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FORM 10-K/A
United States Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from _____ to _____
Commission File Number: 0-26412
UNION ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1908796
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification Number)
or organization)
250 N. Shadeland Avenue, Indianapolis, IN 46219
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 317-231-6400
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: Class A Common
Stock, without par value
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405,
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( X )
The aggregate market value of the 4,047,351 shares of the issuer's Class A
Common Stock held by non-affiliates, as of September 23, 1998, was $21,754,512.
There is no trading market for the issuer's Class B Common Stock.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
The number of shares of Class A Common Stock of the Registrant, without par
value, outstanding as of September 23, 1998, was 4,376,446 shares. The number of
shares of Class B Common Stock of the Registrant, without par value, as of such
date was 8,855,036.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1998 Annual Meeting of Shareholders are
incorporated into Part III.
<PAGE>
Item 6, 7A and 8 of the Registrant's annual report, on Form 10-K for the year
ended June 30, 1998 as filed September 28, 1998, are included with this
amendment to make several technical corrections. Additionally, Exhibit 23, the
consent of KPMG Peat Marwick LLP, which was inadvertently omitted, is filed
herewith.
Item 6. Selected Consolidated Financial Data
- ---------------------------------------------
The following table sets forth certain selected consolidated financial
information reflecting the consolidated operations and financial condition of
the Company for each year in the five year period ended June 30, 1998. This data
should be read in conjunction with the Company's consolidated financial
statements and related notes thereto and "Item 7. Management's Discussion and
Analysis of Results of Operations and Financial Condition" included herein. As
described more fully in the notes to Consolidated Financial Statements, this
report contains financial information which has been restated to correct the
June 30, 1997 valuation of Retained Interest in Securitized Assets.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Interest income $ 33,727 $ 40,299 $ 34,160 $ 18,638 $ 14,260
Interest expense(1) 26,107 25,688 22,275 12,961 7,769
---------------------------------------------------------------------
Net interest margin 7,620 14,611 11,885 5,677 6,491
Provision for estimated
credit losses 8,050 4,188 2,875 1,074 484
---------------------------------------------------------------------
Net interest margin (deficit) after provision (430) 10,423 9,010 4,603 6,007
Gain (loss) on sales of loans, net (11,926) 963 30,357 8,684 4,643
Servicing fees, net 26,137 25,344 16,926 14,628 11,570
Other 4,087 3,820 3,096 2,783 2,735
---------------------------------------------------------------------
Total revenues 17,868 40,550 59,389 30,698 24,955
Operating expenses 35,546 30,502 23,841 14,913 8,995
---------------------------------------------------------------------
Earnings (loss) before provision for income taxes (17,678) 10,048 35,548 15,785 15,960
Provision (benefit) for income taxes (7,856) 4,166 14,406 6,396 6,384
---------------------------------------------------------------------
Net earnings (loss) $ (9,822) $ 5,882 $ 21,142 $ 9,389 $9,576
=====================================================================
Operating Data:
Tier I auto receivables acquired $944,725 $1,076,064 $ 994,834 $766,972 $614,627
Tier II auto receivables acquired 24,027 39,610 36,030 21,511 -
Marine receivables acquired 2,515 6,590 50 - -
---------------------------------------------------------------------
Total receivables acquired (dollars) $971,267 $1,122,264 $1,030,914 $788,483 $614,627
=====================================================================
Tier I auto receivables acquired 64,152 75,844 71,070 58,409 49,307
Tier II auto receivables acquired 1,746 3,050 2,870 1,770 -
Marine receivables acquired 200 496 6 - -
---------------------------------------------------------------------
Total receivables acquired (number of loans) 66,098 79,390 73,946 60,179 49,307
=====================================================================
Tier I auto loans securitized $919,455 $1,183,190 $ 890,110 $658,703 $617,103
Tier II auto loans securitized
28,659 31,108 34,488 - -
---------------------------------------------------------------------
Total auto loans securitized $948,114 $1,214,298 $ 924,598 $658,703 $617,103
=====================================================================
Ratio of operating expenses as a % of
average servicing portfolio 1.78% 1.67% 1.73% 1.49% 1.21%
Servicing fees, net, as a % of operating
expenses 73.53% 83.09% 71.00% 98.09% 128.63%
Tier I credit losses as a % of avg. servicing portfolio 2.80% 2.40% 1.58% 1.36% 0.69%
Tier II credit losses as a % of avg. servicing portfolio 7.67% 5.18% 2.37% 2.97% N/A
Marine credit losses as a % of avg. servicing portfolio 1.12% 0.25% N/A N/A N/A
Tier I delinquencies of 30 days or more as a
% of servicing portfolio 3.07% 2.96% 1.84% 1.40% 1.40%
Tier II delinquencies of 30 days or more as a
% of servicing portfolio 8.29% 6.18% 3.35% 1.25% N/A
Marine deliquencies of 30 days or more as a
% of servicing portfolio N/A 0.10% N/A N/A N/A
</TABLE>
<PAGE>
Item 6. Selected Consolidated Financial Data (Continued)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
At June 30, 1998 1997 1996 1995 1994
- ----------- ---- ---- ---- ---- ----
(Dollars in thousands)
Balance Sheet Data(2):
<S> <C> <C> <C> <C> <C>
Loans, net $118,259 $121,156 $259,290 $201,022 $ 96,101
Retained interest in securitized assets 171,593 170,791 147,024 118,076 78,598
Total assets 411,533 391,268 451,195 349,283 181,516
Due to Union Federal - - - 338,958 177,577
Amounts due under warehouse facilities 73,123 44,455 187,756 - -
Long-term debt 221,000 221,000 156,000 - -
Total shareholder equity(3) 82,473 86,848 78,624 2 2
Other Data:
Tier I auto servicing portfolio $1,978,920 $1,860,272 $1,548,538 $1,159,349 $843,245
Tier II auto servicing portfolio 66,855 68,289 47,062 19,858 -
Marine servicing portfolio - 6,227 50 - -
Other loans serviced 1,642 2,488 3,420 5,203 -
---------------------------------------------------------------------
Total servicing portfolio $2,047,417 $1,937,276 $1,599,070 $1,184,410 $ 843,245
=====================================================================
Average Tier I auto servicing portfolio 1,922,977 1,759,666 1,343,770 982,875 744,149
Average Tier II auto servicing portfolio 69,622 63,305 33,124 9,448 -
Average Marine servicing portfolio 6,920 2,357 NM - -
Other loans average servicing portfolio 1,941 2,799 4,222 6,643 -
---------------------------------------------------------------------
Total average servicing portfolio $2,001,460 $1,828,127 $1,381,116 $998,966 $744,149
=====================================================================
Number of Tier I auto loans serviced (at period end) 184,003 173,693 147,722 117,837 91,837
Number of Tier II auto loans serviced (at period end) 6,285 6,056 4,067 1,687 -
Number of Marine loans serviced (at period end) - 472 6 - -
Number of Other loans serviced (at period end) 256 402 537 836 -
---------------------------------------------------------------------
Total number of loans serviced (at period end)
190,544 180,623 152,332 120,360 91,837
Number of dealers
3,628 3,204 2,523 1,604 884
Number of employees (full-time equivalents)
529 387 313 215 142
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Interest expense for the years ended June 30, 1994 and 1995, was based
upon the average monthly balance "Due to Union Federal" at Union
Federal's all-inclusive cost of funds.
(2) All consolidated balance sheet amounts, except the amounts "Due to
Union Federal", represent actual recorded assets and liabilities of the
Company's business. The amount Due to Union Federal includes division
funding by Union Federal as well as inter-company funding.
(3) The consolidated financial statements reflect no allocation of Union
Federal's historical equity. Earnings of the Company are transferred to
Union Federal through the Due to Union Federal account at June 30,
1994, and 1995.
