CENTRAL FINANCIAL ACCEPTANCE CORP, 10-K, 1999-03-31

CENTRAL FINANCIAL ACCEPTANCE CORP
10-K, 1999-03-31
PERSONAL CREDIT INSTITUTIONS

Previous: DIAMOND HOME SERVICES INC, 10-K, 1999-03-31

Next: GENESEE & WYOMING INC, 10-K, 1999-03-31

<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1999
================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] 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: 001-11815

CENTRAL FINANCIAL ACCEPTANCE CORPORATION
(Exact name of Registrant as specified in its charter)

DELAWARE 95-4574983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)

5480 EAST FERGUSON DRIVE COMMERCE, CALIFORNIA 90022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:(323) 720-8600

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)

Indicate by check mark whether the Registrant (1) 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 shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant based upon the closing sale price of the Common Stock on March 25,
1999, as reported on the Nasdaq National Market, was approximately $4,600,000.
Shares of Common Stock held by each executive officer and director and each
person owning more than 5% of the outstanding Common Stock of the Registrant
have been excluded in that such persons may be deemed to be affiliates of the
Registrant. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

Number of shares outstanding of the Registrant's Common Stock, as of March 25,
1999: 7,277,000

DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT INCORPORATED PART OF FORM 10-K INTO WHICH INCORPORATED
- ----------------------------------- -----------------------------------------
DEFINITIVE PROXY STATEMENT FOR THE PART III
1999 ANNUAL MEETING OF STOCKHOLDERS

================================================================================

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I ........................................................................... 3

Item 1. BUSINESS................................................................... 3

Item 2. PROPERTIES................................................................. 22

Item 3. LEGAL PROCEEDINGS.......................................................... 23

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................ 23

PART II ........................................................................... 24

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...... 24

Item 6. SELECTED FINANCIAL DATA.................................................... 25

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...................................................... 27

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................. 42

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................ 43

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE....................................................... 43

PART III ........................................................................... 44

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT............................. 44

Item 11. EXECUTIVE COMPENSATION..................................................... 44

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................................. 44

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 44

PART IV ........................................................................... 45

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K............ 45
</TABLE>

2
<PAGE> 3

PART I

ITEM. BUSINESS

INTRODUCTION

Certain matters discussed in this Annual Report on Form 10-K may
constitute forward-looking statements under Section 27A of the Securities Act of
1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These statements may
involve risks and uncertainties. These forward-looking statements relate to,
among other things, expectations of the business environment in which Central
Financial Acceptance Corporation and its subsidiaries (the "Company" which may
be referred to as "we" or "us," or "Central" when referring only to the parent
company) operate in, projections of future performance, expectations regarding
our efforts to resolve Year 2000 issues and the effects of a failure to resolve
such issues, perceived opportunities in the market and statements regarding our
mission and vision. Our actual results, performance, or achievements may differ
significantly from the results, performance, or achievements expressed or
implied in such forward-looking statements. For discussion of the factors that
might cause such a difference, see "-- Business Considerations and Certain
Factors that May Affect Future Results of Operations and Stock Price."

COMPANY OVERVIEW

We are a specialized consumer finance company that primarily serves the
financing needs of the rapidly growing low income Hispanic population. We
believe this market is underserved. Through our consumer finance services, we:

o Provide small, unsecured personal loans to our customers

o Purchase and service consumer finance receivables our customers
generate for purchases of high quality brand name consumer products,
electronics, appliances and furniture sold by Banner's Central
Electric, Inc. ("Banner"), an affiliate of the Company, and by
independent retailers

o Sell airline tickets and originate and service travel-related finance
receivables

o Provide insurance products and insurance premium financing to our
customers

o Provide income tax preparation services

o Provide check cashing services

o Provide mortgage loan financing

We have catered to the low income Hispanic population during our 40
years of operation by locating our facilities primarily in Hispanic communities,
advertising in Spanish, and employing Spanish as the primary language at our
locations. While we operate primarily in the greater Los Angeles area and face
substantial competition with respect to our lines of business, our objective is
to become the leading provider of consumer credit and other financial services
to the low income Hispanic population in urban areas within California and
elsewhere in the United States.

3
<PAGE> 4

Our customers are typically between the ages of 21 and 45, earn less
than $25,000 per year, have little or no savings, and have limited or short-term
employment histories. In addition, our customers typically have no or limited
prior credit histories and are generally unable to secure credit from
traditional lending sources. We base our credit decisions on our assessment of a
customer's ability to repay the obligation. In making a credit decision, in
addition to the size of the obligation, we generally consider a customer's
income level, type and length of employment, stability of residence, personal
references, and prior credit history with us. We also obtain a credit bureau
report and rating, if available, and seek to confirm other credit-related
information. We, however, are more susceptible to the risk that our customers
will not satisfy their repayment obligations than are less specialized consumer
finance companies or consumer finance companies that have more stringent
underwriting criteria. See "-- Business Considerations and Certain Factors that
May Affect Future Results of Operations and Stock Price -- Credit Risk
Associated with Customers; Lack of Collateral" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Financial Trends," "-- Credit Quality" and "-- Delinquency Experience and
Allowance for Credit Losses."

