-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fjf6pXri9YALFnskPaFyInVM+XvxGltFQqTijFsejG+ZOnE1Fyry6Sa0M7beAobi TS7bFBLyQT8EzYjKVBksLw== 0000950134-98-000545.txt : 19980128 0000950134-98-000545.hdr.sgml : 19980128 ACCESSION NUMBER: 0000950134-98-000545 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980127 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980127 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED COMPANIES FINANCIAL CORP CENTRAL INDEX KEY: 0000217416 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 710430414 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07067 FILM NUMBER: 98514101 BUSINESS ADDRESS: STREET 1: 4041 ESSEN LN STREET 2: P O BOX 1591 CITY: BATON ROUGE STATE: LA ZIP: 70809 BUSINESS PHONE: 5049870000 8-K 1 FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 27, 1998 UNITED COMPANIES FINANCIAL CORPORATION (Exact name as specified in its charter) Louisiana 1-7067 71-0430414 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.)
4041 Essen Lane, Baton Rouge Louisiana 70809 -------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (504) 987-0000 Not Applicable (Former name or former address, if changed since last report) 2 Item 5. Other Events. The Registrant files herewith the exhibit listed in Item 7(c) below. Item 7(c). Exhibits. The following exhibit is furnished in accordance with Item 601 of Regulation S-K: 99 Press Release dated January 26, 1998 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED COMPANIES FINANCIAL CORPORATION (Registrant) Date: January 26, 1998 By: /s/ Dale E. Redman ------------------------------------------- Dale E. Redman, Executive Vice President and Chief Financial Officer 3 4 INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY NO. EXHIBIT NUMBERED PAGE - ------- ------- ------------- 99 Press Release dated January 26, 1998
4 EX-99 2 PRESS RELEASE DATED JANUARY 26, 1998 1 EXHIBIT 99 FOR MORE INFORMATION, PLEASE CONTACT: Dale E. Redman Executive Vice President & Chief Financial Officer 504.987.2385 or 800.234.8232 FOR IMMEDIATE RELEASE: January 26, 1998 UNITED COMPANIES ANNOUNCES EARNINGS EXPECTED FOR THE FOURTH QUARTER AND FORECASTS FUTURE PRODUCTION AND EARNINGS BATON ROUGE, LA - United Companies Financial Corporation (NYSE: UC) today announced that it expects to earn between $.20 and $.30 per share from continuing operations for the fourth quarter of 1997. These expected earnings are before the previously announced $.15 charge per share arising from the settlement of a lawsuit related to the 1993 divestiture of Foster Mortgage and a writeoff related to the 1996 sale of its former life insurance company. J. Terrell Brown, Chairman and Chief Executive Officer of United Companies, stated, "We accomplished our annual loan growth goal of 30% in 1997. Production for the fourth quarter totaled $996 million, an increase of 28% over the same period in 1996. However, widening of spreads to the U.S. treasuries by 17 to 26 basis points on the pass through certificates sold in our fourth quarter securitizations, increased expenses related to the Company's entrance into the Texas market and continued expansion of its retail infrastructure and an adjustment to the prepayment rate assumption utilized in the loan sale gain computation on our 3/27 hybrid loan product combined to negatively affect our fourth quarter." Brown added, "We estimate, based on what we know today, that our loan production levels for 1998 will be approximately $3.6 billion: approximately $2 billion from UC Lending, $700 million from Unicor Mortgage, $300 million from Ginger Mae, $200 million from UC Acquisition and $400 million from United Companies Funding. I expect on the basis of our current information that we will meet our loan production goal in 1998 and grow those levels approximately 20% in 1999." The Company announced that beginning in the first quarter of 1998 and going forward, it expects that the gain on sale will be in the range of 6% to 7% of loans sold. "This gain approximates the "cash gain" we believe the Company could receive in a whole loan secondary market sale at the present time," said Dale E. Redman, Executive Vice President