<PAGE>
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------- ----------------------------------------------------------
The Company bears the primary risk of loss due to defaults in its servicing
portfolio. Default and credit loss rates are impacted by general economic
factors that affect borrowers' ability to continue to make timely payments on
their indebtedness. Prepayments on loans in the servicing portfolio reduce the
size of the portfolio and reduce the Company's servicing income. The Gain on
Sales of Loans in connection with each securitization transaction and the amount
of Retained Interest recognized in each transaction reflect deductions for
estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted periodically to reflect differences between estimated
and actual credit losses and prepayments on past securitizations. For example,
if credit losses increased or decreased by 1.00%, the gain on sale of a $300.0
million securitization would result in a reduction or an increase of the Gain
(Loss) on Sales of Loans by $3.0 million pre-tax. The same 1.00% increase or
decrease would result in a reduction or an increase of the Retained Interest of
approximately $19.3 million as of June 30, 1998. The Company does not believe
fluctuations in interest rates materially affect the rate of prepayments on
loans. See "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition" and "Notes 1 and 4 of the Consolidated
Financial Statements."
The Company's sources of funds generally have variable rates of interest
and its loan portfolio bears interest at fixed rates. The Company therefore
bears interest rate risk on loans until they are securitized and employs a
hedging strategy to mitigate this risk. As a part of the hedging strategy, the
Company executes short sales of U.S. Treasury securities having a maturity
approximating the average maturity of loans to be acquired during the relevant
period. There is no assurance that this strategy will completely offset changes
in interest rates. In particular, such strategy depends on management's
estimates of loan acquisition volume. The Company realizes a gain on its hedging
transactions during periods of increasing interest rates and realizes a loss on
such transactions during periods of decreasing interest rates. The hedging gain
or loss will substantially offset changes in interest rates as seen by a lower
or higher reported gain on sales of loans, respectively. Recognition of
unrealized gains or losses is deferred until the sale of loans during the
securitization. On the date of the sale, hedging deferred gains and losses are
recognized as a component of gain on sales of loans. Increases or decreases in
interest rates reduce or increase the fair value of long-term debt,
respectively. See "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition" and "Notes 2 and 6 of the Consolidated
Financial Statements."
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
Independent Auditors' Report
The Board of Directors
Union Acceptance Corporation:
We have audited the accompanying consolidated balance sheets of Union Acceptance
Corporation and Subsidiaries as of June 30, 1998 and 1997, and the related
consolidated statements of earnings (loss) and comprehensive earnings (loss),
shareholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Union Acceptance
Corporation and Subsidiaries as of June 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1998 in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standard No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, on January 1, 1997.
As discussed in note 13 to the consolidated financial statements, the Company
has restated its June 30, 1997 consolidated financial statements to include an
other than temporary impairment adjustment of the retained interest in
securitized assets.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
August 27, 1998
Indianapolis, Indiana
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1998 and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Assets 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 75,612 58,801
Restricted cash 17,823 16,657
Loans, net 118,259 121,156
Accrued interest receivable 1,045 1,232
Property, equipment, and leasehold improvements, net 7,921 2,150
Retained interest in securitized assets 171,593 170,791
Other assets 19,280 20,481
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 411,533 391,268
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Amounts due under warehouse facilities 73,123 44,455
Long-term debt 221,000 221,000
Accrued interest payable 6,280 5,793
Amounts due to trusts 15,510 16,067
Dealer premiums payable 1,374 1,372
Deferred income tax payable 9,573 13,859
Other payables and accrued expenses 2,200 1,874
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 329,060 304,420
- ---------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, without par value, authorized 10,000,000 shares;
none issued and outstanding -- --
Class A common stock, without par value, authorized 30,000,000 shares;
4,376,446 and 4,016,788 shares issued and outstanding at June 30, 1998
and June 30, 1997, respectively 58,360 58,270
Class B common stock, without par value, authorized 20,000,000 shares;
8,855,036 and 9,200,000 shares issued and outstanding at June 30, 1998
and June 30, 1997, respectively -- --
Net unrealized gain on retained interest in securitized assets 7,609 2,252
Retained earnings 16,504 26,326
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 82,473 86,848
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 411,533 391,268
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
Years ended June 30, 1998, 1997, and 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on loans $ 27,871 33,914 28,712
Interest on spread accounts and restricted cash 5,856 6,385 5,448
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 33,727 40,299 34,160
Interest expense 26,107 25,688 22,275
- --------------------------------------------------------------------------------------------------------------------------
Net interest margin 7,620 14,611 11,885
Provision for estimated credit losses 8,050 4,188 2,875
- --------------------------------------------------------------------------------------------------------------------------
Net interest margin (deficit) after provision (430) 10,423 9,010
Gain (loss) on sales of loans, net (11,926) 963 30,357
Servicing fees, net 26,137 25,344 16,926
Other revenues 4,087 3,820 3,096
- --------------------------------------------------------------------------------------------------------------------------
Total revenues 17,868 40,550 59,389
- --------------------------------------------------------------------------------------------------------------------------
Salaries and benefits 19,427 15,673 11,985
Other expenses 16,119 14,829 11,856
- --------------------------------------------------------------------------------------------------------------------------
Total operating expenses 35,546 30,502 23,841
- --------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before provision (benefit) for income taxes (17,678) 10,048 35,548
Provision (benefit) for income taxes (7,856) 4,166 14,406
- --------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) (9,822) 5,882 21,142
- --------------------------------------------------------------------------------------------------------------------------
Other comprehensive earnings before taxes:
Net unrealized gain on retained interests in securitized assets 8,527 3,785 -
Income taxes related to items of other comprehensive earnings (3,170) (1,533) -
- --------------------------------------------------------------------------------------------------------------------------
Other comprehensive earnings, net of taxes 5,357 2,252 -
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive earnings (loss) $ (4,465) 8,134 21,142
==========================================================================================================================
Net earnings (loss) per common share (basic and diluted) $ (0.74) 0.45 1.60
==========================================================================================================================
Weighted average number of common shares outstanding 13,226,651 13,215,112 13,209,378
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the years ended June 30, 1998, 1997, and 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Net
Number of unrealized
common stock gain on
shares outstanding retained Total
--------------------------------------- Common interest in Retained shareholders'
Class A Class B stock securitized earnings equity
assets
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1995 1 1 $ 2 - - 2
Issuance of common
stock through initial
public offering 4,000,000 9,200,000 58,000 - - 58,000
Regulatory equity
distributions related
to spin-off (1) (1) (2) - (698) (700)
Grants of common stock 11,358 - 180 - - 180
Net earnings - - - - 21,142 21,142
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 4,011,358 9,200,000 58,180 - 20,444 78,624
Grants of common stock 5,430 - 90 - - 90
Net earnings - - - - 5,882 5,882
Net change in unrealized
gain on retained interest
in securitized assets - - - 2,252 - 2,252
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 4,016,788 9,200,000 58,270 2,252 26,326 86,848
Grants of common stock 14,694 - 90 - - 90
Conversion of Class B
common stock into
Class A common stock 344,964 (344,964) - - - -
Net loss - - - - (9,822) (9,822)
Net change in unrealized
gain on retained interest
in securitized assets - - - 5,357 - 5,357
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 4,376,446 8,855,036 $ 58,360 7,609 16,504 82,473
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1998, 1997, and 1996
(in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings (loss) $ (9,822) 5,882 21,142
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Loan originations in excess of liquidations (953,252) (1,087,065) (982,800)
Dealer premiums paid in excess of dealer premium
rebates received on loans held for sale (40,526) (53,461) (50,059)
Securitization of loans held for sale 948,114 1,214,298 924,598
Gain on sales of loans (19,253) (46,713) (37,900)
Proceeds on sale of interest only strip 13,869 31,773 26,686
Return of excess and servicing asset cash flows,
net of present value effect 23,347 24,738 37,871
Impairment of retained interest in securitized assets 23,636 34,828 --
Provision for estimated credit losses 8,050 4,188 2,875
Amortization and depreciation 4,689 3,979 4,395
Spread accounts 3,631 (8,154) (6,176)
Restricted cash (1,166) (1,868) (5,934)
Other assets and accrued interest receivable (2,425) (10,296) (6,788)
Amounts due to trusts (557) 8,136 2,030
Other payables and accrued expenses (3,383) 5,697 14,281
- ------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (5,048) 125,962 (55,779)
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property, equipment, and leasehold improvements (6,809) (967) (1,347)
- ------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in warehouse credit facilities 28,668 (143,301) 187,756
Proceeds from issuance of senior notes -- 65,000 110,000
Proceeds from issuance of senior subordinated notes -- -- 46,000
Payment of borrowing fees -- (1,352) (3,231)
Net proceeds from issuance of common stock -- -- 58,000
Net change in due to Union Federal, including
regulatory equity distribution -- -- (337,423)
- ------------------------------------------------------------------------------------------------------
Net cash provided (used) from financing activities 28,668 (79,653) 61,102
- ------------------------------------------------------------------------------------------------------
Change in cash 16,811 45,342 3,976
Cash, beginning of year 58,801 13,459 9,483
- ------------------------------------------------------------------------------------------------------
Cash, end of year $ 75,612 58,801 13,459
=======================================================================================================
Supplemental disclosures of cash flow information:
Income taxes paid $ 22 4,288 10,680
=======================================================================================================
Interest paid $ 26,472 26,475 15,648
=======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998, 1997, and 1996
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies
(a) Description of Business
Union Acceptance Corporation ("UAC") is an Indiana corporation formed in
December 1993. UAC and its subsidiaries (collectively, the Company)
engage primarily in the business of acquiring, securitizing, and
servicing retail automobile installment sales contracts originated by
dealerships affiliated with major domestic and foreign automobile
manufacturers. The Company currently acquires loans from a network of
over 3,600 manufacturer-franchised automobile dealerships in 32 states.
