<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
MAY 31, 1996
RAC FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-27550 75-2561052
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1250 W. MOCKINGBIRD LANE, DALLAS TEXAS 75247
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 630-6006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following exhibits are furnished in accordance with Item 601 of
Regulation 8-K.
(a) Financial statements of business required
1. Mortgage Plus Incorporated audited financial statements for the fiscal
years ended April 30, 1994 and 1995.
2. Mortgage Plus Incorporated unaudited interim financial statements for
the eleven months ended March 31, 1995.
3. Mortgage Plus Incorporated unaudited interim financial statements for
the eleven months ended March 31, 1996.
(b) Pro forma financial information
1. Combined unaudited Pro forma consolidated financial information as of
and for the six months ended March 31, 1996.
2. Combined unaudited Pro forma consolidated statement of income for the
year ended September 30, 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
MORTGAGE PLUS INCORPORATED:
We have audited the accompanying balance sheets of Mortgage Plus Incorporated
(the Company) as of April 30, 1995 and 1994, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mortgage Plus Incorporated as
of April 30, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
-----------------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
July 10, 1995
<PAGE>
MORTGAGE PLUS INCORPORATED
BALANCE SHEETS
APRIL 30, 1995 AND 1994
- -----------------------------------------------------------------------------
<TABLE>
ASSETS 1995 1994
- ------ ----------- ---------
<S> <C> <C>
Cash and cash equivalents (note 4) $ 452,696 2,290,741
Accounts receivable, net of allowance for doubtful
accounts of $167,879 and $200,429, respectively
(notes 2 and 9) 2,123,794 1,616,877
Officer and employee advances (note 7) 396,737 37,837
Notes receivable, officers (note 7) - 552,932
First mortgage loans held for sale (note 4) 6,545,864 3,061,481
Prepaid expenses 54,617 111,591
Net furniture, fixtures, and equipment (note 3) 731,927 945,323
Refundable deposits 8,988 21,999
Other assets 7,352 11,374
----------- ---------
Total assets $10,321,975 8,650,155
----------- ---------
----------- ---------
Escrow funds (segregated in separate account and excluded
from the Company's assets and liabilities (note 9)) $ 91,000 707,000
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Warehouse line of credit (note 4) $ 7,019,768 2,105,632
Accounts payable and accrued expenses 326,850 868,387
Other liabilities 972,924 488,936
----------- ---------
Total liabilities 8,319,542 3,462,955
----------- ---------
Stockholders' equity (notes 5 and 11):
Common stock, no par value. 10,000 shares authorized;
6,073 shares issued and outstanding 2,495,842 2,495,842
Additional paid-in capital 187,647 187,647
Retained earnings (deficit) (681,056) 2,503,711
----------- ---------
Total stockholders' equity 2,002,433 5,187,200
----------- ---------
Commitments and contingencies (notes 4, 7, 8, 9, and 10)
Total liabilities and stockholders' equity $10,321,975 8,650,155
----------- ---------
----------- ---------
Liability for escrow funds (note 9) $ 91,000 707,000
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MORTGAGE PLUS INCORPORATED
STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1995 AND 1994
- -----------------------------------------------------------------------------
1995 1994
----------- ----------
Revenue (notes 6 and 9):
Sales of mortgage loans, net $ 972,227 16,857,153
Sales of servicing rights (note 1) 3,085,320 8,742,438
Interest income 518,043 1,702,436
Brokerage fees 276,539 -
Servicing fee income 89,627 71,982
Other 21,544 20,222
----------- ----------
Total revenue 4,963,300 27,394,231
----------- ----------
Costs and expenses:
Salaries and commissions (note 5) 3,093,631 14,057,334
Employee benefits and payroll taxes 809,694 1,426,354
Office rental and other occupancy
expense (notes 7 and 10) 316,647 1,117,250
Office and administrative expense 728,931 1,891,458
Interest 245,155 842,627
Other 787,034 2,256,348
----------- ----------
Total costs and expenses 5,981,092 21,591,371
----------- ----------
Net income (loss) $(1,017,792) 5,802,860
----------- ----------
----------- ----------
See accompanying notes to financial statements.