The Company was incorporated in Delaware on April 11, 1996. Our
principal executive offices are located at 5480 East Ferguson Drive, Commerce,
California 90022, and our telephone number is (323) 720-8600.

DEMOGRAPHIC TRENDS AND MARKET OPPORTUNITY

Since 1950 Hispanics have been the fastest growing minority group in the
United States, increasing from 4.0 million in 1950 to approximately 27.0 million
in 1996, a compound annual growth rate of 4.3%. According to the 1996 U.S.
Bureau of the Census Current Population Report (the "1996 Report"), this trend
is expected to continue. The 1996 Report projects that the Hispanic population
will total 36.0 million by 2005. California is home to the largest Hispanic
population in the United States and this population is estimated to grow from
9.4 million in 1995 to 13.0 million by 2005. At this time the Hispanic
population will comprise approximately 34% of California's total population. We
believe that, despite the current size and projected population growth of the
Hispanic population in the United States, this segment of the population will
continue to have limited access to traditional sources of credit.

We have identified certain metropolitan markets in which we believe we
can successfully introduce our financial products and services. Specifically, we
have determined that significant opportunities exist in markets having large
Hispanic populations but in which such populations account for less than 30% of
such area's total population. We believe that Hispanic consumers in these
markets are more likely to be underserved than Hispanics in locations in which
they comprise a greater proportion of an area's total population.

BUSINESS STRATEGY

Recognizing these demographic trends, our strategy has been to identify
new financial products and services that we believe could be introduced
successfully to the low income Hispanic population in urban areas within
California and increase the number of locations through which we can distribute
our products and services. From 1991, when we were acquired by our current
management, until our initial public offering in June 1996, we grew primarily by
introducing such financial products and services and by increasing our pricing.
Our most significant growth has occurred as a result of the introduction of
unsecured small loans in the fourth quarter of 1992, a product which we believe
offers significant continued growth potential. In 1995, we began offering
company-financed sales of airline tickets and in 1996, we began selling
automobile insurance and offering insurance premium financing and expanded our
independent retail financing business. In 1996, we expanded our distribution
network through acquisitions of travel and auto insurance businesses primarily
serving the Hispanic community.

4
<PAGE> 5

In May 1997, we introduced a new financial product involving the
issuance of a card, called an "Efectiva Card." The Efectiva Card provides our
customers with the ability to access their established lines of credit with us
by withdrawing cash from our cash dispensing machines. Our cash dispensing
machines are proprietary and are not part of any networked system. We have
presently installed our cash dispensing machines in 25 locations owned or leased
by the Company or Banner and 20 locations owned or leased by unaffiliated
parties.

In October 1997, we entered into an agreement with K-Mart Corporation
("K-Mart") to install our cash dispensing machines at 10 K-Mart locations in
Southern California. In January 1998, we and K-Mart agreed to expand the
relationship and install cash dispensing machines in an additional 9 K-Mart
stores. At certain times of the year, we also place our employees at the K-Mart
stores in kiosks we provide to receive and process applications for lines of
credit and Efectiva Cards with the Company. The agreement, which can be
terminated for any reason by either K-Mart or us at any time after the first six
months, requires us to pay a monthly license fee to K-Mart for each location and
to pay all costs and expenses related to the installation and maintenance of our
cash dispensing machines and our on-site employees. In December 1998, we
commenced discussions with K-Mart to seek expansion opportunities for our K-Mart
program and to explore alternative means of compensating K-Mart.

In January 1998, we began to offer income tax return preparation and
electronic filing services to our customers. In January 1999, we began to offer
income tax refund anticipation loans of up to $2,500 in connection with the tax
return preparation and electronic filing services.

In February 1998, we entered into a definitive agreement to acquire
Mission Savings and Loan Association, a federally chartered savings association
based in Riverside, California (the "Bank") with deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). The cost of the acquisition to be
paid in cash will equal 1.47 times the Bank's adjusted stockholders' equity at
the end of the month immediately prior to the date of acquisition. This amount
is currently estimated to be approximately $5.0 million. The acquisition is
subject to, among other things, the approval of the Office of Thrift Supervision
(the "OTS"). The agreement expires on May 31, 1999 unless extended by us and the
Bank. We cannot assure that the OTS will approve the acquisition or that the
Bank will agree to extend the agreement if the acquisition is not consummated by
May 31, 1999. At December 31, 1998, the Bank had approximately $47.5 million in
total assets and $3.4 million in total stockholders' equity. The Bank had net
income of $0.2 million during 1998.

Although we expect the Bank to continue to accept deposits, the primary
purpose of the acquisition is to offer checking accounts and other financial
services and to expand our consumer lending business through the issuance of a
credit card substantially similar to our Efectiva Card.

In mid-1998, we began to offer fee based check cashing services in check
cashing centers in both the retail stores operated by Banner and in separate
stand-alone check cashing centers or coupled with our finance centers. By the
end of 1998, we had established 24 check cashing centers.

In the third quarter of 1998, we established a mortgage loan business
and began to offer and write small second trust mortgage loans.

5
<PAGE> 6
Panamericana travel center stores and will add to our existing travel business,
which we believe will make us the largest provider of travel services to the
Hispanic community in Southern California.