No individual dealer or group of affiliated dealers accounted for more
than 1.9% of the Company's loan acquisitions during the year ended June
30, 1998.
The Company's lending program focuses on acquiring two levels of loan
quality. Primarily, the Company acquires loans from borrowers who
exhibit a favorable credit profile ("Tier I" lending) purchasing late
model used and, to a lesser extent, new automobiles. The Company also
acquires loans from borrowers with adequate credit quality who would not
qualify for the Company's Tier I lending quality criteria ("Tier II"
lending). Tier II loan acquisitions accounted for 2.5% of total loan
acquisitions during fiscal 1998 and 3.3% of loan servicing portfolio at
June 30, 1998.
(b) Basis of Financial Statement Presentation
The consolidated financial statements included the accounts of UAC and
its wholly-owned subsidiaries, Union Acceptance Funding Corporation, UAC
Securitization Corporation, Performance Funding Corporation, Performance
Securitization Corporation, UAC Boat Funding Corp., UAC Finance
Corporation, Circle City Car Company, and Union Acceptance Receivables
Corporation.
All significant intercompany balances and transactions have been
eliminated in the consolidation. The consolidated financial statements
have been prepared in conformity with generally accepted accounting
principles and with those in the general practice of the consumer
finance industry. In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of 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 significantly from those
estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to the valuation of retained
interest in securitized assets, gain (loss) on sales of loans, net, and
the allowance for credit losses.
Priorto the UAC's initial public offering in August 1995, the Company
was a wholly-owned subsidiary of Union Federal Savings Bank of
Indianapolis Union Federal. The consolidated financial statements
reflect no allocation of Union Federal's historical equity. Earnings of
the Company were transferred to Union Federal through the Due to Union
Federal account prior to the spin-off.
(c) Cash
The Company considers all investments with a maturity of three months or
less when purchased to be cash equivalents.
(d) Restricted Cash
Restricted cash primarily consists of funds held in reserve accounts in
compliance with the terms of the Warehouse Facility Agreements.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(e) Loans, Net
All loans in the Company's Tier I and Tier II portfolios are held for
sale and include automobile, light-truck, van, and other loans including
dealer premiums (on Tier I loans). Such loans are packaged and sold
through asset-backed securitization transactions and are carried at
their principal amount outstanding (amortized cost) which approximates
the lower of cost or market, net of unearned discount. Interest on these
loans is accrued and credited to interest income based upon the daily
principal amount outstanding. The Company provides an allowance for
credit losses from the date of origination to the date of
securitization. The allowance is shown as a reduction to loans. The
Company accrues interest on loans until the earlier of an account being
charged-off or becoming 120 days delinquent.
Loans, net includes dealer premiums which are incentives paid to dealers
in connection with the acquisition of loans. Dealer premiums are
deferred in accordance with Statement of Financial Accounting Standards
No. 91, Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases. A
portion of the dealer premiums are refundable to the Company in the
event of loan prepayment or default.
On January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinquishments of Liabilities (SFAS 125). The
adoption of SFAS 125 had the effect of reducing fiscal 1997 net earnings
by $1,311,000 or $0.10 per share and increasing retained earnings by
$941,000.
(f) Accrued Interest Receivable
Accrued interest receivable represents interest earned but not
collected on loans held for sale.
(g) Property, Equipment, and Leasehold Improvements, Net
Property, equipment, and leasehold improvements are recorded at cost.
Depreciation is determined on accelerated methods over the estimated
useful lives of the respective assets.
(h) Retained Interest in Securitized Assets and Gain on Sales of Loans.
The Company acquires loans with the primary intention of reselling them
as asset-backed securities through securitizations. In the
securitization transactions, the Company sells a portfolio of loans to a
wholly owned subsidiary ("SPS") which has been established for the
limited purpose of buying and reselling the Company's loans. The SPS
transfers the same loans to a trust vehicle (the "Trust"), which issues
interest-bearing asset-backed securities (the "Certificates"). The
Certificates are generally sold to investors in the public market. The
Company provides credit enhancement for the benefit of the investors in
the form of a specific cash account ("Spread Account") held by the
Trust. The Spread Account is required by the servicing agreement (the
Company's servicing agreements are collectively referred to as the
"Pooling and Servicing Agreements") to be maintained at specified
levels.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
At the closing of each securitization, the Company allocates its basis
in the loans between the portion of the loans sold through the
certificates and the portion of the loans retained from the
securitizations ("Residuals" and "Servicing Assets") based on the
relative fair values of those portions at the date of the sale. The fair
value is based upon the cash proceeds received for the loans sold and
the estimated fair value of the Residuals and Servicing Assets.
Residuals consist of (a) the fair value of cash held in the Spread
Account and (b) the excess servicing receivables ("ESRs"). ESRs
represent the discounted cash flows to be received by the Trust in the
future and dealer premium rebates less a discounted allowance for
estimated credit losses. Servicing Assets represent the present value
benefit derived from retaining the right to service loans securitized in
excess of adequate servicer compensation. The excess of the cash
received over the basis allocated to the loans sold, less transaction
costs, and hedging gains and losses, equals the net gain on sale of
loans recorded by the Company.
The Company recognizes unrealized gains or losses attributable to the
change in the fair value of the Residuals, which are recorded as
"available-for-sale" securities, net of related income taxes as a
separate component of shareholders' equity until realized. The Company
is not aware of an active market for the purchase or sale of residuals,
and accordingly, the Company determines the estimated fair value of the
Residuals by discounting the expected cash flows released from the
Spread Account (the cash out method) using a discount rate which the
Company believes is commensurate with the risks involved. The Company
has utilized discount rates ranging from 9.00% to 11.50% on the
estimated cash flows released from the Spread Account to value the
Residuals.
The Annual Percentage Rate ("APR") on the loans is relatively high in
comparison to the pass through rate on the certificates, accordingly,
the Residuals described above are a significant asset of the Company. In
determining the fair value of the Residuals described above, the Company
must estimate the future rates of prepayments, delinquencies, defaults
and default loss severity as they impact the amount and timing of the
estimated cash flows. The Company estimates prepayments by evaluating
historical prepayment performance of comparable loans and the impact of
trends in the economy. The Company has used annual prepayment estimates
ranging from 20.0% to 26.5%. The Company estimates defaults and default
loss severity using available historical loss data for comparable loans
and the specific characteristics of the loans purchased by the Company.
