TFC Enterprises Announces 1997 Financial Results
25 February 1998
TFC Enterprises Announces 1997 Financial Results
NORFOLK, Va., Feb. 25 -- TFC Enterprises, Inc.
today reported 1997 net income of $0.7 million, or $0.06 per common share.
This compares to a net loss of $7.6 million, or $0.67 per common share, for
1996. Results reported for the fourth quarter of 1997 were a net loss of
$0.1 million, or $0.01 per common share, compared to a net loss of
$7.1 million, or $0.63 per common share, in the fourth quarter of 1996. The
Company also reported that new contract volume had increased by $38.7 million,
or 29.0%, for 1997 compared to 1996, with volume for the fourth quarter of
1997 up by $19.3 million, or 54.9%, over the fourth quarter of 1996.
"We are extremely pleased to see this continuing evidence that the many
difficult changes we undertook during 1996 are paying off with improved
operating results," said Robert S. Raley, Jr., the TFCEI Chairman, President
and Chief Executive Officer. "Our goal for 1997 was to continue to build on
this success, with particular emphasis on high quality service, sound credit
quality, and increased growth in our contract purchase volume. Contract
volume increased $38.7 million or 29.0% in 1997 over 1996 without sacrificing
our credit quality and pricing. This combined with the continued improvement
in delinquency and charge-off further support that the renewed business
strategies are working. To achieve these improvements, in an environment as
volatile as the sub prime industry, is rewarding. Given the problems many of
our competitors are experiencing the Company views 1998 as a year of
opportunity and will strive to capitalize on this opportunity," he added.
The Company's return to profitability was primarily the result of
continuing improvement in the performance of its contract receivables and a
24.7% reduction in operating expenses resulting from the restructuring during
1996.
Improved credit quality and servicing of the Company's auto finance
contracts eliminated the need for a loss provision in 1997 compared to a
provision of $8.4 million for 1996. The provision for credit losses on the
Company's consumer finance loan business increased to $0.3 million in the
fourth quarter of 1997 compared to $0.1 million in the fourth quarter of 1996,
and increased to $0.7 million for 1997 compared to $0.3 million for 1996, due
to growth in the loan portfolio.
Operating expenses, excluding the 1996 charge for severance benefits and
restructuring, decreased by $4.1 million, or 17.3%, for 1997 compared to 1996.
In the fourth quarter of 1997, operating expenses decreased $0.1 million, or
1.9%, compared to the fourth quarter of 1996 even with the cost of opening one
auto finance office and three consumer finance offices in 1997. This decrease
reflects the impact of the Company's restructuring plans implemented during
1996 to consolidate service center operations from three locations into two
and to downsize the management staff.
Auto finance contract purchase volume totaled $47.9 million in the fourth
quarter of 1997, or 58.1% above the $30.3 million purchased in the fourth
quarter of 1996. For the full year 1997, gross contract volume totaled
$155.8 million, or 29.8%, above the $120.0 million volume for 1996. In spite
of a highly competitive market during 1997 and an overall tightening of its
credit and pricing guidelines the Company increased its gross contract volume
in the fourth quarter and full year 1997, relative to the comparable periods
in 1996. Consumer finance contract originations totaled $6.7 million in the
fourth quarter of 1997, an increase of $1.7 million, or 35%, from the fourth
quarter of 1996. Consumer finance contract originations totaled
$16.0 million in 1997, an increase of $2.8 million, or 21%, compared to 1996.
Key performance indicators that have improved in 1997 include 60+ days
delinquencies as a percent of period-end gross contract receivables, which
improved from 9.9% at December 31, 1996, to 8.9% at December 31, 1997. In
addition, the Company reported that net loan charge-offs as a percentage of
average contract receivables (net of unearned interest) decreased from 22.3%
for 1996 to 18.5% for 1997 and 17.0% in the fourth quarter of 1997 compared to
21.4% in the fourth quarter of 1996. These positive trends are especially
significant because the Company achieved the improved ratios while its
contract receivables decreased.
Net interest revenue reported for the fourth quarter of 1997 totaled
$5.2 million, a decrease of 10.6% compared with the $5.8 million reported in
the fourth quarter of 1996. For the full year 1997, net interest income was
$20.3 million, down 24.9% from $27.0 million in 1996. The decreases were
attributable to reductions in the net interest margin and average interest-
earning assets.
In addition to historical information, this press release contains
forward-looking statements that are subject to risks and uncertainties that
could cause the Company's actual results to differ materially from those
anticipated in these forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's current analysis. For example, during 1998 the Company's
operations could be materially adversely affected if interest rates were to
rise, if credit experience deteriorated, or the Company were to face increased
competition.
TFC Enterprises, Inc., through its wholly-owned subsidiary, The Finance
Company, specializes in purchasing and servicing installment sales contracts
originated by automobile and motorcycle dealers. Through First Community
Finance, Inc., another wholly-owned subsidiary, TFC Enterprises, Inc. is
involved in the direct origination and servicing of small consumer loans.
