDITED)
<S> <C> <C>
Operating activities:
Net income........................................................................... $ 97,881 $ 90,028
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for deferred income taxes............................................. 663 1,586
Amortization of fixed maturity securities....................................... 1,886 671
Policy acquisition costs deferred............................................... (8,515) (6,979)
Amortization of deferred policy acquisition costs............................... 10,576 7,525
Depreciation of fixed assets.................................................... 732 1,267
Change in reinsurance receivable................................................ 639 (62)
Change in prepaid reinsurance premiums.......................................... 7,630 1,977
Foreign currency translation adjustment......................................... 382 (380)
Change in accrued investment income, prepaid expenses and other assets.......... 13,719 4,090
Change in unearned premiums..................................................... (24,228) (25,959)
Change in losses and loss adjustment expense reserves........................... (15,756) (2,500)
Change in other liabilities..................................................... 13,289 (25,679)
Change in current income taxes payable.......................................... 29,779 (27,208)
Net realized gains on investments............................................... (25,773) (9,127)
---------- ----------
Net cash provided by operating activities.......................................... 102,904 9,250
---------- ----------
Investing activities:
Sales or maturities of fixed maturity securities................................... 431,647 425,102
Purchases of fixed maturity securities............................................. (535,726) (419,674)
Sales or maturities (purchases) of short-term investments, net..................... 1,441 (12,863)
Purchases of property and equipment, net........................................... -- (484)
---------- ----------
Net cash used for investing activities............................................... (102,638) (7,919)
Increase in cash..................................................................... 266 1,331
Cash at beginning of period.......................................................... 802 860
---------- ----------
Cash at end of period................................................................ $ 1,068 $ 2,191
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to unaudited interim financial statements
B-3
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim financial statements of Financial Guaranty Insurance Company
(the Company) in this report reflect all adjustments necessary, in the opinion
of management, for a fair statement of (a) results of operations for the six
months ended June 30, 1998 and 1997, (b) the financial position at June 30, 1998
and December 31, 1997, and (c) cash flows for the six months ended June 30, 1998
and 1997.
These interim financial statements should be read in conjunction with the
financial statements and related notes included in the 1997 audited financial
statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. STATUTORY ACCOUNTING PRACTICES
The financial statements are prepared on the basis of GAAP, which differs
in certain respects from accounting practices prescribed or permitted by state
insurance regulatory authorities. The following are the significant ways in
which statutory basis accounting practices differ from GAAP:
(a) premiums are earned directly in proportion to the scheduled
principal and interest payments rather than in proportion to the total
exposure outstanding at any point in time;
(b) policy acquisition costs are charged to current operations as
incurred rather than as related premiums are earned;
(c) a contingency reserve is computed on the basis of statutory
requirements for the security of all policyholders, regardless of whether
loss contingencies actually exist, whereas under GAAP, a reserve is
established based on an ultimate estimate of exposure;
(d) certain assets designated as "non-admitted assets" are charged
directly against surplus but are reflected as assets under GAAP, if
recoverable;
(e) federal income taxes are only provided with respect to taxable
income for which income taxes are currently payable, while under GAAP taxes
are also provided for differences between the financial reporting and tax
bases of assets and liabilities;
(f) purchases of tax and loss bonds are reflected as admitted assets,
while under GAAP they are recorded as federal income tax payments; and
(g) all fixed income investments are carried at amortized cost, rather
than at fair value for securities classified as "Available for Sale" under
GAAP.
B-4
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998 AND 1997
(UNAUDITED)
2. STATUTORY ACCOUNTING PRACTICES--(CONTINUED)
The following is a reconciliation of the net income and stockholder's
equity of Financial Guaranty prepared on a GAAP basis to the corresponding
amounts reported on a statutory basis for the periods indicated below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------
1998 1997
------------------------ ------------------------
NET STOCKHOLDER'S NET STOCKHOLDER'S
INCOME EQUITY INCOME EQUITY
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
GAAP basis amount.................................... $97,881 $ 2,005,404 $90,028 $ 1,783,238
Premium revenue recognition.......................... (6,709) (187,918) (2,158) (178,443)
Deferral of acquisition costs........................ 2,061 (84,225) 545 (91,399)
Contingency reserve.................................. -- (567,350) -- (489,210)
Non-admitted assets.................................. -- (2,090) -- (3,369)
Case-basis losses incurred........................... 1,286 (586) (355) (3,604)
Portfolio loss reserves.............................. 1,400 30,400 -- 24,000
Deferral of income tax............................... 663 73,633 1,586 72,173
Unrealized gains on fixed maturity securities held at
fair value, net of taxes........................... -- (64,021) -- (48,183)
Profit commission.................................... 1,754 (5,635) (266) (6,452)
Contingency reserve tax deduction.................... -- 74,059 -- 95,185
Allocation of tax benefits due to Parent's net
operating loss to the Company...................... 106 11,022 156 10,759
------- ----------- ------- -----------
Statutory basis amount............................... $98,442 $ 1,282,693 $89,536 $ 1,164,695
------- ----------- ------- -----------
------- ----------- ------- -----------
</TABLE>
3. DIVIDENDS
Under New York Insurance Law, the Company may pay a dividend only from
earned surplus subject to the following limitations:
o Statutory surplus after dividends may not be less than the minimum
required paid-in capital, which was $66.4 million in 1997.
o Dividends may not exceed the lesser of 10 percent of its surplus or
100 percent of adjusted net investment income, as defined therein,
for the twelve month period ending on the preceding December 31,
without the prior approval of the Superintendent of the New York
State Insurance Department.
The amount of the Company's surplus available for dividends during 1998 is
approximately $128.3 million.
During 1998, the Company declared dividends of $25.0 million.
4. INCOME TAXES
The Company's effective Federal corporate tax rate (22.6 percent and 21.6
percent for the six months ended June 30, 1998 and 1997, respectively) is less
than the statutory corporate tax rate (35 percent in 1998 and 1997) on ordinary
income due to permanent differences between financial and taxable income,
principally tax-exempt interest.
B-5
<PAGE>
FINANCIAL GUARANTY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998 AND 1997
(UNAUDITED)
5. REINSURANCE
In accordance with Statement of Financial Accounting Standards No. 113
("SFAS 113"), "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts", the Company reports assets and liabilities relating to
reinsured contracts gross of the effects of reinsurance. Net premiums earned are
shown net of premiums ceded of $12.4 million and $13.6 million, respectively,
for the six months ended June 30, 1998 and 1997.
6. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standard Board issued statement
No. 130, "Reporting Comprehensive Income", which requires enterprises to
disclose comprehensive income and its components. Comprehensive income
encompasses all changes in shareholders' equity (except those arising from
transactions with shareholders) and includes net income, net unrealized capital
gains or losses on available-for-sale securities and foreign currency
translation adjustments, net of taxes. This new standard only changes the
presentation of certain information in the financial statements and does not
affect the Company's financial position or results of operations. The following
is a reconciliation of comprehensive income:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Net income............................................................. $ 97,881 $ 90,028
Other comprehensive income:
Change in unrealized investment gains, net of taxes.................. (20,666) 9,023
Change in foreign exchange gains, net of taxes....................... 248 (247)
-------- --------
Comprehensive income................................................... $ 77,463 $ 98,804
-------- --------
-------- --------
</TABLE>
B-6