The Company used default losses of 3.0% to 6.3% for Tier I loans and
12.0% to 15.0% for Tier II loans as a percentage of the original
principal balance over the life of the loans.
The Company receives periodic base servicing fees for the servicing and
collection of the loans. In addition, the Company is entitled to the
cash flows from the Residuals that represent collections on the loans in
excess of the amounts required to pay the Certificate principal and
interest, the base servicing fees and certain other fees such as credit
enhancement fees. In general, at the end of each collection period, the
aggregate cash collections from the loans are allocated first to the
base servicing fees, then to the Certificateholders for interest at the
pass-through rate on the certificates plus principal as defined in the
Pooling and Servicing Agreements, and finally to the credit enhancement
fees. If the amount of cash required for the above allocations exceeds
the amount collected during the collection period, the shortfall is
drawn from the Spread Account. If the cash collected during the period
exceeds the amount necessary for the above allocations, and the related
Spread Account is not at the required level, the excess cash collected
is retained in the Spread Account until the specified level is achieved.
The cash in the Spread Accounts is restricted from use by the Company.
Once the required Spread Account level is achieved, the excess is
released to the Company. Cash held in the various Spread Accounts is
invested in high quality liquid investment securities, as specified in
the Pooling and Servicing Agreements. The specified credit enhancement
levels are defined in the Pooling and Servicing Agreements as the Spread
Account balance expressed generally as a percentage of the current
collateral principal balance.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
An other than temporary impairment adjustment to the carrying value of
the Residuals may be required if the present value of an individual
Residual (the pool by pool method), discounted at a risk free rate, is
less than its carrying value. Other than temporary impairment
adjustments are recorded as a component of gain on sales of loans, net.
(i) Servicing Assets
Servicing Assets are the Company's present value benefit derived from
retaining the right to service loans securitized in excess of adequate
servicer compensation. Servicing Assets are recognized as a component of
gain on sales of loans, net. Accretion of related discount to present
value is recognized as a component of interest income.
Servicing Assets are carried at their amortized cost and is included in
other assets. Impairment is measured using relative fair value of the
individual Servicing Assets and recognized through a valuation
allowance. Impairment adjustments are recorded as a component of gain on
sales of loans, net.
(j) Common Stock
In election of directors, the holders of Class B Common Stock are
entitled to five votes per share and Class A Common Stock are entitled
to one vote per share. On all matters other than the election of
directors, holders of Class B and A have one vote per share and vote as
a single class.
The Company's charter provides that shares of Class B Common Stock
convert automatically to shares of Class A Common Stock on a
share-for-share basis upon transfer outside a prescribed group of
initial holders and certain affiliates. Pursuant to such provision,
344,964 shares of Class B Common Stock were converted to shares of Class
A Common Stock during fiscal 1998.
(k) 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 basis. 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.
(l) Amounts Due to Trusts
Amounts due to trusts represent monies collected but not paid to the
trustee for principal and interest remittances as well as recovery
payments in respect of securitized loans. All amounts collected by the
Company are remitted to the trustee within two business days, and
subsequently distributed by the trustee to the investors, servicer, and
credit enhancers on a monthly basis.
(m) Servicing Fees, Net
Servicing fees, net include the contractual fee, typically one percent
of loans serviced, earned from each trust plus the accretion of
discounted retained interest in securitized assets.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(n) Hedging
Loan production is hedged periodically to such time as the next
securitization is estimated to occur. Securitizations of the Tier I
portfolio occur approximately every three months. The primary hedging
vehicle is a short sale of Treasury Notes having a maturity
approximating the average maturity of the loan production during the
relevant period. At such time as a securitization is committed, the
hedge is covered by the purchase of a like volume of Treasury Notes.
Gains or losses on the hedge are recognized concurrently with the gain
or loss at securitization.
(o) Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, Earnings Per Share
(SFAS 128). SFAS 128 provides computation, presentation, and disclosure
requirements for earnings per share and supersedes Accounting Principles
Board Opinion 15. Basic EPS for fiscal 1998, 1997, and 1996 have been
computed on the basis of the weighted average number of common shares
outstanding. The effect of stock options not exercised during the
periods presented are anti-dilutive and therefore not included in
diluted earnings per share.
The initial public offering was completed on August 7, 1995. Shares
outstanding from August 7, 1995, through September 30, 1995, were
assumed to be outstanding for the entire three months ended September
30, 1995.
(p) Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130, Reporting Comprehensive Income
(SFAS 130), which establishes standards for reporting and displaying
comprehensive income and its components in the financial statements.
Comprehensive income is the total of net income and all nonowner changes
in equity. The Statement is effective for fiscal years beginning after
December 15, 1997 with earlier application permitted. The Company
elected to adopt SFAS 130 as of June 30, 1998, and the Statement had no
impact on the financial condition or results of operations.
(q) Reclassification
Certain amounts for the prior periods have been reclassified to conform
to the current presentation.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(2) Loans, Net
Loans, net are as follows (in thousands, except average loan balance) at:
- --------------------------------------------------------------------------------
June 30,
-------------------------
1998 1997
- --------------------------------------------------------------------------------
Principal balance of Tier I loans held for sale,
net of unearned discount $ 108,159 90,331
Principal balance of Tier II loans held for sale,
net of unearned discount 7,624 19,829
Other loans held for sale 171 6,227
Loans in process (154) 1,189
Dealer premiums 4,375 4,360
Allowance for credit losses (1,916) (780)
- --------------------------------------------------------------------------------
$ 118,259 121,156
- --------------------------------------------------------------------------------
Activity in the allowance for credit losses on loans held for sale (in
thousands):
- --------------------------------------------------------------------------------
Year ended June 30,
----------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
Balance at the beginning of the period $ 780 1,099 453
Charge-offs (10,635) (7,361) (4,556)
Recoveries 3,721 2,854 2,327
Provision for estimated credit losses 8,050 4,188 2,875
- -------------------------------------------------------------------------------
Balance at the end of the period $ 1,916 780 1,099
- -------------------------------------------------------------------------------
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Loans serviced are as follows (in thousands) at:
- --------------------------------------------------------------------------------
June 30,
--------------------------------
1998 1997
- --------------------------------------------------------------------------------
Loans held for sale:
Tier I (net of unearned discount) $ 108,159 90,331
Tier II (net of unearned discount) 7,624 19,829
Other 171 6,227
- --------------------------------------------------------------------------------
115,954 116,387
- --------------------------------------------------------------------------------
Securitized loan:
Tier I 1,870,750 1,769,903
Tier II 59,231 48,460
- --------------------------------------------------------------------------------
1,929,981 1,818,363
- --------------------------------------------------------------------------------
Other loans serviced 1,482 2,526
- --------------------------------------------------------------------------------
$ 2,047,417 1,937,276
================================================================================
Certain characteristics of loans serviced are as follows at:
- --------------------------------------------------------------------------------
June 30,
--------------------------------
1998 1997
- --------------------------------------------------------------------------------
Weighted average interest rate (Tier I) 13.09% 13.18%
Weighted average interest rate (Tier II) 19.03 19.62
Average loan balance (Tier I) 10,755 10,710
Average loan balance (Tier II) $ 10,637 11,276
- --------------------------------------------------------------------------------
During fiscal 1998, loan acquisitions relating to borrowers who reside
in Texas, California, and North Carolina totaled 12.5%, 11.6%, and 9.1%,
respectively, of all loans acquired. At June 30, 1998, borrowers who
reside in Texas, California, and North Carolina totaled 15.0%, 11.0%,
and 10.5%, respectively, of the loan servicing portfolio. A significant
adverse change in the economic climate in Texas, California, and North
Carolina or other states could result in fewer loans held for sale and
potentially less revenue.
Notional amounts and unrealized losses related to outstanding hedges
follow (in thousands) at:
- --------------------------------------------------------------------------------
June 30,
--------------------------------
1998 1997
- --------------------------------------------------------------------------------
Notional amounts outstanding $ 210,000 204,000
Unrealized losses on hedging transactions 394 909
- --------------------------------------------------------------------------------
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Notional amounts of $210 million were expected to be closed in September
1998 for the amounts outstanding at June 30, 1998, and $180 million, $18
million and $6 million were closed in September 1997, December 1997, and
March 1998, respectively, for amounts outstanding at June 30, 1997.
