10-Q 1 g65108e10-q.txt UNION PLANTERS MORTGAGE FINANCE CORP. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 000-23849 --------- UNION PLANTERS MORTGAGE FINANCE CORP. (Exact name of registrant as specified in its charter) Delaware 62-1712370 -------------------------------- --------------------------------- (State or other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) Union Planters Administrative Center 7130 Goodlett Farms Parkway Cordova, Tennessee 38018 ------------------------------------ (Address of principal executive offices) Registrant's telephone number, including area code: (901) 580-6000 --------------- N/A (former name) Indicate by check mark whether the Registrant (i) 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 short period that the Registrant was required to file such report), and (ii) has been subject to such filing requirements for the past 90 days: Yes [X] No [ ] As of October 31, 2000, the latest practicable date, there were 1,000 shares of Union Planters Mortgage Finance Corp. common stock outstanding. The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format. 2 UNION PLANTERS MORTGAGE FINANCE CORP. FORM 10-Q INDEX

Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements ~~(Unaudited)~~ Balance Sheet ~~June~~September 30, 2000 and December 31, 1999 ..............................~~...~~ 3 Statement of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2000 and 1999 ...................................................~~...~~ 4 Statement of Changes in Shareholder's Equity for the ~~six~~nine months ended ~~June~~September 30, 2000 ~~and 1999~~ ........................................ 5 Statement of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2000 and 1999 ...................................................~~...~~ 6 Notes to Unaudited Financial Statements ............................................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................... 8 Item 3. Quantitative and Qualitative Disclosure about Market Risk ................................................................... 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings ................................................................... 9 Item 5. Other Information ................................................................... 9 Item 6. Exhibits and Reports on Form 8-K .................................................... 9 Signatures .................................................................................... 11

2 3 UNION PLANTERS MORTGAGE FINANCE CORP. BALANCE SHEET (UNAUDITED)

~~JUNE~~SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (DOLLARS IN THOUSANDS) Cash ..................................................~~.....~~ $ ~~435~~394 $ 489 Deferred income taxes ................................. 86 45 Intercompany federal tax receivable ................... 45113 45-- ------ ------ TOTAL ASSETS ................................~~.......~~ $ ~~480~~593 $ 534 ====== ====== Accrued expenses ......................................~~.....~~ $ ~~124~~243 $ 128 Tax and other payables to affiliates ..................~~.....~~ 6-- 46 ------ ------ TOTAL LIABILITIES ...........................~~.......~~ ~~130~~243 174 ------ ------ Shareholder's equity Common stock, par value $.01 per share, 1,000 shares authorized, issued, and outstanding ~~......~~ -- -- Additional paid-in capital ..........................~~.....~~ 10 10 Retained earnings ...................................~~.....~~ 340 350 ------ ------ TOTAL SHAREHOLDER'S EQUITY ..................~~.......~~ 350 360 ------ ------ TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ..~~.......~~ $ ~~480~~593 $ 534 ====== ======

--------------- The accompanying notes are an integral part of these financial statements. 3 4 UNION PLANTERS MORTGAGE FINANCE CORP. STATEMENT OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ (DOLLARS IN THOUSANDS) NONINTEREST INCOME Net gain on the sale of residential mortgages ..~~.....~~ $ -- $ -- $ -- $4,442 ------ ------ ------ ------ NONINTEREST EXPENSE ~~------ ------ ------ ------~~ Accounting and auditing fees ...................~~.....~~ 15 -- 15 --15 15 ------ ------ ------ ------ EARNINGS BEFORE INCOME TAXES (LOSS) .....~~.......~~ -- (15) -- (15) 4,~~442~~427 Income taxes (credit) ............................~~.....~~ ~~(5)~~ -- (6) (5) 1,~~555~~549 ------ ------ ------ ------ NET EARNINGS (LOSS) .....................~~.......~~ $ ~~(10)~~-- $ --(9) $ (10) $2,~~887~~878 ====== ====== ====== ======

--------------- The accompanying notes are an integral part of these financial statements. 4 5 UNION PLANTERS MORTGAGE FINANCE CORP. STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)

ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL ------ ---------- -------- ------ (DOLLARS IN THOUSANDS) BALANCE, JANUARY 1, 2000 ......................... $ -- $ 10 $ 350 $ 360 Net ~~earnings (~~loss) ......................................... -- -- (10) (10) ------ ------ ------ ------ BALANCE, ~~JUNE~~SEPTEMBER 30, 2000 ...................... $ -- $ 10 $ 340 $ 350 ====== ====== ====== ======