3
<PAGE>
MORTGAGE PLUS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 1995 AND 1994
- -----------------------------------------------------------------------------
<TABLE>
Common stock
---------------------- Additional Retained Total
Number paid-in earnings stockholders'
of shares Amount capital (deficit) equity
--------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES, MAY 1, 1993 3,492 $ 832,594 187,647 3,573,779 4,594,020
Issuance of common
stock (note 5) 2,581 1,663,248 - - 1,663,248
Net income - - - 5,802,860 5,802,860
Distributions to stockholders - - - (6,872,928) (6,872,928)
----- ---------- ------- ---------- ----------
BALANCES, APRIL 30, 1994 6,073 2,495,842 187,647 2,503,711 5,187,200
Net loss - - - (1,017,792) (1,017,792)
Distributions to stockholders - - - (2,166,975) (2,166,975)
----- ---------- ------- ---------- ----------
BALANCES, APRIL 30, 1995 6,073 $2,495,842 187,647 (681,056) 2,002,433
----- ---------- ------- ---------- ----------
----- ---------- ------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
MORTGAGE PLUS INCORPORATED
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1995 AND 1994
- -----------------------------------------------------------------------------
<TABLE>
1995 1994
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,017,792) 5,802,860
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 217,764 328,142
Provision (credit) for losses on accounts receivable (32,550) 139,429
Loss on sales of furniture, fixtures
and equipment, net 48,994 35,011
Changes in operating assets and liabilities:
Accounts receivable (474,367) (449,751)
Officer and employee advances (358,900) 101,331
Mortgage loans held for sale (3,484,383) (357,835)
Prepaid expenses 56,974 (36,306)
Refundable deposits 13,011 (3,394)
Other assets 4,022 -
Accounts payable and accrued expenses (541,537) 249,150
Other liabilities 483,988 416,532
----------- ---------
Net cash provided (used) by operating activities (5,084,776) 6,225,169
----------- ---------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (71,692) (634,011)
Proceeds from sale of furniture, fixtures and equipment 18,330 7,481
Advances on notes receivable, officers (28,354) (1,280,556)
Proceeds from repayment of notes receivable, officers 581,286 1,104,388
Purchases of marketable securities - (15,958)
Proceeds from sales and maturities of marketable securities - 644,693
Proceeds from sale of other assets - 112,259
----------- ---------
Net cash provided (used) by investing activities 499,570 (61,704)
----------- ---------
Cash flows from financing activities:
Net borrowings on warehouse line of credit 4,914,136 157,260
Distributions to stockholders (2,166,975) (6,872,928)
Proceeds from issuance of common stock - 1,663,248
----------- ---------
Net cash provided (used) by financing activities 2,747,161 (5,052,420)
----------- ---------
Net increase (decrease) in cash and cash
equivalents (1,838,045) 1,111,045
Cash and cash equivalents, beginning of year 2,290,741 1,179,696
----------- ---------
Cash and cash equivalents, end of year $ 452,696 2,290,741
----------- ---------
----------- ---------
Interest paid in cash $ 245,155 842,627
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
MORTGAGE PLUS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 AND 1994
- -----------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Mortgage Plus Incorporated (the Company) was incorporated under the laws of
the State of Delaware on August 27, 1984. The Company's principal activity
is the origination and placement of permanent mortgage loans.
FINANCIAL STATEMENT PRESENTATION
The Company prepares its financial statements using an unclassified balance
sheet presentation as is customary in the mortgage banking industry. A
classified balance sheet presentation would have aggregated current assets,
current liabilities and net working capital as of April 30, 1995 and 1994,
as follows:
1995 1994
----------- ---------
Current assets $ 9,573,708 7,671,459
Current liabilities 8,319,542 3,462,955
----------- ---------
Net working capital $ 1,254,166 4,208,504
----------- ---------
----------- ---------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit and highly
liquid invest-ments with maturities of three months or less.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable,
and bank deposits and temporary cash investments in excess of federally
insured limits. Uninsured cash deposits at April 30, 1995 and 1994 totaled
approximately $390,000 and $2,078,000, respectively.
The Company sells mortgage loans to various investors. Included in the
April 30, 1995 accounts receivable balances were receivables due from two
investors approximating $655,000 and $580,000. Included in the April 30,
1994 accounts receivable balances were receivables due from one investor
approximating $585,000. Concentrations of credit risk with respect to
other trade receivables are limited due to the Company's broad customer
base. Historically, the Company has not experienced any losses from
investor receivables; however, provisions for losses are made when, in
management's opinion, uncertainties exist as to collectibility.
