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Thursday July 16, 10:30 am Eastern Time
Company Press Release
SOURCE: TFC Enterprises, Inc.
TFC Enterprises Reports Improved Financial Results for Second Quarter
and First Six Months of 1998
NORFOLK, Va., July 16 /PRNewswire/ -- TFC Enterprises, Inc. (Nasdaq: TFCE - news) today reported increased profits
and contract purchase volume for the second quarter and first six months of 1998. Second quarter 1998 net income increased
to $1.0 million, or $.09 per common share, compared to net income of $0.7 million, or $.06 per common share, in the second
quarter of 1997, and net income of $0.3 million, or $.03 per common share, in the first quarter of 1998. Net income for the
first six months of 1998 increased to $1.3 million, or $.12 per common share, compared to net income of $0.9 million, or $.08
per common share, for the first six months of 1997. The Company also reported that new contract volume had increased by
$31.9 million, or 41%, for the first six months of 1998 compared to the first six months of 1997, and that volume for the
second quarter of 1998 increased $6.3 million, or 12%, over the first quarter of 1998.
''Every key performance indicator improved during the second quarter of 1998 over the first quarter of 1998,'' said Robert S.
Raley Jr., the TFCEI Chairman, President and Chief Executive Officer. ''Delinquency and charge-off continue to show marked
improvement with the 60+ days delinquencies of 6.20% being the second lowest quarter, next to the second quarter of 1994
of 6.17%, since the Company went public. Contract purchase volume and consumer finance originations also continued to
show substantial improvement during a time that the Company was improving its yields. In short we have increased our volume
of business while we increased our prices. It's rewarding to see these continuous improvements since the Company began its
turnaround in 1996,'' he added.
Delinquency and charge-off improved significantly, 60+ days delinquencies as a percent of period-end gross contract
receivables improved from 8.13% at June 30, 1997, and 8.85% at December 31, 1997, to 6.20% at June 30, 1998. Net loan
charge-offs as a percentage of average contract receivables (net of unearned interest) improved from 20.53% (on an
annualized basis)in the first six months of 1997 to 18.35% in the first six months of 1998 and 15.47% in the second quarter of
1998.
The Company reported that auto finance contract purchase volume totaled $52.6 million in the second quarter of 1998
compared to $48.1 million in the first quarter of 1998, an increase of $4.5 million, or 9%, and an increase of $13.7 million, or
35%, over the second quarter of 1997. For the first six months of 1998, contract purchase volume was $100.7 million, an
increase of $29.8 million, or 42%, over the first six months of 1997.
Consumer finance contract originations increased to $5.0 million in the second quarter of 1998, an increase of $1.8 million, or
56%, over the first quarter of 1998, and an increase of $1.2 million, or 32%, over the second quarter of 1997. For the first six
months, consumer finance contract originations totaled $8.2 million, an increase of $2.1 million, or 34%, compared to the first
six months of 1997.
The provision for credit losses relates solely to the Company's consumer finance loan business. The slight increase in the
second quarter of 1998 compared to the second quarter of 1997 as well as for the first six months of 1998 compared to the
first six months of 1997 is a result of growth in the consumer finance receivables. Improved credit quality and servicing of the
Company's auto finance contracts eliminated the need for a loss provision for all of 1997 and the first six months of 1998.
The yield on interest earning assets was 22.73% in the second quarter of 1998, compared to 21.73% in the second quarter of
1997. The yield on interest earning assets was 22.18% for the first six months of 1998, compared to 21.34% for the first six
months of 1997. The increase was primarily attributable to an increase in the amount of contract purchase discount accreted to
interest revenue as a yield enhancement.
The cost of interest bearing liabilities was 10.56% in the second quarter of 1998, compared with 10.99% in the second quarter
of 1997. The decrease was related to an interest rate reduction in the primary line of credit. The cost of interest bearing
liabilities was 10.72% for the first six months of 1998, compared to 10.63% for the first six months of 1997. The increase in
the first six months of 1998 was primarily attributable to the amortization of stock warrants issued in 1997. The Company
continues to explore ways to reduce its overall cost of interest bearing liabilities.
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. In accordance with the Private Securities Litigation Reform Act of 1995, the following are
factors that could cause the Company's actual results to differ materially from those expressed or implied by such
forward-looking statements: a rise in interest rates, a deterioration of credit experience, the loss of or reduction in its credit
facilities, or if the Company were to face increased competition. Investors are encouraged to review the Company's SEC filings
for more information about the factors affecting the Company's business.