Hedging realized losses were approximately $2,669,000, $6,293,000, and
$2,733,000 during fiscal 1998, 1997, and 1996, respectively.
(3) Property, Equipment, and Leasehold Improvements, Net
Property, equipment, and leasehold improvements, net are as follows (in
thousands) at:
- --------------------------------------------------------------------------------
June 30,
-----------------------
1998 1997
- --------------------------------------------------------------------------------
Property, equipment, and leasehold improvements $ 11,410 4,724
Accumulated depreciation (3,489) (2,574)
- --------------------------------------------------------------------------------
$ 7,921 2,150
================================================================================
(4) Retained Interest in Securitized Assets
The carrying amount of retained interest in securitized assets is as
follows (in thousands) at:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
June 30,
--------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Estimated fair value of excess servicing receivable,
net of estimated prepayments $ 175,164 145,872
Estimated dealer premium rebates 25,718 26,447
Allowance for estimated credit losses on securitized loans (90,203) (79,923)
Discount to present value (33,117) (9,941)
- -----------------------------------------------------------------------------------------------
77,562 82,455
Spread accounts 68,113 71,744
Accrued interest on securitized loans 13,606 12,807
Unrealized gain 12,312 3,785
- -----------------------------------------------------------------------------------------------
$ 171,593 170,791
- -----------------------------------------------------------------------------------------------
Outstanding balance of securitized loans serviced $ 1,929,981 1,818,363
- -----------------------------------------------------------------------------------------------
Allowance for estimated credit losses as a
percentage of securitized loans serviced 4.67% 4.40%
- -----------------------------------------------------------------------------------------------
</TABLE>
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Retained interest in securitized assets activity is as follows (in
thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Year ended June 30,
-----------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 170,791 147,024 118,036
Amounts capitalized (including estimated dealer rebates) 49,071 68,922 56,436
Return of excess cash flows, net of present value effect (22,457) (24,619) (37,871)
Change in spread accounts (3,631) 8,154 6,176
Change in accrued interest on securitized loans 799 2,353 4,247
Impairment of retained interest in securitized assets (23,636) (34,828) -
Change in method of estimating fair value of excess
servicing receivable (7,871) - -
Change in unrealized gain 8,527 3,785 -
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 171,593 170,791 147,024
===========================================================================================================================
</TABLE>
Because of current trends with respect to credit loss and delinquency,
and their effects on the valuation of the retained interest in
securitized assets, the Company recorded a pre-tax charge of $23,636,000
and $34,828,000 for the impairment of the retained interest in
securitized assets during fiscal 1998 and 1997, respectively. During the
fourth quarter of fiscal 1998, the Company changed the method of
estimating the fair value of the retained interest in securitized assets
from "cash in" to "cash out." This change in method, which is
inseparable from the change in estimate, reduced the retained interest
in securitized assets by $7,871,000 as of June 30, 1998, and had the
effect of reducing fiscal 1997 net earnings by $4,864,000 or $0.37 per
share. The change in estimate adjustment was recorded as a component of
gain on sales of loans, net.
The weighted average yield, net of fees, on spread accounts was 4.85%
and 4.97% at June 30, 1998 and 1997, respectively.
(5) Other Assets
Other assets are as follows (in thousands) at:
- -------------------------------------------------------------------------
June 30,
-----------------------
1998 1997
- -------------------------------------------------------------------------
Repossessed assets $ 5,934 5,048
Accrued servicing fees 3,228 2,511
Servicing assets 2,743 1,374
Deferred borrowing fees 1,981 3,078
Income tax receivable 1,577 5,735
Advance of delinquent interest 1,387 1,056
Other 2,430 1,679
- -------------------------------------------------------------------------
$ 19,280 20,481
=========================================================================
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(6) Amounts Due Under Warehouse Facilities
At June 30, 1998 and 1997, the Company, through its wholly owned
special-purpose subsidiaries, had borrowing arrangements with a
financial institution which provided for two and three, respectively,
revolving Warehouse Facilities (the Facilities) with an aggregate
borrowing capacity of $400 million and $450 million, respectively.
Borrowings under these facilities are collateralized by certain loans
held for sale. There are separate Facilities for the funding of Tier I
auto, Tier II auto, and until March 1998, marine loan acquisitions.
Outstanding borrowings of the Facilities at June 30, 1998 and 1997, was
$73,123,000 and $44,455,000, respectively. The weighted average cost of
funds, net of income earned, of the Facilities for the years ended June
30, 1998 and 1997, was 6.92% and 5.94%, respectively.
The cost of funds includes a variable interest rate on the outstanding
commercial paper, fees on the used and unused portions of the
Facilities, and the amortization of prepaid warehouse fees. The largest
portion of the cost of funds related to the Facilities is the variable
rate interest on the commercial paper issued by the financing conduit.
Upfront warehouse fees are non-recurring costs related to the initial
set-up of the Facilities. The Company recognized $6,622,000, $9,991,000,
and $12,491,000 of interest expense during the years ended June 30,
1998, 1997, and 1996, respectively, related to amounts due under
Warehouse Facilities.
The Facilities agreements specify a term of one year and are renewable
annually. Both the Tier I auto and Tier II auto Facilities have been
renewed for an additional year, and expire in June and July 1999,
respectively.
(7) Long-term Debt
In connection with the Company's initial public offering, the Company
issued, in a private placement, $110 million principal amount of 8.53%
Senior Notes due 2002. Interest on the Senior Notes is payable
semi-annually on February 1 and August 1 of each year, and commenced on
February 1, 1996, with annual principal reductions commencing on August
1, 1998. The Senior Notes are redeemable, in whole or in part, at the
option of the Company, in a principal amount not less than $1 million,
together with accrued and unpaid interest to the date of redemption and
a yield-maintenance premium as defined in the note agreement.
In April 1996, the Company issued, in a private placement, $46 million
9.99% Senior Subordinated Notes due 2003. Interest on the Senior
Subordinated Notes is payable quarterly on March 30, June 30, September
30 and December 30 of each year, and commenced on June 30, 1996. The
Senior Subordinated Notes are redeemable, in whole or in part, at the
option of the Company, in a principal amount not less than $1 million,
together with accrued and unpaid interest to the date of redemption and
a yield-maintenance premium as defined in the note agreement.
In March 1997, the Company issued, in a private placement, $50 million
Series A 7.75% Senior Notes due 2002 and $15 million Series B 7.97%
Senior Notes due 2002. Interest on the Senior Notes is payable
semi-annually on March 15 and September 15 of each year, commencing
September 15, 1997, with a principal reduction occurring on March 15,
2002. The Senior Notes are redeemable, in whole or in part, at the
option of the Company, in a principal amount not less than $1 million,
together with accrued and unpaid interest to the date of redemption and
a yield-maintenance premium as defined in the note agreement.