6
<PAGE>
MORTGAGE PLUS INCORPORATED
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -----------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregated cost
or market as determined by outstanding commitments from investors or
current yield requirements calculated on the aggregate loan basis after
giving effect to any gains or losses resulting from outstanding
commitments to fund loans. The carrying amount includes loan origination
fees, commissions paid and other direct costs of originating the loan.
Adjustments to market and provisions for possible losses are charged to
income when such amounts are identified.
Differences between the carrying amount of mortgage loans held for sale
and amounts received upon sale are credited or charged to income at the
time the loans are purchased by an investor. Interest on mortgage loans
is recorded as income on the accrual basis. No interest is recorded
when, in management's opinion, uncertainties exist as to its
collectibility.
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement No. 119, DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND
FAIR VALUE OF FINANCIAL INSTRUMENTS (Statement 119). Statement 119
requires disclosures about derivative financial instruments which are
defined as futures, forward, swap, and option contracts and other
financial instruments with similar characteristics. Statement 119
requires disclosures about amounts, the nature, and terms of derivative
financial instruments that are not subject to FASB Statement No. 105,
DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF
CREDIT RISK, because they do not result in off-balance-sheet risk of
accounting loss. For entities that hold or issue derivative financial
instruments for trading purposes, Statement 119 requires disclosure of
the average fair value of net trading gains or losses. For derivatives
held or issued for other than trading, it requires disclosure about
those purposes and about how the instruments are reported in financial
statements. Statement 119 is effective for financial statements for
fiscal years ending after December 15, 1995. The Company, by policy,
does not engage in trading, speculative, or high risk financial
instruments activities, and therefore is not now engaged in futures,
forward, swap, option, or hedging activity.
SALES OF SERVICING RIGHTS
Revenue recorded for sales of servicing rights represent amounts paid by
investors for the rights to service loans and is credited to income when
all risks and rewards have irrevocably passed to the purchasers and
there are no unresolved contingencies. In 1995, revenue of approximately
$1,686,000 relates to one investor.
FURNITURE, FIXTURES, AND EQUIPMENT
Furniture, fixtures, and equipment are recorded at cost. Depreciation
and amortization are computed using the straight-line method over the
estimated useful lives of the assets, and in the case of leasehold
improvements, the shorter of the term of the lease or the estimated
useful lives of the improvements.
7
<PAGE>
MORTGAGE PLUS INCORPORATED
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -----------------------------------------------------------------------------
OTHER ASSETS
The Company is the owner of record of one share of Federal National
Mortgage Association (FNMA) stock, as required to be in compliance with
its FNMA servicing agreement.
INCOME TAXES
No tax liability is reported in the accompanying financial statements
because the Company elected to be taxed as an S corporation effective
May 1, 1992. Accordingly, earnings and losses are included in the
personal income tax returns of the stockholders.
RECLASSIFICATIONS
Certain 1994 reported amounts have been reclassified to conform to the
1995 presentation.
(2) ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from investors, title
companies and borrowers and escrow assignments relating to loans closed.
(3) FURNITURE, FIXTURES, AND EQUIPMENT
Furniture, fixtures, and equipment at April 30, 1995 and 1994 consist of
the following:
1995 1994
---------- ---------
Furniture and fixtures $ 357,528 426,090
Office equipment 961,118 1,068,053
Leasehold improvements 22,916 22,916
---------- ---------
1,341,562 1,517,059
Less accumulated depreciation
and amortization 609,635 571,736
---------- ---------
Net furniture, fixtures,
and equipment $ 731,927 945,323
---------- ---------
---------- ---------
(4) WAREHOUSE LINE OF CREDIT
The Company has a $10,000,000 warehouse line of credit with a bank,
expiring in September 1995, which provides financing for the Company's
origination of mortgage loans. Interest is set at 0.5% over the bank's
prime rate, which was 9.0% at April 30, 1995. In addition, the Company
is charged a non-usage fee monthly, which is equal to .25% per annum of
the unused portion of the commitment. Payments are withdrawn from the
Company's bank account as funding proceeds from investors are deposited.
The line is collateralized by pledged loans and related documents and
instruments, and cash deposits. The Company is charged $15 for each
mortgage loan taken as collateral.