Based in Norfolk, Va., TFC Enterprises, Inc. through its subsidiary The
Finance Company, has offices in Killeen, Texas; Jacksonville, Fla.; San Diego;
and through its subsidiary First Community Finance, Inc., has offices
throughout Virginia and North Carolina.
NOTE: Detailed supplemental information follows.
Conference Call Notice
Robert S. Raley, Jr., Chairman, President and Chief Executive Officer of
TFC Enterprises, Inc., will host a conference call for analysts and investors
at 3:00 p.m. eastern time on Wednesday, February 25, 1998. Those wishing to
participate should call 1-800-786-4914 a few minutes prior to the scheduled
start of the conference call.
TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
12/31/97 12/31/96
(dollars in thousands)
Assets
Cash $1,975 $2,688
Restricted cash -- 5,532
Net contract receivables 128,503 126,252
Recoverable income taxes 1,229 5,831
Property and equipment, net 2,297 2,823
Intangible assets, net 12,070 13,161
Deferred income taxes 188 188
Other assets 1,571 2,108
Total assets $147,833 $158,583
Liabilities and shareholders'
equity
Liabilities:
Revolving line of credit $98,572 $72,562
Term notes -- 19,464
Automobile Receivables-
Backed notes -- 15,843
Subordinated notes, net 11,214 12,509
Accounts payable and
accrued expenses 2,841 3,960
Income taxes 2,075 2,075
Refundable dealer reserve 1,987 2,208
Other liabilities 64 100
Total liabilities 116,753 128,721
Shareholders' equity:
Common stock, $.01 par value,
40,000,000 shares authorized;
11,290,308 shares outstanding 49 49
Additional paid-in capital 55,844 55,333
Retained deficit (24,813) (25,520)
Total shareholders' equity 31,080 29,862
Total liabilities and
shareholders' equity $147,833 $158,583
TFC ENTERPRISES, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three months ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
(in thousands,
except per share amounts)
Interest and other
finance revenue $8,132 $ 8,777 $ 32,317 $40,484
Interest expense 2,979 3,011 12,019 13,451
Net interest revenue 5,153 5,766 20,298 27,033
Provision for
credit losses 253 6,103 719 8,733
Net interest revenue
after provision for
credit losses 4,900 (337) 19,579 18,300
Other revenue 293 53 1,105 1,436
Operating expense:
Salaries 2,633 2,473 9,866 12,107
Employee benefits 425 492 1,511 1,957
Occupancy 230 301 896 1,053
Equipment 324 434 1,253 1,379
Amortization of
intangibles 272 272 1,091 1,091
Severance benefits -- -- -- 1,804
Restructuring charge -- 590 -- 590
Other 1,427 1,461 5,360 6,559
Total operating
expense 5,311 6,023 19,977 26,540
Income (loss) before
income taxes (118) (6,307) 707 (6,804)
Provision for
income taxes -- 749 -- 792
Net income (loss) $(118) $(7,056) $707 $(7,596)
Net income (loss) per
common share:
Basic $(.01) $(.63) $.06 $(.67)
Diluted $(.01) $(.63) $.06 $(.67)
Weighted average shares
outstanding 11,290 11,290 11,290 11,290
TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
Three months ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
(dollars in thousands)
CONTRACT PURCHASES
OR ORIGINATIONS
Auto finance:
Point of sale $29,079 $14,651 $85,311 $58,623
Portfolio 18,796 15,635 70,520 61,391
Consumer Finance 6,661 4,932 16,023 13,174
Total $54,536 $35,218 $171,854 $133,188
AVERAGE BALANCES
Interest earning
assets $150,480 $168,430 $151,743 $188,239
Total assets 145,395 168,133 148,932 186,040
Interest bearing
liabilities 107,839 125,737 110,812 140,943
Equity 31,143 34,735 30,731 36,386
PERFORMANCE RATIOS*
Return on average
assets NM NM .47% NM
Return on average
equity NM NM 2.30% NM
Yield on interest
earning assets 21.62% 20.84% 21.30% 21.51%
Cost of interest
bearing liabilities 11.05% 9.58% 10.85% 9.54%
Net interest margin 13.70% 13.69% 13.38% 14.36%
Operating expense/
Interest earning
assets 14.12% 12.44% 13.17% 12.83%
Total net charge-offs
to average gross
contract receivables,
net of unearned
interest 16.99% 21.36% 18.53% 22.25%
60 day delinquencies
to gross contract
receivables, period
end 8.85% 9.89% 8.85% 9.89%
Total allowance and
nonrefundable reserve
to gross contract
receivables net of
unearned interest,
period end 14.70% 17.88% 14.70% 17.88%
Equity to assets,
period end 21.02% 18.83% 21.02% 18.83%
*Annualized as appropriate
SOURCE TFC Enterprises, Inc.