The Company recognized $19,485,000, $15,697,000, and $9,784,000 of
interest expense during the years ended June 30, 1998, 1997, and 1996,
respectively, related to long-term debt.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Scheduled contractual maturities of long-term debt at June 30, 1998
follows:
- --------------------------------------------------------------------------
1999 $ 22,000,000
2000 22,000,000
2001 22,000,000
2002 43,666,667
2003 111,333,333
- --------------------------------------------------------------------------
Total $ 221,000,000
==========================================================================
(8) Other Revenue and Expenses
Other revenue and expenses follow (in thousands):
- --------------------------------------------------------------------------------
Year ended June 30,
-------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Other revenues:
Late charges $ 3,283 2,618 1,922
Origination fees 637 1,019 1,072
Other 167 183 102
- --------------------------------------------------------------------------------
$ 4,087 3,820 3,096
================================================================================
Other expenses:
Loan expenses 2,691 2,948 2,202
Outside services 3,223 2,767 2,515
Office, telephone and postage 2,522 2,626 2,207
Occupancy 1,769 1,433 891
Equipment 1,190 1,013 839
Other 4,724 4,042 3,202
- --------------------------------------------------------------------------------
$ 16,119 14,829 11,856
================================================================================
(9) Income Taxes
The composition of income tax expense (benefit) follows (in thousands):
- --------------------------------------------------------------------------------
Year ended June 30,
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Current tax expense (benefit) $ (9,863) (1,644) 9,096
Deferred tax expense 2,007 5,810 5,310
- --------------------------------------------------------------------------------
$ (7,856) 4,166 14,406
================================================================================
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The effective income tax rate differs from the statutory federal
corporate tax rate as follows:
- --------------------------------------------------------------------------------
Year ended June 30,
---------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Statutory rate 35.0% 35.0 35.0
State income taxes 3.2 5.5 5.5
Change in commercial domicile 4.9 - -
Other 1.3 1.0 -
- --------------------------------------------------------------------------------
Effective rate 44.4% 41.5 40.5
================================================================================
The composition of deferred income taxes payable is as follows (in
thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
June 30,
------------------------
1998 1997
- ------------------------------------------------------------------------------------------------
Deferred tax assets:
<S> <C> <C>
Net operating losses carryforward $ 11,304 1,841
Allowance for estimated credit losses 732 316
Mark to market and allowance for credit losses 5,713 2,073
- ------------------------------------------------------------------------------------------------
17,749 4,230
- ------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Retained interest in securitized assets 22,619 16,556
Unrealized gain on retained interest in securitized assets 4,703 1,533
- ------------------------------------------------------------------------------------------------
27,322 18,089
- ------------------------------------------------------------------------------------------------
Deferred income taxes payable $ 9,573 13,859
===============================================================================================
</TABLE>
The Company believes the deferred tax assets will more likely than not be
realized due to the reversal of deferred tax liabilities and expected
future taxable income. Accordingly, no deferred tax asset valuation
allowance has been established.
(10) Estimated Fair Value of Financial Instruments
Loans held for sale--Cost approximates fair value as loans are sold
shortly after origination.
Accrued interest receivable--Cost approximates fair value.
Retained interest in securitized assets--Amount carried at fair value.
Spread accounts--Cost approximates fair value as the interest rate
earned is at a variable rate.
Repossessed assets--Cost approximates fair market value.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
All liabilities, except long-term debt--Cost approximates fair value.
Long-term debt--Carrying amount of $221,000,000 at June 30, 1998 and
1997, has been calculated to have a fair value of approximately
$195,000,000 and $221,000,000, respectively, by discounting the
scheduled loan payments to maturity using rates that are believed to be
currently available for debt of similar terms and maturities.
(11) Commitments and Contingencies
Future minimum payments under noncancelable operating leases on premises
and equipment with terms of one year or more as of June 30, 1998 are as follows:
- --------------------------------------------------------------------------------
1999 $ 1,341,000
2000 1,161,000
2001 954,000
2002 911,000
2003 759,000
Thereafter -
- --------------------------------------------------------------------------------
Total $ 5,126,000
================================================================================
These agreements include, in certain cases, various renewal options and
contingent rental agreements. Rental expense for premises and equipment
amounted to approximately $1,900,000, $1,572,000, and $1,015,000 for the
years ended June 30, 1998, 1997 and 1996, respectively. A majority of
the rental expense relates to the lease of the Company's principal
offices with a company owned by the majority shareholders of UAC.
The Company is party to litigation in the ordinary course of business,
often involving claims by consumers under the consumer protection laws
described above. Other claims brought are primarily allegations of
wrongdoing by the motor vehicle dealer which originated the contract or
sold the vehicle financed by the Company. The Company is named as a
co-defendant in such actions because of its status as holder of the
contract. Such litigation is common for industry participants.
The Company is currently a defendant in an action commenced October 23,
1997, in the Common Pleas Court of Cuyahoga County, Ohio, Civil
Division, by plaintiff Barohda Rucker. Suit was initially filed against
the Company and Jackshaw Chevrolet, Inc. ("Jackshaw"), alleging that
Jackshaw committed unfair, deceptive and unconscionable acts in
connection with the sale of a vehicle, and further alleging that the
Company committed disclosure and other violations of the Ohio Retail
Installment Sales Act. Plaintiff seeks rescission of the contract,
injunctive relief and damages. Although the suit was considered routine
when initiated, the plaintiff has now sought to amend the complaint,
asserting class action claims and seeking monetary damages. The class
claims relate to the claims set forth in the original complaint and new
claims under or related to the Ohio Mortgage Loan Act. The court has
not, at this time, granted the motion to amend.
The Company is also a defendant in an action brought in the District
Court for Boulder County, Colorado, on April 10, 1998, by plaintiff
Cristy Waggoner. The suit alleges usury, contending that the retail
installment contracts purchased by the Company were, in fact, direct
loans by the Company subject to a lower usury limitation. The complaint
seeks certification of a class of Colorado residents similarly injured
but no class has been certified at this time.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company is a defendant in an adversary action brought in the United
States Bankruptcy Court for the Northern District of Illinois, Eastern
Division on August 23, 1998, by plaintiff, Keith D. Ferrell. The
plaintiff alleges the Company overstated the value of its collateral in
connection with his Chapter 13 bankruptcy proceedings. The plaintiff has
also asserted claims on behalf of a class consisting of similarly
situated debtors involved in Chapter 13 proceedings. The plaintiff seeks
injunctive relief, actual and punitive damages and attorney fees.
Management of the Company, based on advice of outside legal counsel,
does not expect any pending proceeding to have a material adverse effect
on the Company, and such proceedings are being vigorously defended.
(12) Stock-Based Compensation
The Company has one stock-based compensation plan, which is described
below. The Company applies APB Opinion No. 25, Accounting for Stock
Issued to Employees and related Interpretations in accounting for these
plans. Had compensation cost been determined based on the fair value at
the grant date for awards under those plans consistent with the method
of Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), the Company's net income and
earnings per share would have been reduced to the pro forma amounts
indicated below (in thousands, except share data):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
June 30,
--------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss):
As reported $ (9,822) 5,882 21,142
Pro forma (10,951) 4,543 19,449
Net earnings (loss) per common share (basic and diluted):
As reported (0.74) 0.45 1.60
Pro forma (0.83) 0.34 1.47
==================================================================================================
</TABLE>
The Union Acceptance Corporation 1994 Incentive Stock Plan (Incentive
Stock Plan) is the Company's long-term incentive plan for directors,
executive officers and other key employees. The Incentive Stock Plan
authorizes the Company's Compensation Committee to award executive
officers and other key employees incentive and non-qualified stock
options and restricted shares of Class A Common Stock. A total of
500,000 shares of Class A Common Stock have been reserved for issuance
under the Incentive Stock Plan, of which options for 271,875 shares of
Class A Common Stock were granted at an issue price of $16 per share to
senior officers upon consummation of the Company's initial public
offering of the Class A Common Stock.
Options or other grants to be received by executive officers or other
employees in the future are within the discretion of the Company's
Compensation Committee and are not determinable. Stock options granted
under the Incentive Stock Plan are exercisable at such times (not after
ten years and one day from the date of the grant) and at such exercise
prices (not less than 85% of the fair market value of the Class A Common
Stock at date of grant) as the Committee determines and will, except in
limited circumstances, terminate if the grantee's employment terminates
prior to exercise. The outstanding options' maximum term is ten years.
Such options vest over a period of five years, with one-fifth becoming
exercisable on each anniversary of the option grant.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model with the following
weighted average assumptions used for grants in 1998, 1997, and 1996;
dividend yield of 0.0% for all three years; expected volatility of 100%
for all three years; weighted average risk-free interest rates of 5.45%,
6.50%, and 6.41%, respectively; and expected lives of ten years for all
three years.