8
<PAGE>
MORTGAGE PLUS INCORPORATED
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -----------------------------------------------------------------------------
The agreement contains covenants which include certain financial
requirements, including maintenance of minimum net worth, minimum
current ratios, limitations on maximum borrowings on secured assets, and
leverage limitations on the ratio of total liabilities to tangible
adjusted net worth, as defined. For the year ended April 30, 1995, the
Company was in compliance with or had received waivers from the lender
for the aforementioned loan covenants.
(5) STOCKHOLDERS' EQUITY
In January 1994, the Company issued 1,366 and 1,215 shares of common
stock to two officers. The value of the no par shares was determined
based on the Company's unaudited net worth as of December 31, 1993, and
totaled $1,663,248, or $644 per share. In exchange for the shares, the
officers paid cash and signed notes receivable to the Company for
$880,543 and $782,705, respectively. The notes, which bore interest at
6%, matured in March 1994 and were repaid in full. The officers funded
the notes' repayments from bonuses paid by the Company totaling
$3,002,253, which were charged to expense during 1994.
(6) MAJOR CUSTOMERS
The Company sells mortgage loans to various investors. Percentages of
loans sold to investors for the years ended April 30, 1995 and 1994 were
as follows:
1995 1994
---- ----
Prudential Home Mortgage Company, Inc. 71% 43%
Countrywide Funding Corp. 9 29
Nations Credit Corp. 6 -
Northwestern Savings and Loan Association 5 -
Government National Mortgage Association - 16
Heigl Mortgage and Fin. Corp. - 8
Other 9 4
--- ---
100% 100%
--- ---
--- ---
(7) TRANSACTIONS WITH RELATED PARTIES
The Company's corporate headquarters are being leased from a
partnership, 15% of which is owned by one of the Company's stockholders
and chief executive officer. Total rent paid to this partnership for
the years ended April 30, 1995 and 1994 was $194,250 and $232,312,
respectively.
The Company had an unsecured note receivable from an officer totaling
$552,932 at April 30, 1994. The note had a stated interest rate of
4.325% and was paid in full as of April 30, 1995. For the years ended
April 30, 1995 and 1994, the Company had unsecured, non-interest-bearing
advances receivable from stockholders totaling $365,429 and $21,745,
respectively.
9
<PAGE>
MORTGAGE PLUS INCORPORATED
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -----------------------------------------------------------------------------
As of April 30, 1993, the Company owned a 70% interest in a real estate
partnership whose only asset was shopping center land, carried at cost.
The partnership interest was sold by the Company at book value to a
company owned by officers and stockholders of the Company on July 1,
1993.
(8) PROFIT SHARING PLAN
In March 1994, the Company established a profit sharing plan covering
substantially all employees after 90 days of service. The Company's
discretionary contributions to the plan were approximately $119,000 and
$86,000 during the years ended April 30, 1995 and 1994, respectively.
(9) LOAN ADMINISTRATION
At April 30, 1995 and 1994, the Company had a portfolio of mortgage
loans serviced for institutional investors aggregating approximately
$7,481,000 and $94,019,000, respectively, which are serviced by
subservicers. Servicing fee income is recorded net of subservicing costs.
The Company collects funds from borrowers which are subsequently
remitted to various authorities for property taxes and insurance
premiums. The trust funds, which are maintained in segregated bank
accounts and not included in the accompanying balance sheets, totaled
approximately $91,000 and $707,000 as of April 30, 1995 and 1994,
respectively.
In connection with its loan administration activities, the Company will
make certain payments of property taxes and insurance premiums in
advance of collecting them from specific mortgagees. These amounts
receivable are recorded as escrow advances and are included in accounts
receivable.
(10) COMMITMENTS
The Company leases its office facilities under various noncancelable
operating leases. These leases generally provide that the Company pay
taxes, maintenance, insurance, and other occupancy expense applicable to
the leased premises. The leases generally contain options to renew for
additional periods at the then existing market rates. Future minimum
rental payments under the leases are $230,200, $236,318 and $40,654, for
the years ending April 30, 1996 through 1998, respectively.
Total rent expense charged to operations under all operating leases for
the years ended April 30, 1995 and 1994 was $239,325 and $718,329,
respectively.