BUSINESS ACTIVITIES

At December 31, 1998, our gross receivables portfolio was approximately
$108.3 million, consisting of these major product categories

o Loan contracts (the "Small Loan Portfolio")

o Consumer product contracts from sales by Banner (the "Consumer
Product Portfolio")

Our receivables portfolio also includes

o Consumer finance contracts from sales by independent retailers (the
"Independent Retail Finance Portfolio")

o Travel finance contracts (the "Travel Finance Portfolio")

o Insurance premium finance contracts (the "Premium Finance Portfolio")

o Automobile finance contracts (the "Automobile Finance Portfolio")

o Mortgage loan contracts (the "Mortgage Loan Portfolio")

Installment Credit and Related Businesses

We provide credit to low income consumers who want to purchase consumer
products and services on credit. By granting credit, we provide these consumers
with an increased number of purchasing options. We purchase and service consumer
finance receivables generated through Banner's sales of brand name consumer
products. We also purchase and service consumer finance receivables generated by
independent retailers and originate and service consumer finance receivables
generated through our sales of airline tickets and insurance products. From 1995
through May 30, 1997, we also financed the sale of used automobiles.

Consumer Product Finance. We purchase and service consumer finance
receivables generated through Banner's sales of brand name consumer products
through five stores in the greater Los Angeles area. Consumer products that we
finance include televisions, stereos, refrigerators, washers and dryers, ovens,
freezers, furniture, household accessories and special order items.

Small Loan Business

In December 1992, we began offering unsecured, closed-end, small loans
generally ranging from $350 to $1,500 for personal, family or household purposes
at Banner's flagship installment credit store. Prior to beginning this business,
we determined that there was a significant demand for small loans, and that
financial institutions in our geographic market were not making loans of less
than $1,500 and did not have adequate underwriting experience to serve the low
income Hispanic population. Beginning in May 1997, we began offering unsecured
open-end small loans which can be accessed through the Efectiva Card. At
December 31, 1998, we had issued approximately 148,000 Efectiva Cards. At
December 31, 1998, our small loan business

6
<PAGE> 7

was operating through 52 facilities, 5 of which were at Banner locations and 28
of which were finance, check cashing or travel centers and 19 of which were at
K-Mart locations.

Independent Retail Installment Finance. We also provide financing to
consumers for the purchase of products and services that independent retailers
sell. At present, we have independent retail installment financing arrangements
with approximately 75 retailers in the greater Los Angeles area, most with one
or two locations. However, since we plan to concentrate on expanding our
Efectiva Card with major retailers, we have begun to phase out our relationship
with the smaller retailers.

Travel Sales and Finance. As a complementary business line, in mid-1995
we began our travel business, offering sales of airline tickets, as well as the
financing of such purchases. We believe that we are currently the largest
provider of travel services to the low income Hispanic population in California.
Substantially all of our ticket sales are for international travel, which
generally provides a higher commission structure than does domestic travel. At
December 31, 1998, we operated through 71 locations, of which 49 are located in
Southern California, 16 are located in Northern California and six are located
outside of California. In March of 1999, we completed the asset purchase of 24
Panamericana Travel System locations located primarily in Southern California.
Combined with our existing travel locations, we believe that this purchase
positions us as the leading provider of travel services to Hispanic consumers in
Southern California. We believe that both our small loan and travel product
lines can be offered out of the 1,000 to 1,500 square foot travel locations, and
that these locations can efficiently offer additional financial products and
services which we anticipate we will make available in the future.

Automobile Finance. From mid 1995 to May 30, 1997 (when we discontinued
the sale of used automobiles), we also provided financing to consumers for the
purchase of automobiles that Banner sold. Banner offered used automobiles for
prices ranging from $6,500 to $8,500. We offered financing terms on sales of
automobiles of up to 42 months. All financing that we extended on automobiles
that Banner sold is with full recourse back to Banner in the event the customer
defaults.

Other Business Activities

We act as an intermediary for an independent insurance carrier who sells
credit life and credit accident and health insurance to our customers. Through
this arrangement, we sell policies to our customers within limitations
established by agency contracts with that insurer. Credit life insurance
provides for the payment in full of the borrower's credit obligation to the
lender if the borrower dies. Credit accident and health insurance provides for
repayment of loan installments to the lender during the insured's period of
involuntary unemployment resulting from disability, illness or injury. Premiums
for such credit insurance are at the maximum authorized rates and are stated
separately in our disclosure to customers, as required by the Truth-in-Lending
Act and applicable state statutes. We do not act as an intermediary with respect
to the sale of credit insurance to non-borrowers. We earn a commission from the
insurance carrier on the sale of credit insurance which is based in part on the
claims experience on policies that the insurance carrier sells through us.
Beginning in mid-1996, the independent insurance carrier reinsured the credit
life and credit accident and health risk with a newly formed subsidiary of the
Company. As a result of this reinsurance arrangement, the credit risk remains
with us. In 1996, we also began our automobile insurance and insurance premium
financing businesses. Our income tax service company began servicing our
customers in January 1998. In mid-1998, we began to offer fee based check
cashing services. In the third quarter of 1998, we established a mortgage loan
business and began to offer and write small second trust mortgage loans.