and Chief Financial Officer. The anticipated lower gains are based on the Company's analysis of several factors, including the continued use of the higher prepayment rate assumption on the Company's 3/27 loan product which is now accounting for approximately 30% of production and the Company's -CONTINUED- 5 2 UC ANNOUNCES EARNINGS EXPECTED FOR THE FOURTH QUARTER AND FORECASTS FUTURE PRODUCTION AND EARNINGS - PAGE 2 OF 6 intent to use alternative securitization structures that focus on improving cash flow. Also, the Company expects a proposed change in accounting rules by the Financial Accounting Standards Board (FASB) to allow the classification of interest only and residual certificates as "available for sale" assets will be adopted in 1998, which will reduce the amount of earnings recorded at the time of sale. Considering the Company's loan production goals and the anticipated 6% to 7% gains on the sale of those loans, Mr. Redman estimated earnings per share in 1998 would be in the approximate range of $1.25 to $1.75 per share, increasing to approximately $2.50 to $3.00 per share in 1999. Both Mr. Brown and Mr. Redman cautioned that their views on estimated future production and earnings levels were subject to a number of risks and uncertainties as set forth in the "safe harbor" statement below. During 1997, United Companies increased its home equity servicing portfolio by 37% to a balance of $5.5 billion at year end. The percentage of home equity loans thirty days or more delinquent decreased to 10.63% at December 31, 1997 compared to 11.24% at September 30, 1997. This percentage was 10.60% at December 31, 1996. Net charge-offs on home equity loans were $9.3 million for the fourth quarter compared to $7.6 million for the previous third quarter, and were $31 million for the year of 1997 compared with $17.1 million for 1996. The charge-off rate on the average home equity loans outstanding for the twelve months ended December 31, 1997 and 1996 was 0.65% and 0.51%, respectively. The Company also provided the following prepayment assumption information relating to its loan sale gain computations: o With its fixed rate product, the Company currently assumes a life-to-date prepayment speed of 24% based on a seasoning curve that begins at 9% in month one, increases to 27% in month twelve, increases to 30% in month 20 and stays constant until month 36, ramps down to 17% in month 53 and remains constant at this rate until maturity. At December 31, 1997, the Company had $3.3 billion in fixed rate home equity loans in its servicing portfolio. o The Company currently assumes a life-to-date prepayment speed of 28%, based on a seasoning curve, for its adjustable rate product ("ARMs"). The curve begins at 14% in month one, reaches 32% by month 12, increases to 34% in month 18 and stays constant until month 28 when it declines to 33% and remains at this rate until month 48, then ramps down to 17% in month 56 and remains at 17% until maturity. At December 31, 1997 the Company had $1.2 billion in ARMs in its servicing portfolio. - continued - 6 3 UC ANNOUNCES EARNINGS EXPECTED FOR THE FOURTH QUARTER AND FORECASTS FUTURE PRODUCTION AND EARNINGS - PAGE 3 OF 6 o The Company currently assumes a life-to-date prepayment speed of 24%, based on a seasoning curve for its hybrid loan products. The curve begins at 4% in month one, increases to 22% in month 12, continues to increase to 30% in month 30 and stays constant until month 40, ramps down to 20% by month 56 and remains constant at this rate until maturity. At December 31, 1997 the Company had $1.0 billion in hybrid loans in its servicing portfolio. For each loan product type, the Company stated that the actual prepayment performance of the loans closely matches the prepayment assumptions set forth above. In its loan sale gain calculation, the Company has historically used a discount rate of approximately 10% and projected cumulative losses of approximately 250 basis points for its fixed rate and hybrid loan products and 200 basis points for ARMs. Mr. Redman commented, "It is quite apparent to us that the equity market valuations for even the premier companies in