(11) SUBSEQUENT EVENT (UNAUDITED)
On May 31, 1996, the Company was acquired by RAC Financial Group, Inc.
(RAC) in exchange for 800,000 shares of RAC common stock.
10
<PAGE>
MORTGAGE PLUS INCORPORATED
UNAUDITED STATEMENT OF OPERATIONS
FOR THE 11 MONTHS ENDING MARCH 31, 1995
<TABLE>
<S> <C>
Revenues
Loan Origination Fees 944,639.16
Gain on Sale of Loans 1,699,181.14
Service Release Fees 2,898,219.37
Interest income 500,550.57
Service Fees 180,486.72
Other Loan Admin. Income 12,732.92
Subservicing Fees (93,622.37)
Miscellaneous Income 5,663.95
------------
Gross revenue 6,147,851.46
Direct costs
Direct loan costs 1,144,029.76
Warehouse interest 215,331.25
Other warehouse fees 63,063.65
Provision for losses-F/C 33,748.61
------------
Total direct costs 1,456,173.27
Net revenue 4,691,678.19
Expenses
Personnel expenses 3,649,528.12
Occupancy expenses 496,534.49
Operating expenses 464,750.33
Other operating expenses 675,168.67
------------
Total expenses 5,285,981.61
------------
Income before taxes (594,303.42)
Provision for income taxes 234.00
------------
Net income (loss) (594,537.42)
------------
------------
</TABLE>
<PAGE>
MORTGAGE PLUS INCORPORATED
UNAUDITED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<S> <C>
Assets
Cash and cash equivalents 1,859,178.28
Accounts receivable
Receivable from loan sales 10,010,167.14
Receivable from loan closings 368,265.73
Other receivables 486,456.89
Allowance for losses (114,092.30)
-------------
Total Accounts receivable - net 10,750,797.46
Excess servicing - net 200,609.09
Loans held for sale 10,981,496.12
Property and equipment
Furniture and fixtures 534,738.57
Machinery and equipment 1,584,871.08
Leasehold improvements 7,609.82
Less accumulated depreciation (884,492.77)
-------------
Total Property and equipment 1,242,726.70
Other assets
Prepaid expenses 174,616.47
Investment in affiliates 66,140.92
Other investments 63.54
Deposits held 16,694.97
-------------
Total other assets 257,515.90
Total assets 25,292,323.55
-------------
-------------
Liabilities
Funding Liabilities 1,903,248.82
Warehouse Notes Payable 17,202,058.79
Trade accounts payable 140,490.00
Accrued liabilities 2,477,480.15
Investor payable 687,396.97
Notes payable 902,578.73
-------------
Total liabilities 23,313,253.46
Stockholders' equity
Common stock 2,495,842.32
Additional paid in capital 187,646.55
Retained earnings (704,418.78)
Total stockholders' equity 1,979,070.09
-------------
Total liabilties and stockholders' equity 25,292,323.55
-------------
-------------
</TABLE>
<PAGE>
MORTGAGE PLUS INCORPORATED
UNAUDITED STATEMENT OF OPERATIONS
FOR THE 11 MONTHS ENDING MARCH 31, 1996
<TABLE>
<S> <C>
Revenues
Loan origination income 7,924,725.23
Gain on Sale of Loans 1,715,287.57
Service Release Fees 1,476,654.91
Interest income 1,348,177.56
Other Loan Admin. Income 544,178.60
Amort of Excess Servicing (28,819.91)
Miscellaneous Income 101,268.91
-------------
Gross revenue 13,081,472.87
Direct costs
Direct Loan Costs 1,112,190.82
Correspondent Fees 962,219.85
Warehouse Interest 944,774.30
Other Warehouse Fees 92,392.94
Provision for Losses 42,240.55
-------------
Total direct costs 3,153,818.46
Net revenue 9,927,654.41
Expenses
Personnel expenses 7,305,212.06
Occupancy expenses 702,658.71
Operating expenses 1,173,626.40
Other operating expenses 769,108.54
-------------
Total expenses 9,950,605.71
-------------
Income before taxes (22,951.30)
Provision for income taxes 411.00
-------------
Net income (23,362.30)
-------------
-------------
</TABLE>
<PAGE>
MORTGAGE PLUS INCORPORATED
STATEMENT OF CASH FLOWS
For the eleven months ended March 31, 1996
OPERATING ACTIVITIES:
Net loss $ (23,362)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Provision for possible credit losses 42,242
Depreciation and amortization 311,281
Gain on sale of loans 8,366,143
Change in operating assets and liabilities:
Loans originated or acquired 246,849,727
Principal collected and proceeds from
sale of loans (259,693,744)
Excess servicing receivable, net (229,429)
Other Assets (8,350,687)
Accounts payable and accrued expenses 3,908,842
-------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (8,818,987)
-------------
INVESTING ACTIVITIES:
Cash from acquisitions (66,141)
Purchases of equipment and leasehold
improvements (793,259)
-------------
(859,400)
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES --
-------------
FINANCING ACTIVITIES:
Borrowings on warehouse financing
facilities, net 10,182,291
Borrowings on term line of credit 902,578
-------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 11,084,869
------------
INCREASE (DECREASE) IN CASH 1,406,482
Cash and cash equivalents at beginning of period 452,696
------------
Cash and cash equivalents at end of period $ 1,859,178
------------
------------
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
<TABLE>
RAC
FINANCIAL MORTGAGE PLUS PRO FORMA UNAUDITED
GROUP, INC. INCORPORATED ADJUSTMENTS PRO FORMA
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash $ 4,532,055 $ 1,859,178 $ 6,391,233
Loans held for sale, net 103,410,006 10,867,404 114,297,410
Receivable from loan sales 10,010,167 10,010,167
Receivable from loan closings 368,266 368,266
Excess servicing receivable 77,199,165 200,609 77,399,774
Residual certificate held for sale 8,152,471 8,152,471
Receivable from trusts 5,609,334 5,609,334
Other assets 4,543,288 1,986,700 6,529,988
------------ ----------- ------------
Total assets $203,446,319 $25,292,324 $228,738,643
------------ ----------- ------------
------------ ----------- ------------
Liabilities:
Accounts payable and accrued liabilities $ 10,981,129 $ 4,521,219 $ (30,318)(b) $ 15,472,030
Investor payable - 687,397 687,397
Warehouse financing facilities with affiliates 75,457,042 17,202,059 92,659,101
Term line of credit 18,536,494 18,536,494
Notes payable 1,079,254 902,578 1,981,832
Subordinated notes payable to affiliates 7,002,500 7,002,500
Allowance for possible credit losses on loans sold 14,401,374 14,401,374
Deferred tax liabilities, net 6,561,375 6,561,375
------------ ----------- ------------
Total liabilities 134,019,168 23,313,253 157,302,103
Stockholders' Equity
Common stock 104,496 2,495,842 8,000 (c) 112,496
(2,495,842)(d)
Nonvoting common stock 22,203 22,203
Additional capital 57,619,897 187,647 (12,543)(a) 59,608,677
30,318 (b)
(8,000)(c)
2,495,842 (d)
(704,418)(e)
Retained earnings (deficit) 11,680,555 (704,418) 704,418 (e) 11,680,555
------------ ----------- ------------
Total stockholders' equity 69,427,151 1,979,071 71,423,997
------------ ----------- ------------
Total liabilities and stockholders' equity $203,446,319 $25,292,324 $228,726,100
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
(a) To eliminate gain on sale of mortgages recorded by Mortgage Plus
Incorporated relating to loans sold to RAC Financial Group, Inc.
(b) To reflect the income tax effect of the loss from Mortgage Plus Incorporated
on RAC Financial Group, Inc.'s income tax obligation at an assumed effective
rate of 38%.
(c) To record the issuance of 800,000 shares of common stock in connection
with the acquisition of Mortgage Plus Incorporated, accounted for as a
pooling of interest.
(d) To eliminate the common stock and additional capital of Mortgage Plus
Incorporated.