A summary of the status of the Company's stock option plans as of June
30, 1998 and 1997 changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------- ----------------------- -------------------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at
<S> <C> <C> <C> <C> <C>
beginning of year 314,485 $ 16.02 276,915 $ 16.03 - $ -
Options granted 74,000 9.69 39,750 16.00 280,600 16.04
Options exercised - - - - - -
Options canceled 19,810 14.63 2,180 17.48 3,685 16.31
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at
end of year 368,675 $ 14.86 314,485 $ 16.02 276,915 $ 16.03
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of
options granted during the year $ 8.86 $14.71 $ 14.79
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options
outstanding at June 30, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Options outstanding Options exercisable
---------------------------------------------- -----------------------------
Weighted prices Weighted
average remaining Average Average
number contractual exercise Number exercise
outstanding life price exercisable price
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 9.69 67,500 9.10 $ 9.69 3,500 $ 9.69
16.00 298,375 7.27 16.00 109,288 16.00
17.88 2,800 7.53 17.88 1,120 17.88
- ---------------------------------------------------------------------------------------------------
368,675 7.67 $ 14.86 113,908 $ 15.90
- ---------------------------------------------------------------------------------------------------
</TABLE>
In addition to the options outstanding at June 30, 1998, there were
99,843 shares of Class A Common Stock were available for future grants
or awards.
The Incentive Stock Plan also provides that each director of the Company
who is not an executive officer is automatically granted shares of Class
A Common Stock with a fair market value of $15,000 following each annual
meeting of shareholders. Shares so granted have a six-month period of
restriction during which they may not be transferred. Shares granted
under this section of the Incentive Stock Plan totaled 14,694, 5,430,
and 11,358 in fiscal 1998, 1997, and 1996, respectively, and
compensation cost charged against income was $90,000 in 1998 and 1997,
and $180,000 in 1996.
(cont'd)
<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(13) Restatement of Consolidated Financial Statements
The Company determined in August 1998 that it should have been measuring
other than temporary impairment of Retained Interest in Securitized
Assets, previously captioned Excess Servicing, on a disaggregate basis
(the pool-by-pool method). The adjustments resulting from the
measurement of other than temporary impairment on a disaggregate basis
were of sufficient significance to require restatement of the
consolidated financial statements since the implementation of SFAS 125.
This restatement had the effect of reducing fiscal 1997 earnings by
$1,890,000 (net of income taxes of $1,288,000) or $0.14 per share. The
restatement had no effect on shareholders' equity at June 30, 1997. In
conjunction with the restatement, the Company made other adjustments,
which were not individually significant, that increased fiscal 1997 net
earnings by $372,000 (net of income taxes of $259,000) or $0.03 per
share and increased shareholders' equity at June 30, 1997 by $733,000.
(14) Quarterly Financial Information (unaudited)
Quarterly financial information is as follows (in thousands, except
share data):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
First Second Third Fourth Total
Year ended June 30, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest on loans $ 6,627 $ 6,473 $ 7,133 $ 7,638 $27,871
Interest on spread
accounts and
restricted cash 1,572 1,461 1,443 1,380 5,856
Interest expense (6,053) (6,167) (6,990) (6,897) (26,107)
Provision for
estimated credit
losses on loans
held for sale (1,505) (1,770) (1,900) (2,875) (8,050)
- --------------------------------------------------------------------------------------------------
Net interest margin
(deficit)
after provision 641 (3) (314) (754) (430)
Gain (loss) on sales of
loans, net (10,847) 2,020 3,113 (6,212) (11,926)
Servicing fees, net 6,286 6,533 6,529 6,789 26,137
Other revenues 1,020 985 1,065 1,017 4,087
- --------------------------------------------------------------------------------------------------
Total revenues (2,900) 9,535 10,393 840 17,868
- --------------------------------------------------------------------------------------------------
Salaries and benefits 4,610 4,871 4,815 5,131 19,427
Other expenses 4,013 4,165 4,007 3,934 16,119
- --------------------------------------------------------------------------------------------------
Operating expenses 8,623 9,036 8,822 9,065 35,546
- --------------------------------------------------------------------------------------------------
Provision (benefit) for
income taxes (4,656) (711) 654 (3,143) (7,856)
- --------------------------------------------------------------------------------------------------
Net earnings (loss) $ (6,867) $ 1,210 $ 917 $ (5,082) $(9,822)
==================================================================================================
Net earnings (loss)
per common
share (basic and
diluted) $ (0.52) 0.09 0.07 (0.38) (0.74)
==================================================================================================
Weighted average common
shares outstanding $13,216,788 13,227,010 13,231,482 13,231,482 13,226,651
==================================================================================================
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
UNION ACCEPTANCE CORPORATION
September 29, 1998 By: /S/ Rick A. Brown
-------------------------------------
Rick A. Brown
Vice President, Treasurer, and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page (Ex. No.
Cross Reference)(1)
- -------------------------------------------------------------------------------
3.1 Registrant's Articles of Incorporation, as amended S-1, 3.1
and restated.
3.2 Registrant's Code of By-Laws, as amended and S-1, 3.2
restated.
3.3 Form of Share Certificate for Class A Common Stock. S-1, 3.3
4.1 Articles V and VI of the Registrant's Articles of S-1, 4.1
Incorporation respecting the terms * of shares of
Common Stock, are incorporated by reference to the
Registrant's Articles of Incorporation filed
hereunder as Exhibit 3.1
4.2 Article III - "Shareholder Meetings," Article VI - S-1, 4.2
"Certificates for Shares," Article VII - "Corporate
Books and Records - Section 3" and Article X -
"Control Share Acquisitions Statute" of the
Registrant's Code of By-Laws are incorporated by
reference to the Registrant's Restated Code of
By-Laws filed herewith as Exhibit 3.2.
4.3 Transfer and Administration Agreement among S-1, 4.3
Enterprise Funding Corporation, Union Acceptance
Funding Corporation and Union Acceptance Corporation,
dated as of June 27, 1995 ("UAFC Transfer and
Administration Agreement").
4.3(a) Amendment No. 1 to UAFC Transfer and Administration 10Q 9/95
Agreement dated September 8, 1995 4.3(a)
4.3(b) Amendment No. 2 to UAFC Transfer and Administration 10Q 9/95
Agreement dated September 29, 1995 4.3(b)
4.3(c) Letter Agreement regarding UAFC Transfer and 10K 1996
Administration Agreement dated November 13, 1995 4.3(c)
4.3(d) Amendment No. 3 to UAFC Transfer and Administration 10K 1996
Agreement dated March 1, 1996 4.3(d)
4.3(e) Letter Agreement UAFC regarding UAFC Transfer and 10K 1996
Administration Agreement dated May 30, 1996 4.3(e)
4.3(f) Amendment No. 4 to UAFC Transfer and Administration 10K 1996
Agreement dated September 5, 1996 4.3(f)
4.3(g) Amendment No. 5 to UAFC Transfer and Administration 10K 1997
Agreement dated October 31, 1996 4.3(g)
4.3(i) Amendment No. 6 to UAFC Transfer and Administration 10Q 12/96
Agreement dated December 23, 1996 4.1
4.3(h) Amendment No. 7 to UAFC Transfer and Administration 10K 1997
Agreement dated March 31, 1997 4.3(h)
4.3(j) Letter Agreement No. 3 with respect to UAFC Transfer 10K 1997
and Administration Agreement, dated April 28, 1997 4.3(j)
4.4 Note Purchase Agreement between Union Acceptance 10K 1995
Corporation and certain lenders dated as of August 7, 4.4
1995.
4.4(a) Amendment No. 1 to Note Purchase Agreement dated 10Q 12/95
November 22, 1995 4.4(a)
4.5 Transfer and Administration Agreement among S-1, 4.5
Enterprise Funding Corporation, Performance Funding
Corporation and Union Acceptance Corporation, dated
as of July 24, 1995.