this specialty lending industry will continue to be impaired unless the "quality of earnings" issue is addressed. Disclosure of our prepayment, loan loss and discount rate assumptions and the related historical performance of our loan pools is intended to further the goal of better investor understanding of the Company's financial reporting. We are hopeful that others in the industry will follow our lead." Mr. Redman continued, "Disclosure of this information is intended to eliminate uncertainties concerning assumptions utilized by the Company in the gain on sale accounting method and ultimately benefit our shareholders." The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release that are not historical facts are forward looking statements based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. Actual results may differ from those projected in the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to the following risks: changes in the performance of the financial markets, in the demand for and market acceptance of United Companies' products, and in general economic conditions, including interest rates; presence of competitors with greater financial resources and the impact of competitive products and pricing; the effect of the Company's policies; the continued availability to the Company of adequate funding sources; actual prepayment rates and credit losses of loans sold as compared to prepayment rates and credit losses assumed by the Company at the time of sale for purposes of its gain on sale computations; the effect of changes in market interest rates on the spread between the coupon rate on loans sold and the pass through rate on securities backed by such loans issued by the Company in securitzation transactions and on the discount rate assumed by the Company in its gain on sale -continued- 7 4 UC ANNOUNCES EARNINGS EXPECTED FOR THE FOURTH QUARTER AND FORECASTS FUTURE PRODUCTION AND EARNINGS - PAGE 4 OF 6 computations; and various legal, regulatory and litigation risks. Investors are also directed to other risks discussed in documents filed by the Company with the Securities and Exchange Commission including without limitation "Investment Considerations" in the prospectus supplement of the Company dated June 17, 1997, relating to the sale of the subordinated notes described therein. The Company assumes no obligation to update the information included in this press release. CONFERENCE CALL: The Company will further discuss the expected results of operations and expected future production and earnings levels on a conference call set for 8:30 a.m. EST Tuesday, January 27, 1998. To participate in the conference call, please dial (800) 553-0318 for domestic calls and (612) 332-1025 for international calls. A replay of the conference call will be available beginning January 27, 1998 at 12:30 p.m. EST and the call will run through midnight, Thursday, January 29, 1998. To access the replay, please dial (800) 475-6701 for domestic calls and (320) 365-3844 for international. The access code is 375066. United Companies is one of the leading originators of non-traditional mortgage loan products throughout the United States. Through its five channels of origination, the Company lends to a customer base of homeowners with consumer borrowing needs who are not able to access conventional credit. The Company's Common and Preferred stock trade on the New York Stock Exchange under the symbols "UC" and "UCPRI" respectively. *See the following pages for additional information. 8 5 The following table provides certain contractual delinquency and default information for home equity loans serviced as of the dates indicated:
DECEMBER 31, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1996 ------------------------- ------------------------- --------------------------- % OF % OF % OF CONTRACTUAL CONTRACTUAL CONTRACTUAL CONTRACTUAL CONTRACTUAL CONTRACTUAL BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Home equity loans serviced.................. $5,528,923 $5,001,501 $4,040,138 ========== ========== Delinquency 30-59 days ............... $ 176,882 3.20% $ 185,426 3.71% $ 136,976 3.39% 60-89 days ............... 57,975 1.05 47,602 0.95 53,124 1.31 90+ days ................. 46,873 0.85 24,911 0.50 28,663 0.71 ---------- ----- ---------- ----- ---------- ----- 281,730 5.10 257,939 5.16 218,763 5.41 ---------- ----- ---------- ----- ---------- ----- Defaults Foreclosures in process .. 189,801 3.43 190,743 3.81 135,779 3.36 Bankruptcy ............... 115,856 2.10 113,673 2.27 73,887 1.83 ---------- ----- ---------- ----- ---------- ----- 305,657 5.53 304,416 6.08 209,666 5.19 ---------- ----- ---------- ----- ---------- ----- Total delinquency and defaults ........... $ 587,387 10.63% $ 562,355 11.24% $ 428,429 10.60% ========== ===== ========== ===== ========== =====
The following table provides certain contractual delinquency and default data with respect to the Company's home equity loans serviced, by year of production, as of the dates indicated:
DECEMBER 31, 1997 --------------------------------------------------------------------------------------------------- DEFAULTS ------------------------------- DELINQUENCY FORECLOSURES TOTAL CONTRACTUAL ------------------------------------ IN BANK- DELINQUENCY YEAR OF PRODUCTION BALANCE 30-59 60-89 90+ TOTAL PROCESS RUPTCY TOTAL & DEFAULTS - ------------------ ------------ ----- ----- ------- --------- ------------ -------- ------- ----------- (DOLLARS IN THOUSANDS) 1991 & prior .. $ 75,114 4.79% 1.06% 1.56% 7.41% 4.92% 5.72% 10.64% 18.05% 1992 .......... 43,134 5.21% 1.72% 2.28% 9.21% 4.82% 5.23% 10.05% 19.26% 1993 .......... 135,399 4.59% 1.12% 1.01% 6.72% 4.79% 5.30% 10.09% 16.81% 1994 .......... 302,819 4.95% 1.54% 1.47% 7.96% 6.17% 6.79% 12.96% 20.92% 1995 .......... 710,685 5.04% 1.59% 1.46% 8.09% 7.80% 5.66% 13.46% 21.55% 1996 .......... 1,544,278 4.54% 1.50% 1.22% 7.26% 5.39% 2.28% 7.67% 14.93% 1997 .......... 2,717,494 1.62% 0.58% 0.35% 2.55% 0.74% 0.23% 0.97% 3.52% ---------- Total ..... $5,528,923 3.20% 1.05% 0.85% 5.10% 3.43% 2.10% 5.53% 10.63% ==========
DECEMBER 31, 1996 --------------------------------------------------------------------------------------------------- DEFAULTS ------------------------------- DELINQUENCY FORECLOSURES TOTAL CONTRACTUAL ------------------------------------ IN BANK- DELINQUENCY YEAR OF PRODUCTION BALANCE 30-59 60-89 90+ TOTAL PROCESS RUPTCY TOTAL & DEFAULTS - ------------------ ------------ ----- ----- ------- --------- ------------ -------- ------- ----------- (DOLLARS IN THOUSANDS) 1990 & prior... $ 75,252 5.12% 1.20% 1.22% 7.54% 5.97% 4.85% 10.82% 18.36% 1991........... 38,114 5.26% 0.97% 0.83% 7.06% 5.45% 6.59% 12.04% 19.10% 1992........... 63,842 4.74% 1.74% 1.97% 8.45% 5.87% 5.40% 11.27% 19.72% 1993........... 199,037 4.39% 1.28% 1.07% 6.74% 4.94% 5.05% 9.99% 16.73% 1994........... 451,224 5.15% 1.58% 0.92% 7.65% 4.70% 6.37% 11.07% 18.72% 1995........... 1,069,818 4.75% 2.12% 1.17% 8.04% 2.64% 6.26% 8.90% 16.94% 1996........... 2,142,851 2.11% 0.86% 0.35% 3.32% 0.20% 0.95% 1.15% 4.47% ------------ Total...... $ 4,040,138 3.39% 1.31% 0.71% 5.41% 3.36% 1.83% 5.19% 10.60% ============
9 6 The following table provides certain pool factors and cumulative losses with respect to the Company's home-equity loans by year of production:
CUMULATIVE YEAR HOME-EQUITY NET LOSSES AS OF LOAN POOL % OF PRODUCTION PRODUCTION FACTOR(1) PRODUCTION - --------------- --------------- --------------- -------------- (DOLLARS IN THOUSANDS) FIXED - ----- 1993 $ 500,900 0.2542 1.98% 1994 $ 837,901 0.3469 2.01% 1995 $ 1,130,715 0.4727 1.03% 1996 $ 1,383,714 0.7128 0.11% 1997 $ 1,373,984 0.9342 0.00% ARM - --- 1993 $ 38,968 0.2065 1.64% 1994 $ 70,920 0.1716 0.55% 1995 $ 410,922 0.4289 0.58% 1996 $ 860,744 0.6482 0.05% 1997 $ 1,513,667 0.9473 0.00%
(1) Pool Factor - Percentage of the year's production remaining outstanding at December 31, 1997. 7 UNITED COMPANIES FINANCIAL CORPORATION