(e) To eliminate Mortgage Plus Incorporated's S-Corporation retained deficit
against additional capital to reflect the conversion to C-corp status.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
RAC FINANCIAL MORTGAGE PLUS
GROUP, INC. INCORPORATION PRO FORMA
FOR THE FOR THE FOR THE
SIX MONTHS ELEVEN MONTHS SIX MONTHS
ENDED ENDED PRO FORMA ENDED
MARCH 31, 1996 MARCH 31, 1996 ADJUSTMENTS MARCH 31, 1996
-------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Revenues
Gain on sales of loans, net $42,241,373 $ 8,366,143 $(3,099,746)(a) $47,507,770
Sale of servicing rights 1,476,656 (424,638)(b) 1,052,018
Interest 3,298,282 1,348,177 (589,416)(b) 4,057,043
Servicing income 1,260,701 515,359 (142,426)(b) 1,633,634
Other income 1,909,774 1,375,140 (269,607)(b) 3,015,307
----------- ----------- ----------- -----------
Total revenues 48,710,130 13,081,475 (4,525,833) 57,265,772
Expenses
Salaries and employee benefits 8,240,278 7,305,211 (2,441,497)(b) 13,103,992
Interest 4,283,487 990,039 (414,606)(b) 4,858,920
Other operating 5,744,246 4,766,933 (1,594,995)(b) 8,915,270
Provision for possible credit losses 12,465,966 42,242 (4,445)(b) 12,503,763
----------- ----------- ----------- -----------
Total expenses 30,733,977 13,104,425 (4,455,543) 39,381,945
----------- ----------- ----------- -----------
Income before income taxes 17,976,153 (22,950) (70,290) 17,883,826
Provision for income taxes (6,830,938) (412) 30,318 (c) (6,801,032)
----------- ----------- ----------- -----------
Net income (loss) $11,145,215 $ (23,362) $ (39,972) $11,082,794
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share of common stock $ 1.05 $ 0.97
----------- -----------
----------- -----------
Weighted average common shares and
common equivalent shares outstanding 10,595,480 11,395,480
----------- -----------
----------- -----------
</TABLE>
(a) To eliminate $12,543 of premiums paid on loans sold by Mortgage Plus
Incorporated to RAC Financial Group, Inc. and not subsequently securitized,
$3,087,203 to recast income to six months ended March 31, 1996.
(ie:, to eliminate revenues and expenses which relate to the Mortgage Plus
Incorporated operations for the period from May 1, 1995 through September
30, 1995.)
(b) To recast financial statements to the six months ended March 31, 1996.
(c) To record the income tax effect of the loss from Mortgage Plus
Incorporated on RAC Financial Group, Inc.'s income tax obligation at an
assumed effective rate of 38%.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
RAC
FINANCIAL MORTGAGE
GROUP, INC. PLUS INCORPORATED UNAUDITED
FOR THE YEAR ENDED FOR THE YEAR ENDED PRO FORMA PRO FORMA
SEPTEMBER 30,1995 APRIL 30, 1995 ADJUSTMENTS SEPTEMBER 30, 1995
------------------ ------------------ ----------- -----------------
<S> <C> <C> <C> <C>
Revenues
Gain on sales of loans, net $25,074,265 $ 972,227 $(18,111)(a) $26,028,381
Sale of servicing rights 3,085,320 3,085,320
Interest 2,342,329 518,043 2,860,372
Servicing income 959,561 89,627 1,049,188
Other income 574,994 298,083 873,077
----------- ----------- -------- -----------
Total revenues 28,951,149 4,963,300 (18,111) 33,896,338
Expenses
Salaries and employee benefits 6,207,123 3,903,325 10,110,448
Interest 2,415,252 245,155 2,660,407
Other operating 5,130,321 1,832,612 6,962,933
Provision for possible credit losses 4,419,736 - 4,419,736
----------- ----------- -----------
Total expenses 18,172,432 5,981,092 24,153,524
----------- ----------- -----------
Income before income taxes 10,778,717 (1,017,792) 9,742,814
Provision for income taxes (3,903,304) - 386,761 (b) (3,516,543)
----------- ----------- -------- -----------
Net income (loss) $ 6,875,413 $(1,017,792) $368,650 $ 6,226,271
----------- ----------- -------- -----------
----------- ----------- -------- -----------
Net income per share of common stock $ 0.71 $ 0.59
----------- -----------
----------- -----------
Weighted average common shares and
common equivalent shares outstanding 9,348,437 10,148,437
----------- -----------
----------- -----------
</TABLE>
(a) To eliminate premiums paid on loans sold to RAC Financial Group, Inc.
which were not subsequently securitized.
(b) To record the income tax effect of the loss from Mortgage Plus
Incorporated on RAC Financial Group, Inc.'s income tax obligation at an
assumed effective rate of 38%.