<PAGE>
4.5(a) Amendment No. 1 to Transfer and Administration 10Q 12/95
Agreement dated September 8, 1995 4.5(a)
4.5(b) Letter Agreement regarding Transfer and 10K 1996
Administration Agreement dated October 12, 1995 4.5(b)
4.5(c) Amendment No. 2 to Transfer and Administration 10K 1996
Agreement dated May 10, 1996 4.5(c)
4.5(d) Letter Agreement regarding Transfer and 10K 1996
Administration Agreement dated July 11, 1996 4.5(d)
4.5(e) Letter Agreement regarding Transfer and 10K 1996
Administration Agreement dated August 20, 1996 4.5(e)
4.5(f) Amendment No. 3 to Transfer and Administration 10Q 12/96
Agreement, dated December 23, 1996 4.2
4.5(g) Letter Agreement No. 4 to Transfer and 10K 1997
Administration Agreement dated April 25, 1997 4.5(g)
4.5(h) Amendment No. 5 to Transfer and Administration 10K 1997
Agreement dated June 6, 1997 4.5(h)
4.5(i) Letter Agreement with regard to Transfer and 10K 1997
Administration Agreement dated June 24, 1997 4.5(i)
4.5(j) Amendment No. 6 to Transfer and Administration Agreement 10K 1997
dated as of July 29, 1997 4.5(j)
4.6 Note Purchase Agreement dated as of April 3, 1996 10Q 3/96
among Union Acceptance Corporation and several 4.1
purchasers of Senior Subordinated Notes due 2003
4.7 Note Purchase Agreement, dated March 24, 1997, among 10Q 3/97
Union Acceptance Corporation and certain purchasers 10.1
of Senior Notes, due 2002.
4.8(a) Note Purchase Agreement, dated April 3, 1997 among 10K 1997
UAC Boat Funding Corp., Enterpirse Funding 4.8(a)
Corporation and NationsBank, N.A.
4.8(b) Security Agreement, dated April 3, 1997, among UAC Boat 10K 1997
Funding Corp., Enterpirse Funding Corp., et. al. 4.8(b)
4.9(a) Note Purchase Agreement among Union Acceptance Funding
Corporation, Enterprise Funding Corporation, Nationsbank,
N.A., Dated as of September 18, 1998 _____
4.9(b) Security Agreement among Enterprise Funding Corporation,
Union Acceptance Funding Corporation, Union Acceptance
Corporation, Mbia Insurance Corporation and Nationsbank,
N.A., dated as of September 18, 1998 _____
9(a) Voting Trust Agreement among Richard D. Waterfield, S-1, 9(a)
as trustee, and certain existing shareholders of
Union Holding Company, Inc., dated June 10, 1994.
9(b) First Amendment to Voting Trust Agreement dated June S-1, 9(b)
1, 1995.
10.1 Remittance Processing Agreement by and between Union S-1, 10.5
Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated June 29, 1994.
10.2 Mail and Printing Services Agreement by and between S-1, 10.6
Union Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated June 29, 1994.
10.3 Telephone Equipment Lease Agreement by and between S-1, 10.7
Union Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated June 29, 1994.
10.4 Telecommunications Agreement by and between Union S-1, 10.8
Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated June 29, 1994.
10.5 Communications Equipment and Software License by and S-1, 10.9
between Union Federal Savings Bank of Indianapolis
and Union Acceptance Corporation dated June 29, 1994.
<PAGE>
10.6 Software License and Maintenance Agreement by and S-1, 10.10
between Union Federal Savings Bank of Indianapolis
and Union Acceptance Corporation dated June 29, 1994.
10.7 Loan Servicing Agreement by and between Union Federal S-1, 10.11
Savings Bank of Indianapolis and Union Acceptance
Corporation dated June 29, 1994.
10.8 General Subservicing Agreement by and between Union S-1, 10.12
Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated as of January 1, 1995.
10.9 Loan Collection Agreement by and between Union S-1, 10.13
Federal Savings Bank of Indianapolis and Union
Acceptance Corporation dated June 29, 1994.
10.10 Letter respecting Terms of Bank Accounts from Union S-1, 10.14
Federal Savings Bank of Indianapolis to Union
Acceptance Corporation dated May 25, 1994.
10.11 Supplement to Account Agreement Re: Drafts by and S-1, 10.15
between Union Federal Savings Bank of Indianapolis
and Union Acceptance Corporation dated June 29, 1994.
10.12 Tax Allocation Agreement by and between Union Holding S-1, 10.16
Company, Inc. and its subsidiaries dated February 1,
1991, as amended.
10.13 Form of Remote Outsourcing Agreement by and between S-1, 10.18
Systematics Financial Services, Inc. and Union
Acceptance Corporation.
10.13(a) Letter Agreement by and among Systematics Financial S-1, 10.18(a)
Services, Inc., Union Federal Savings Bank of
Indianapolis and Union Acceptance Corporation dated
July 13, 1994 respecting Provision of Data Processing
Services.
10.13(b) Memorandum respecting Billing Procedure in connection S-1, 10.18(b)
with Remote Outsourcing Agreement from Systematics
System Financial Services, Inc. to Union Federal
Savings Bank of Indianapolis and Union Acceptance
Corporation dated October 25, 1994.
10.14 Union Acceptance Corporation Annual Bonus Plan For S-1, 10.23
Senior Officers.
<PAGE>
10.15 Union Acceptance Corporation Incentive Stock Plan. S-1, 10.24
10.16 Letter respecting Access to Records from Union S-1, 10.25
Acceptance Corporation to Union Federal Savings Bank
of Indianapolis dated September 13, 1994.
10.17 Letter Agreement by and between Union Federal S-1, 10.26
Savings Bank of Indianapolis and Union Acceptance
Corporation dated December 14, 1994 amending and
initiating terms of certain Inter-Company
Agreements.
10.18 Letter respecting terms and conditions of bank S-1, 10.27
accounts from Union Federal Savings Bank of
Indianapolis to Union Acceptance Corporation dated
December 16, 1994.
10.19 Lease Agreement between Waterfield Mortgage Company, 10Q 12/95
Incorporated, and Union Acceptance Corporation dated 10.19
as of November 1, 1995
10.20 Purchase Agreement among Union Acceptance Funding 10Q 3/96
Corporation, Union Acceptance Corporation and Union 10.1
Federal Savings Bank of Indianapolis dated as of
January 18, 1996
10.21 Sublease Agreement between Union Acceptance 10K 1996
Corporation and Union Federal Savings Bank of 10.26
Indianapolis dated as of August 1, 1996
10.22 Annual Bonus Plan for Management Employees, dated 10Q 12/97
July 1, 1997 10.1
10.23 Annual Bonus and Deferral Plan for Senior Officers, 10Q 12/97
dated July 1, 1997 10.2
21 Subsidiaries of the Registrant _____
23 Consent of KPMG Peat Marwick LLP. _____
27 Financial Data Schedule _____
- --------------------
(1) Exhibits set forth above that are not included with this filing are
incorporated by reference to the Registrant's previously filed registration
statement or reports (and the indicated exhibit number) as indicated in the
right hand column above, as follows:
S-1 -- Refers to Registrant's Registration Statement on Form S-1 (Reg. No.
33-82254
10K 1995 -- Refers to Registrant's Form 10-K for the year ended June 30,
1995
10K 1997 -- Refers to Registrant's Form 10-K for the year ended June 30,
1996
10K 1996 -- Refers to Registrant's Form 10-K for the year ended June 30,
1997
10Q (month/year) -- Refers to Registrant's Form 10-Q for the quarter ended
at the end of such month in such calendar year
[Letterhead]
KPMG Peat Marwick LLP
2400 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204-2452
The Board of Directors
Union Acceptance Corporation:
We consent to incorporation by reference in the Registration Statement (No.
333-09717) on Form S-8 of Union Acceptance Corporation of our report dated
August 27, 1998, relating to the consolidated balance sheets of the Union
Acceptance Corporation and Subsidiaries as of June 30, 1998 and 1997, and the
related consolidated statements of earnings (loss) and comprehensive earnings
(loss) shareholders' equity and cash flows for each of the years in the three
year period ended June 30, 1998, which report appears in the June 30, 1998
Annual Report on Form 10-K of Union Acceptance Corporation.
/s/ KPMG Peat Marwick LLP
Indianapolis, Indiana
September 28, 1998