TOTAL TOTAL 1994 1995 1996 Q1 1996 Q2 1996 Q3 1996 Q4 ------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) LOAN PRODUCTION - --------------- HOME EQUITY UC Lending Fixed-rate $ 679,466 $ 740,707 $ 183,552 $ 153,725 $ 147,271 $ 195,933 Arm 11,560 198,369 80,020 126,908 127,862 95,584 ---------- ---------- ---------- ---------- ---------- ---------- Total UC Lending 691,026 939,076 263,572 280,633 275,133 291,517 ---------- ---------- ---------- ---------- ---------- ---------- Unicor Fixed-rate 146,832 337,802 95,141 163,057 142,025 142,622 Arm 45,248 85,208 6,805 4,502 10,242 5,710 ---------- ---------- ---------- ---------- ---------- ---------- Total Unicor 192,080 423,010 101,946 167,559 152,267 148,332 ---------- ---------- ---------- ---------- ---------- ---------- Ginger Mae Fixed-rate 9,864 44,497 16,650 32,423 28,400 37,606 Arm 201 6,351 722 888 1,375 820 ---------- ---------- ---------- ---------- ---------- ---------- Total Ginger Mae 10,065 50,848 17,372 33,311 29,775 38,426 ---------- ---------- ---------- ---------- ---------- ---------- Sub total 893,171 1,412,934 382,890 481,503 457,175 478,275 ---------- ---------- ---------- ---------- ---------- ---------- UCFI Fixed-rate - - - - - 3,170 ---------- ---------- ---------- ---------- ---------- ---------- Asset Acquisition Fixed-rate 1,739 7,709 8,392 8,674 4,963 20,110 Arm 13,911 120,894 3,382 141,074 5,922 248,928 ---------- ---------- ---------- ---------- ---------- ---------- Total Asset Acq 15,650 128,603 11,774 149,748 10,885 269,038 ---------- ---------- ---------- ---------- ---------- ---------- Total home equity loans 908,821 1,541,537 394,664 631,251 468,060 750,483 ---------- ---------- ---------- ---------- ---------- ---------- CHATTEL UC Lending - - - - - 1,289 Ginger Mae - - - - - - UCFI - 887 14,903 37,299 34,026 29,403 ---------- ---------- ---------- ---------- ---------- ---------- Total chattel loans - 887 14,903 37,299 34,026 30,692 ---------- ---------- ---------- ---------- ---------- ---------- Total $ 908,821 $1,542,424 $ 409,567 $ 668,550 $ 502,086 $ 781,175 ========== ========== ========== ========== ========== ========== Total Total 1996 1997 Q1 1997 Q2 1997 Q3 1997 Q4 1997 ------------------------------------------------------------------------------------------- (Dollars in Thousands) LOAN PRODUCTION - --------------- HOME EQUITY UC Lending Fixed-rate $ 680,481 $ 179,337 $ 145,377 $ 174,129 $ 182,556 $ 681,399 Arm 430,374 115,279 224,944 248,290 243,118 831,631 ---------- ---------- ---------- ---------- ---------- ---------- Total UC Lending 1,110,855 294,616 370,321 422,419 425,674 1,513,030 ---------- ---------- ---------- ---------- ---------- ---------- Unicor Fixed-rate 542,845 132,065 108,230 102,569 96,771 439,635 Arm 27,259 3,666 21,155 50,101 52,292 127,214 ---------- ---------- ---------- ---------- ---------- ---------- Total Unicor 570,104 135,731 129,385 152,670 149,063 566,849 ---------- ---------- ---------- ---------- ---------- ---------- Ginger Mae Fixed-rate 115,079 33,121 41,286 37,897 34,223 146,527 Arm 3,805 46 10,786 20,842 33,196 64,870 ---------- ---------- ---------- ---------- ---------- ---------- Total Ginger Mae 118,884 33,167 52,072 58,739 67,419 211,397 ---------- ---------- ---------- ---------- ---------- ---------- Sub total 1,799,843 463,514 551,778 633,828 642,156 2,291,276 ---------- ---------- ---------- ---------- ---------- ---------- UCFI Fixed-rate 3,170 6,419 7,078 16,693 25,966 56,156 ---------- ---------- ---------- ---------- ---------- ---------- Asset Acquisition Fixed-rate 42,139 6,905 3,926 6,821 32,615 50,267 Arm 399,306 66,633 140,635 41,590 241,094 489,952 ---------- ---------- ---------- ---------- ---------- ---------- Total Asset Acq 441,445 73,538 144,561 48,411 273,709 540,219 ---------- ---------- ---------- ---------- ---------- ---------- Total home equity loans 2,244,458 543,471 703,417 698,932 941,831 2,887,651 ---------- ---------- ---------- ---------- ---------- ---------- CHATTEL UC Lending 1,289 2,690 3,243 4,755 3,841 14,529 Ginger Mae - 25 43 6 - 74 UCFI 115,631 38,910 50,154 56,343 50,191 195,598 ---------- ---------- ---------- ---------- ---------- ---------- Total chattel loans 116,920 41,625 53,440 61,104 54,032 210,201 ---------- ---------- ---------- ---------- ---------- ---------- Total $2,361,378 $ 585,096 $ 756,857 $ 760,036 $ 995,863 $3,097,852 ========== ========== ========== ========== ========== ==========
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