7
<PAGE> 8

COMPANY OPERATIONS

Credit Procedures

In late 1996, we took a number of steps to improve collections and
credit quality. We hired two senior executives in the credit and collections
fields. In December 1996, we installed an autodialer to assist our collections
personnel in successfully contacting past due borrowers. In November 1998, we
completed installation of our Lexon, front-end scoring system. This system
allows us to track new credit applications and capture and analyze customer
credit data more effectively. This system also eliminated the need for expensive
data lines and terminals which were replaced by fax machines to transmit
applications to the central input location at our corporate headquarters.

We have developed uniform guidelines and procedures for evaluating
credit applications for installment credit sales and small loans. We take credit
applications at all of our locations and at each of Banner's stores. We then
generally transmit them electronically through our computer system to our credit
processing facility, where all credit approval and verification is centralized.
We also take credit applications at each of the independent retail locations for
which we provide financing and at certain times at each K-Mart location that has
our cash dispensing machines, and generally transmit them to our credit
processing facility via facsimile. We believe that our underwriting policies and
procedures allow us to respond quickly to credit requests. We typically respond
to credit applicants within one hour. We believe that because of our prompt
response, many customers prefer to deal with us instead of our competitors.

Our credit managers and credit approvers make their decisions on a case
by case basis and with help from the Lexon system and are influenced by, among
other things, whether an applicant is a new or existing customer. New applicants
complete standardized credit applications which contain information concerning
income level, employment history, stability of residence, driver's license or
state identification card, social security number, capacity to pay and personal
references. We also obtain a credit bureau report and rating, if available, and
seek to confirm other credit-related information. For an established customer,
in all instances the credit process currently includes a review of the
customer's credit and payment history with us. Because we offer multiple lines
of credit, we review the aggregate amount that a customer owes. In cases where a
customer makes a request for a substantial increase in his or her aggregate
outstanding balance, we will obtain a credit bureau report and will seek to
confirm employment. In instances where the applicant has no or limited credit
history, we may require a co-signer with appropriate credit status to sign the
contract and may, in the installment credit business, also require a down
payment. Depending on the size of the transaction and other relevant factors, we
may also verify the applicant's employment and residence with our credit
verifiers. See " -- Business Considerations and Certain Factors that May Affect
Future Results of Operations and Stock Price -- Credit Risk Associated with
Customers; Lack of Collateral."

Payment and Collections

Industry studies estimate that more than 25% of the adult population in
the United States does not maintain a checking account, which is a standard
prerequisite for obtaining a consumer loan, credit card or other form of credit
from most consumer credit sources. Our customers are required to make their
monthly payments using a payment schedule that we provide to them. The vast
majority of our customers make their payments in cash at our locations or at our
payment facilities in Banner's stores. For our customers who are paid their
wages by check but who do not maintain checking accounts, we have begun to cash
such checks for a fee through our check cashing company in order to facilitate
account payments.

8
<PAGE> 9

We consider payments past due if a borrower fails to make any payment in
full on or before its due date, as specified in the installment credit or small
loan contract the customer signs. We currently attempt to contact borrowers
whose payments are not received by the due date within 10 days after such due
date. We contact these borrowers by both letter and telephone. In December 1996,
we installed an autodialer which allows us to make up to 500 telephone calls per
hour to assist our collections personnel in successfully contacting past due
borrowers. If no payment is remitted to us after the initial contact, we make
additional contacts every seven days, and, after a loan becomes 31 days
delinquent, we generally turn the account over to our credit collectors. Under
our guidelines, we generally charge off and turn over an account to a collection
agency when we determine that the account is uncollectible, which is typically
when the account is between 91 and 150 days past due.

Finance Contracts

We use different types of financing contracts, depending on the dollar
amount of the financing and the product financed. Each of the contracts is in
Spanish and English and requires monthly payments. State and federal regulations
govern many of the terms, conditions and disclosures in the finance contracts.
See " -- Regulation of the Company." When a qualifying customer with an open
account balance increases the amount outstanding with an additional purchase or
loan, the customer executes a new contract for the new aggregate balance and,
with a portion of the proceeds, pays off the original contract.

Insurance

We maintain various insurance policies of the type, and in the amounts,
which are usual for our business. We maintain coverage for business
interruptions, including interruptions resulting from computer failure. We
believe that our insurance coverage is adequate.

Management Information Systems

Under an Operating Agreement dated June 24, 1996 among us, Banner and
Banner Holdings, Inc. ("Holdings"), the only shareholder of Banner and our only
shareholder, we use Banner's management information systems and have been
granted a license to use Banner's management information systems' software.
Banner and the Company have invested significant resources to develop a
proprietary system that integrates all major aspects of the businesses of the
Company and Banner. The computer system uses an IBM "AS/400" as the Company
server, which provides on-line, real-time information processing services to
terminals located in each of Banner's locations, in our centralized credit
processing facility and in certain other of the Company's facilities. The system
allows for complete processing of our (1) consumer product finance, automobile
finance, travel finance and small loan businesses, including most application
processing and credit-approval, (2) acquisition of credit bureau reports,
accessing the payment history of all active accounts, (3) preparation of
contracts, (4) payment posting, and (5) all other collection-monitoring
activities. In addition, the system provides customized reports to analyze each
of our portfolios on a daily, weekly and monthly basis. We believe that the
computer system is sufficient to permit significant growth in each of our
business lines and portfolios without the need for a material additional
investment in management information systems. Banner has adopted procedures
designed to minimize the effect of systems failures and other types of potential
problems, including routine backup and off-site storage of computer tapes, as
well as redundancy and "mirroring" of certain computer processes. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Impact of the Year 2000 Issue."