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. has offices of The Finance Company in Killeen, TX; Jacksonville, FL; Norfolk,
VA; San Diego, CA; and Tacoma , Washington and offices of First Community Finance in 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 4:00 p.m. eastern time on Tuesday, July 21, 1998. Those wishing to participate should call
1-800-216-3907 a few minutes prior to the scheduled start of the conference call.
TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
6/30/98 12/31/97
(dollars in thousands)
Assets
Cash and cash equivalents $2,920 $1,975
Net contract receivables 144,868 128,503
Recoverable income taxes 38 1,229
Property and equipment, net 2,022 2,297
Intangible assets, net 11,524 12,070
Deferred income taxes 188 188
Other assets 1,773 1,571
Total assets $163,333 $147,833
Liabilities and shareholders'
equity
Liabilities:
Revolving line of credit $114,662 $ 98,572
Subordinated notes 10,237 11,214
Accounts payable and
accrued expenses 2,474 2,841
Income taxes payable 2,075 2,075
Refundable dealer reserve 1,405 1,987
Other liabilities 69 64
Total liabilities 130,922 116,753
Shareholders' equity:
Common stock, $.01 par value,
40,000,000 shares authorized;
11,301,807 and 11,290,308
outstanding at 6/30/98
and 12/31/97, respectively 49 49
Additional paid-in capital 55,872 55,844
Retained deficit (23,510) (24,813)
Total shareholders' equity 32,411 31,080
Total liabilities and
shareholders' equity $163,333 $147,833
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
6/30/98 6/30/97 6/30/98 6/30/97
(in thousands, except per
share amounts)
Interest and other
finance revenue $ 9,401 $ 8,140 17,921 $16,415
Interest expense 3,163 3,032 6,243 6,059
Net interest revenue 6,238 5,108 11,678 10,356
Provision for
credit losses 199 160 320 252
Net interest revenue
after provision for
credit losses 6,039 4,948 11,358 10,104
Other revenue 301 318 629 594
Operating expense:
Salaries 2,761 2,393 5,443 4,836
Employee benefits 490 373 973 696
Occupancy 221 215 443 451
Equipment 311 335 616 629
Amortization of
intangible assets 273 273 546 546
Other 1,322 1,261 2,663 2,645
Total operating
expense 5,378 4,850 10,684 9,803
Income before
income taxes 962 416 1,303 895
Provision for (benefit from)
income taxes -- (283) -- --
Net income $ 962 $699 $ 1,303 $895
Net income per
basic common share $.09 $ .06 $.12 $.08
Net income per
diluted common share $.08 $ .06 $.11 $.08
TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
Three months ended Six months ended
6/30/98 6/30/97 6/30/98 6/30/97
(dollars in thousands)
CONTRACT PURCHASES AND
ORIGINATIONS
Auto finance:
Point of sale $35,208 $ 19,448 $ 73,084 $ 35,123
Portfolio 17,427 19,412 27,652 35,817
Consumer finance 4,961 3,823 8,181 6,090
Total $57,596 $42,683 $108,917 $77,030
AVERAGE BALANCES
Interest-earning
assets $165,451 $149,857 $161,618 $153,814
Total assets 158,491 149,380 154,960 152,286
Interest-bearing
liabilities 119,786 110,350 116,516 114,011
Equity 31,860 30,641 31,575 30,326
PERFORMANCE RATIOS*
Return on average
assets 2.43% 1.87% 1.68% 1.18%
Return on average
equity 12.07 9.12 8.25 5.90
Yield on interest-
earning assets 22.73 21.73 22.18 21.34
Cost of interest-
bearing liabilities 10.56 10.99 10.72 10.63
Net interest margin 15.08 13.63 14.45 13.47
Operating expense as a
percentage of average
interest-earning
assets 13.00 12.95 13.22 12.75
Total net charge-offs
to average gross
receivables, net
of unearned interest 15.47 19.98 18.35 20.53
60+ days delinquencies
to gross contract
receivables, period
end 6.20 8.13 6.20 8.13
Total allowance and
nonrefundable reserve
to gross contract
receivables net of
unearned interest,
period end 13.44 15.66 13.44 15.66
Equity to assets,
period end 19.84 21.03 19.84 21.03
*annualized rates, as appropriate
SOURCE: TFC Enterprises, Inc.
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