--------------- The accompanying notes are an integral part of these financial statements. 5 6 UNION PLANTERS MORTGAGE FINANCE CORP. STATEMENT OF CASH FLOWS (UNAUDITED)

~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ------------------------- 2000 1999 ---------- ---------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings (loss) ...................................... $ (10) $ 2,~~887~~878 Deferred income tax benefit .............................. --(41) (49) Gain on sale of loans .................................... -- (4,442) Net increase in intercompany federal tax receivable ...... (~~decrease~~113) -- Net increase in other liabilities ........................ ~~(44)~~69 ~~195~~189 ---------- ---------- Net cash used in operating activities .............. (5495) (1,~~409~~424) ---------- ---------- INVESTING ACTIVITIES Purchase of loans from parent company .................... --(127,060) (132,467) Net proceeds from sale of loans to a trust ............... --127,060 136,909 ---------- ---------- Net cash provided by investing activities .......... -- 4,442 ---------- ---------- FINANCING ACTIVITIES Issuance of notes payable to parent company .............. --127,060 132,467 Repayment of notes payable to parent company ............. --(127,060) (132,467) Cash dividends paid ...................................... -- (3,000) ---------- ---------- Net cash used by financing activities .............. -- (3,000) ---------- ---------- Net increase (decrease) in cash ............................ (5495) 3318 Cash at beginning of period ................................ 489 502 ---------- ---------- Cash at end of period ...................................... $ ~~435~~394 $ ~~535~~520 ========== ==========

--------------- The accompanying notes are an integral part of these financial statements. 6 7 UNION PLANTERS MORTGAGE FINANCE CORP. NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES. The accounting and reporting policies of Union Planters Mortgage Finance Corp. (the "Company") conform with accounting principles generally accepted in the United States of America and general practice within the financial services industry. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes; actual results could differ from these estimates. BASIS OF PRESENTATION. The financial statements include the accounts of the Company. The Company was established September 5, 1997 as a wholly owned, limited-purpose finance subsidiary of Union Planters Bank, National Association (the "Bank"), which in turn is an indirect wholly-owned subsidiary of Union Planters Corporation ("UPC"). The Company was organized to facilitate the securitization of loans and other assets through the issuance and sale of collateralized bonds and pass-through securities through trusts established by the Company. Securities issued through trusts will be secured primarily by residential mortgage loans and mortgage-backed certificates of various types. These financial statements do not include the accounts of the trusts established to carry out the issuance and sale of collateralized bonds and pass-through securities. NOTE 2. SALE OF LOANS In July 2000 and February 1999, the Company securitized approximately $127 million and $132 million, respectively, in principal amount of FHA-insured and VA-guaranteed mortgage loans serviced by the Bank. In the July 2000 transaction, all of the expenses were borne by the Bank. The transaction was accounted for as a sale in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfer and Servicing of Financial Assets and Extinguishment of Liabilities." The following summarizes the transactions for the nine months ended September 30, 2000 and 1999.

~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ------------------------- 2000 1999 ---------- ---------- ~~Current~~(DOLLARS ~~tax~~IN ~~(credit~~THOUSANDS) Proceeds from sale of loans ................. $ 127,060 $ 137,817 Principal balance of loans .................. $(127,060) (5132,467) $---------- ~~1,604~~---------- ~~Deferred~~Gain ~~tax~~.............................. ~~(credit)~~-- 5,350 Costs ....................................... -- (49908) ---------- ---------- ~~Total~~Net ~~income~~gain ~~tax~~on ~~expense~~the ~~(credit)~~sale of loans ...... $ ~~(5)~~-- $ 14,~~555~~442 ========== ==========

7 8 NOTE 3. INCOME TAXES Income taxes are computed on a separate company basis. The Company files a consolidated federal income tax return with the Bank and UPC. Deferred income taxes are provided in accordance with SFAS No. 109, "Accounting for Income Taxes." The components of income tax expense (benefit) are as follows:

The deferred tax asset is composed of accrued expenses that have not been paid. The Company's effective tax rate does not differ from the federal statutory rate of 35%. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements and related notes thereto. GENERAL Union Planters Mortgage Finance Corp. (the "Company") was established September 5, 1997 as a wholly owned, limited purpose, finance subsidiary of Union Planters Bank, National Association (the "Bank"), which in turn is an indirect wholly-owned subsidiary of Union Planters Corporation. There was essentially no business activity on the part of the Company until May 1998. The Company was organized to facilitate the securitization of loans and other assets through the issuance and sale of collateralized bonds and pass-through securities. Securities issued are secured primarily by residential mortgage loans and mortgage-backed certificates of various types. In the future, the Company may finance other types of loans and assets. In July 2000, the Company securitized approximately $127 million of FHA-insured and VA-guaranteed mortgage loans serviced by the Bank. The loans continue to be serviced by the Bank for a fee (50 to 100 basis points). Affiliates of the Company purchased all of the subordinated securities issued in this transaction, with an approximate market value of $6.0 million. This securitization did not result in any gain or loss for the Company. All expenses related to the transactions were borne by the Bank. Credit losses not covered by insurance or guarantee are absorbed by subordinated security holders or, in limited circumstances, the Bank as servicer. Therefore, the Company carries no loan loss reserves. In February 1999, the Company securitized approximately $132 million in principal amount of previously defaulted FHA-insured and VA-guaranteed mortgage loans serviced by the Bank. The loans will continue to be serviced by the Bank for a one percent fee. Affiliates of the Company purchased all of the subordinated securities issued in this transaction, with an approximate market value of $9.3 million. This securitization, treated as a sale, resulted in a total gain of approximately $5.4 million before costs and expenses. Securitization costs and expenses accrued by the Company were approximately $908,000. Securitization costs and expenses included underwriting costs, legal and accounting fees, as well as cost to prepare, record and deliver loan documents and files. Credit losses not covered by insurance or guarantees are absorbed by subordinated security holders or, in limited circumstances, the Bank as servicer. Therefore, the Company carries no loan loss reserves. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 8 9 UNION PLANTERS MORTGAGE FINANCE CORP. PART II - OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS None. ITEM 5 -- OTHER INFORMATION None. ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 3.1 Certificate of Incorporation of the Registrant (Incorporated herein by reference to the Exhibits to Registrant's Registration Statement No. 333-35471 on Form S-3, filed September 12, 1997). 3.2 Amended and Restated Bylaws of the Registrant (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 4.1 Standard Terms to Pooling and Servicing Agreement (January 1998 Edition) (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 4.2 Form of Indenture between Registrant and Trustee (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 4.3 Form of Trust Agreement between Registrant and Trustee (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 4.4 Form of Deposit Trust Agreement between Registrant and Trustee (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 4.5 Standard Terms to Pooling and Servicing Agreement (May 1998 Edition) (Incorporated herein by reference to Exhibit to the Registrant's Current Report on Form 8-K , filed June 11, 1998). 4.6 Copy of the Series 1998-1 Pooling and Servicing Agreement, dated as of May 1, 1998, by and among the Registrant, Union Planters Bank, N.A., as Master Servicer, The Bank of New York, as Contract of Insurance Holder, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit to the Registrant's Current Report on Form 8-K , filed June 11, 1998). 4.7 Copy of Series 1999-1 Pooling and Servicing Agreement, dated as of February 1, 1999, by and among the Registrant, Union Planters Bank, N.A., as Master Servicer, and Contract of Insurance Holder, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit to the Registrant's Current Report on Form 8-K, filed March 2, 1999). 4.8 Copy of Series 2000-1 Pooling and Servicing Agreement, dated as of July 1, 2000, by and among the Registrant, Union Planters Bank, N.A., as Master Servicer and Contract of Insurance Holder, and the

9 10 Bank of New York, as Trustee (Incorporated herein by reference to Exhibit to the Registrant's Current Report on Form 8-K, filed August 4, 2000). 27 Financial Data Schedule (for SEC use only) 99.1 Form of Sales Agreement between the Registrant, as Purchaser, and the Seller (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998). 99.2 Form of Supplemental Servicing Agreement (Incorporated herein by reference to the Exhibits to Pre-Effective Amendment No. 3 to the Registrant's Registration Statement No. 333-35471 on Form S-3, filed January 16, 1998).

(b) Reports on Form 8-K 1. Form 8-K dated July 17, 2000, reporting events under Item 5 and Item 7, filed on July 18, 2000. 2. Form 8-K dated July 27, 2000, reporting events under Item 5 and Item 7, filed on August 4, 2000.

10 11 SIGNATURE 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 hereunto duly authorized. UNION PLANTERS MORTGAGE FINANCE CORP. (REGISTRANT) Date: November 6, 2000 By: /s/ Douglas R. Miller --------------------------- ---------------------------------- Douglas R. Miller President and Chief Executive Officer By: /s/ Mark Mosteller ---------------------------------- Mark Mosteller Vice President and Secretary 11

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