9
<PAGE> 10

COMPETITION

The small loan consumer finance industry is a highly fragmented segment
of the consumer finance industry. There are numerous small loan consumer finance
companies operating in the United States. Many of these companies have
substantially greater resources than us, and their entry or expansion within our
markets could have a material adverse effect on our business strategy and
results of operations and financial condition. We do not believe we currently
compete with commercial banks, savings and loans and most other consumer finance
lenders, because these institutions typically do not make loans of less than
$1,500 that become due within one year or less. If the acquisition of the Bank
is consummated, we would also compete with these more traditional financial
institutions to the extent of the Bank's traditional lines of business which we
believe will represent a limited portion of our business as a whole.

The installment credit business is highly competitive. We, through our
relationship with Banner and other retailers, compete with those department
stores, discount stores and other retail outlets which also provide credit to
low income consumers. The largest national and regional competitors have
significantly greater resources than us. Competition may arise from new sources
having the expertise and resources to enter our markets either through expansion
of operations or acquisitions.

Each of our other businesses, including travel sales, check cashing,
income tax preparation and automobile insurance sales, operate in highly
competitive industries. We compete against a large number of national and
regional firms engaged in such businesses. Many of these competitors have
substantially greater financial, marketing and sales resources than us. We
cannot assure that our present competitors or companies that choose to enter the
marketplace in the future will not exert significant competitive pressures on
us.

REGULATION OF THE COMPANY

General

Our consumer finance operations are subject to extensive regulation.
Violation of statutes and regulations applicable to us may result in actions for
damages, claims for refunds of payments made, certain fines and penalties,
injunctions against certain practices and the potential forfeiture of rights to
repayment of loans. Changes in state and federal statutes and regulations may
affect us. We, together with industry associations, actively lobby in the states
in which we operate. Although we are not aware of any pending or proposed
legislation that could have a material adverse effect on our business, we cannot
assure that future regulatory changes will not adversely affect our lending
practices, operations, profitability or prospects.

State Regulation

Consumer Product and Travel Finance. In California, the California
Retail Installment Sales Act (the "Unruh Act") regulates our consumer product
finance and travel finance businesses. The Unruh Act requires us to disclose to
our customers, among other matters, (1) the conditions under which we may impose
a finance charge, (2) the method of determining the balance which is subject to
a finance charge, (3) the method used to determine the amount of the finance
charge, and (4) the minimum periodic payment required. In addition, the Unruh
Act provides consumer protection against unfair or deceptive business practices
by (1) regulating the contents of retail installment sales contracts, (2)
setting forth the respective rights and obligations of buyers and sellers, and
(3) regulating the maximum legal finance rate or charge on installment credit
sales.

Small Loan Business. Small loan consumer finance companies are subject
to extensive regulation, supervision and licensing under various federal and
state statutes, ordinances and regulations. In general, these

10
<PAGE> 11

statutes establish maximum loan amounts and interest rates and the types and
maximum amounts of fees and other costs that may be charged. In addition, state
laws regulate collection procedures, the keeping of books and records and other
aspects of the operation of small-loan consumer finance companies. State agency
approval generally is required to open new branch offices. Accordingly, our
ability to expand by acquiring existing offices and opening new offices will
depend in part on obtaining the necessary regulatory approvals.

Each facility that offers small loans must be separately licensed under
the laws of California. Licenses granted by the regulatory agencies are subject
to renewal every year and may be revoked for failure to comply with applicable
state and federal laws and regulations. In California, licenses may be revoked
only after an administrative hearing.

Insurance Premium Finance. The State of California Department of
Financial Institutions regulates our insurance premium finance business. In
general, state law and regulations set forth requirements and procedures for (1)
the cancellation of policies and collection of unearned premiums, (2) regulating
the form and content of premium finance agreements, (3) limiting the amount of
finance, delinquency, cancellation and other fees we may charge, and (4)
prescribing notice periods for the cancellation of policies for nonpayment.

Insurance Businesses. In California, the State of California Department
of Insurance regulates our insurance businesses. In general, this agency issues
regulations which require us to, among other things, maintain fiduciary fund and
trust accounts and follow specific market, general business and claims
practices.

Federal Regulation

We are subject to extensive federal regulation as well, including the
Truth-in-Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act and the regulations thereunder and the Federal Trade Commission's
Credit Practices Rule. These laws require us to provide complete disclosure of
the principal terms of each loan to every prospective borrower, prohibit
misleading advertising, protect against discriminatory lending practices and
proscribe unfair credit practices. Among the principal disclosure items under
the Truth-in-Lending Act are the terms of repayment, the total finance charge
and the annual rate of finance charge or "Annual Percentage Rate" on each loan.
The Equal Credit Opportunity Act prohibits creditors from discriminating against
loan applicants on certain bases, including race, color, sex, national origin,
age or marital status. Regulation B issued under the Equal Credit Opportunity
Act requires creditors to make certain disclosures regarding consumer rights and
advise consumers whose credit applications are not approved of the reasons for
the rejection. The Fair Credit Reporting Act requires us to provide certain
information to consumers whose credit applications are not approved on the basis
of a report obtained from a consumer reporting agency. The Credit Practices Rule
limits the types of property a creditor may accept as collateral to secure a
consumer loan.

Travel Agency Regulation

Each of our travel locations are travel agencies which are regulated by
the Airline Reporting Corporation ("ARC"). The ARC represents the major
scheduled air carriers and sets the operating rules for travel agencies. We are
required to submit weekly reports to the ARC and to meet certain procedural,
funding and bonding requirements that the ARC sets.

Income Tax Preparation Regulation

Our income tax preparation business is subject to certain state and
Federal regulations. Federal legislation requires income tax preparers to, among
other things, set forth their signatures and identification

11
<PAGE> 12

numbers on all tax returns they prepare and retain for three years all tax
returns prepared. Federal laws also subject income tax return preparers to
accuracy-related penalties in connection with the preparation of income tax
returns.

Check Cashing Regulation

The California Department of Justice regulates our check cashing
business. In general, state law and regulations set forth requirements and
procedures which require us to, among other things, limit the amount of fees we
may charge, renew our check casher's permit annually and post a schedule of the
fees we charge for check cashing services in each of our locations.

REGULATION AND SUPERVISION OF THE BANK AND CENTRAL

General

If the acquisition of the Bank is consummated, Central will be a savings
and loan holding company and, as result, will be subject to OTS regulation,
examination, supervision and reporting requirements. This regulation is intended
primarily for the protection of depositors and the Savings Association Insurance
Fund ("SAIF") and not for the benefit of Central's stockholders. The Bank is a
federally chartered savings bank and a member of the Federal Home Loan Bank
("FHLB") of San Francisco. The FDIC insures the Bank's deposits through the SAIF
to the maximum extent permitted by law. The Bank is subject to extensive
regulation by the OTS, as its chartering agency, and by the FDIC, as its deposit
insurer. The Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") also regulates the Bank with respect to certain aspects of its
business.

Changes in, and the interpretations of, legislation and regulatory
policy have materially affected the business of the Bank and other financial
institutions in the past and are likely to do so in the future. We cannot assure
that future changes in the regulations or their interpretation will not
adversely affect the Bank's business. Future legislation and regulatory policy
could also alter the structures and competitive relationships among financial
institutions. Regulatory authorities also have the power, in certain
circumstances, to prohibit or limit the payment of dividends to holders of the
Bank's common stock. In addition, certain regulatory actions may increase the
Bank's operating expenses in future periods and may have a material adverse
impact on the Bank's capital levels and results of operations. Such regulatory
actions include general increases in federal deposit insurance premiums,
additional insurance premium assessments to recapitalize the SAIF or the
application of the risk-based insurance premium system to the Bank.

The following information describes certain aspects of federal
regulation applicable to Central and the Bank, and does not purport to be
complete. The discussion is qualified in its entirety by reference to applicable
statutory or regulatory provisions.

Holding Company Regulation

If the acquisition of the Bank is consummated, Central will be a
"unitary" savings and loan holding company under the terms of the Home Owners'
Loan Act, as amended ("HOLA"). As a unitary savings and loan holding company,
the OTS will require Central to be registered with the OTS. In addition, the OTS
will subject Central to its regulations, examinations, supervision and reporting
requirements. Among other things, the OTS has enforcement authority which
permits it to restrict or prohibit activities that it determines to be a serious
risk to the subsidiary savings institution.

12
<PAGE> 13

There are generally no regulatory restrictions on the activities of a
unitary savings and loan holding company. However, if the savings institution
subsidiary of such a holding company fails to meet the qualified thrift lender
("QTL") test, then the holding company also will become subject to the
activities restrictions applicable to multiple savings and loan holding
companies. Unless the savings institution requalifies as a QTL within one year
after it fails to meet the QTL test, its parent company will have to register
as, and become subject to, the restrictions applicable to a bank holding
company. See "--Qualified Thrift Lender Test."

Insurance of Deposit Accounts.

The FDIC may terminate a savings association's deposit insurance upon a
finding that the institution (1) has engaged in unsafe or unsound practices, (2)
is in an unsafe or unsound condition to continue operations or (3) has violated
any applicable law, regulation, rule, order or condition imposed by the FDIC or
the institution's primary regulator.

Regulatory Capital Requirements.

The OTS capital regulations require savings associations to meet three
capital standards: (1) tangible capital equal to 1.5% of total adjusted assets,
(2) leverage capital (core capital) equal to 3% of total adjusted assets, and
(3) risk-based capital equal to 8.0% of total risk-based assets. The Bank must
meet each of these standards in order to be deemed in compliance with OTS
capital requirements. In addition, the OTS may require a savings association to
maintain capital above the minimum capital levels.

The OTS views these capital requirements as minimum standards, and
expects most institutions to maintain capital levels well above the minimum. In
addition, the OTS regulations provide that the OTS may establish minimum capital
levels higher than those provided in the regulations for individual savings
associations, upon a determination that the savings association's capital is or
may become inadequate in view of its circumstances. The OTS regulations provide
that higher individual minimum regulatory capital requirements may be
appropriate in circumstances where, among others, a savings association may be
adversely affected by activities or condition of its holding company,
affiliates, subsidiaries or other persons with which it has significant business
relationships.

HOLA permits savings associations not in compliance with the OTS capital
standards to seek an exemption from certain penalties or sanctions for
noncompliance. The OTS will grant such an exemption only if certain strict
requirements are met, and deny the exemption request under certain
circumstances. If the OTS grants an exemption, the savings association still may
be subject to enforcement actions for other violations of law or unsafe or
unsound practices or conditions.

FDICIA Prompt Corrective Action Regulations

The prompt corrective action regulation of the OTS, requires certain
mandatory actions and authorizes the OTS to take certain other discretionary
actions against a savings association that falls within certain undercapitalized
capital categories specified in the regulation.

The regulation establishes five categories of capital classification:
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Under the regulation, the
risk-based capital, leverage capital, and tangible capital ratios are used to
determine an institution's capital classification.

13
<PAGE> 14

In general, the prompt corrective action regulation prohibits an insured
depository institution from declaring any dividends, making any other capital
distribution, or paying a management fee to a controlling person if, following
the distribution or payment, the institution would be within any of the three
undercapitalized categories. In addition, adequately capitalized institutions
may accept Brokered Deposits only with a waiver from the FDIC and are subject to
restrictions on the interest rates that can be paid on such deposits.
Undercapitalized institutions may not accept, renew, or roll-over Brokered
Deposits.

If the OTS determines that an institution is in an unsafe or unsound
condition, or if the institution is deemed to be engaging in an unsafe and
unsound practice, the OTS may, if the institution is well capitalized,
reclassify it as adequately capitalized; if the institution is adequately
capitalized but not well capitalized, require it to comply with restrictions
applicable to undercapitalized institutions; and, if the institution is
undercapitalized, require it to comply with certain restrictions applicable to
significantly undercapitalized institutions.

Safety and Soundness Standards

Pursuant to FDICIA, the OTS has prescribed minimum acceptable
operational and managerial standards, and standards for asset quality, earnings
and valuation of publicly traded shares, for savings institutions and their
holding companies. The operational standards cover internal controls, internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, asset quality, earnings and employee compensation. The asset
quality and earnings standards specify a maximum ratio of classified assets to
capital, minimum earnings sufficient to absorb losses and minimum ratio of
market value to book value for publicly traded shares.

Qualified Thrift Lender Test

Savings associations must meet a QTL test, which test may be met either
by maintaining a specified level of assets in qualified thrift investments as
specified in HOLA or by meeting the definition of a "domestic building and loan
association" in section 7701 of the Internal Revenue Code of 1986, as amended
(the "Code"). If the Bank maintains an appropriate level of certain specified
investments (primarily residential mortgages and related investments, including
certain mortgage-related securities) and otherwise qualifies as a QTL or a
domestic building and loan association, it will continue to enjoy full borrowing
privileges from the FHLB. The required percentage of investments under HOLA is
65% of assets while the Code requires investments of 60% of assets. An
association must be in compliance with the QTL test or the definition of
domestic building and loan association on a monthly basis in nine out of every
12 months. Associations that fail to meet the QTL test will generally be
prohibited from engaging in any activity not permitted for both a national bank
and a savings association.

Investments and Loans

In general, federal savings institutions such as the Bank may not invest
directly in equity securities, noninvestment grade debt securities or real
estate, other than real estate used for the institution's offices and related
facilities. Indirect equity investment in real estate through a subsidiary is
permissible, but subject to certain limitations and deductions from regulatory
capital. Loans by a savings institution to a single borrower are generally
limited to 15% of an institution's "unimpaired capital and unimpaired surplus,"
which is similar but not identical to total capital plus an additional 10% of
unimpaired capital and surplus for loans fully secured by readily marketable
collateral.

14
<PAGE> 15

Payment of Dividends and Other Capital Distributions

OTS regulations impose limitations upon all capital distributions by
savings associations, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger and other distributions charged against capital. The OTS
recently adopted an amendment to these capital distribution limitations which is
effective April 1, 1999. Under the new rule, a savings association in certain
circumstances may be required to file an application and await approval from the
OTS prior to making a capital distribution, may be required to file a notice 30
days prior to the capital distribution, or may be permitted to make the capital
distribution without notice or application to the OTS. Accordingly, any such
payment or distribution by the Bank to Central will be subject to regulation and
certain limitations on amount. In general, the Bank may not declare or pay a
cash dividend on its capital stock if the effect thereof would cause the Bank to
fail to meet one of its regulatory capital requirements. The OTS may prohibit a
proposed capital distribution that would otherwise be permitted if the OTS
determines that the distribution would constitute an unsafe or unsound practice.

Affiliate and Insider Transactions

The ability of Central and its non-depository subsidiaries to deal with
the Bank is limited by the affiliate transaction rules, including Sections 23A
and 23B of the Federal Reserve Act, which also govern commercial banks. With
limited exceptions, these rules require that all transactions between the Bank
and an affiliate must be on arms' length terms. The term "affiliate" covers
Central and any company that controls or is under common control with the Bank,
but does not include individuals and generally does not include the Bank's
subsidiaries, except to the extent that the OTS or the Federal Reserve Board
decides to treat such subsidiaries as affiliates.

In general, Sections 23A and 23B and OTS regulations issued in
connection therewith limit the extent to which a savings association or its
subsidiaries may engage in certain "covered transactions" with affiliates to an
amount equal to 10% of the association's capital and surplus, in the case of
covered transactions with any one affiliate, and to an amount equal to 20% of
such capital and surplus, in the case of covered transactions with all
affiliates. In addition, a savings association and its subsidiaries may engage
in covered transactions and certain other transactions only on terms and under
circumstances that are substantially the same, or at least as favorable to the
savings association or its subsidiary, as those prevailing at the time for
comparable transactions with nonaffiliated companies. A "covered transaction" is
defined to include a loan or extension of credit to an affiliate; a purchase of
investment securities issued by an affiliate; a purchase of assets from an
affiliate, with certain exceptions; the acceptance of securities issued by an
affiliate as collateral for a loan or extension of credit to any party; or the
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate.

In addition, under the OTS regulations, a savings association may not
make a loan or extension of credit to an affiliate unless the affiliate is
engaged only in activities permissible for bank holding companies; a savings
association may not purchase or invest in securities of an affiliate other than
shares of a subsidiary; a savings association and its subsidiaries may not
purchase a low-quality asset from an affiliate; and covered transactions and
certain other transactions between a savings association or its subsidiaries and
an affiliate must be on terms and conditions that are consistent with safe and
sound banking practices. With certain exceptions, each loan or extension of
credit by a savings association to an affiliate must be secured by collateral
with a market value ranging from 100% to 130% (depending on the type of
collateral) of the amount of the loan or extension of credit.

15
<PAGE> 16

The OTS regulation generally excludes all non-bank and non-savings
association subsidiaries of savings associations from treatment as affiliates,
except to the extent that the OTS or the Federal Reserve Board decides to treat
such subsidiaries as affiliates. The regulation also requires savings
associations to make and retain records that reflect affiliate transactions in
reasonable detail, and provides that certain classes of savings associations may
be required to give the OTS prior notice of affiliate transactions.

Enforcement

Whenever the OTS has reasonable cause to believe that a savings and loan
holding company's continuation of any activity or ownership or control of any
non FDIC-insured subsidiary constitutes a serious risk to the financial safety,
soundness or stability of a savings and loan holding company's subsidiary
savings institution and is inconsistent with the sound operation of the savings
institution, the OTS may order the holding company, after notice and opportunity
for a hearing, to terminate such activities or to divest such noninsured
subsidiary. The OTS, in such a situation, also may issue a directive without any
notice or opportunity for a hearing, which may (1) limit the payment of
dividends by the savings institution, (2) limit transactions between the savings
institution and its holding company or its affiliates and (3) limit any activity
of the association that creates a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings institution.

In addition, savings and loan holding companies are included within the
category of persons designated as "institution-affiliated parties" for
regulatory purposes. An institution-affiliated party may be subject to
significant penalties and/or loss of voting rights in the event such party takes
any action for or toward causing, bringing about, participating in, counseling
or aiding and abetting a violation of law or unsafe or unsound practice by a
savings institution.

Community Reinvestment Act and the Fair Lending Laws

Savings associations have a responsibility under the Community
Reinvestment Act ("CRA") and related OTS regulations to help meet the credit
needs of their communities, including low- and moderate-income neighborhoods. In
addition, the Equal Credit Opportunity Act and the Fair Housing Act (together,
the "Fair Lending Laws") prohibit lenders from discriminating in their lending
practices on the basis of characteristics specified in those statutes. An
institution's failure to comply with the provisions of CRA could, at a minimum,
result in regulatory restrictions on its activities and the denial of certain
applications, and failure to comply with the Fair Lending Laws could result in
enforcement actions by the OTS, as well as other federal regulatory agencies and
the Department of Justice.

Federal Home Loan Bank System

The Bank is a member of the FHLB system. Among other benefits, each FHLB
serves as a reserve or central bank for its members within its assigned region.
Each FHLB is financed primarily from the sale of consolidated obligations of the
FHLB system. Each FHLB makes available to members loans (i.e., advances) in
accordance with the policies and procedures established by the Board of
Directors of the individual FHLB.

As a member, the Bank is required to own capital stock in an FHLB in an
amount equal to the greater of: (1) 1% of its aggregate outstanding principal
amount of its residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each calendar year, (2) 0.3% of total assets, or
(3) 5% of its FHLB advances (borrowings).

16
<PAGE> 17

Federal Reserve System

As a creditor and a financial institution, the Bank is subject to
certain regulations promulgated by the Federal Reserve Board. These regulations
include, without limitation, Regulation B (Equal Credit Opportunity Act),
Regulation D (Reserves), Regulation E (Electronic Funds Transfers Act),
Regulation F (limits on exposure to any one correspondent depository
institution), Regulation Z (Truth in Lending Act), Regulation CC (Expedited
Funds Availability Act), and Regulation DD (Truth in Savings Act). As creditors
of loans secured by real property and as owners of real property, financial
institutions, including the Bank, may be subject to potential liability under
various statutes and regulations applicable to property owners, generally
including statutes and regulations relating to the environmental condition of
the property.

Rechartering Legislation

Congress has been considering legislation in various forms that would
require federal thrifts, such as the Bank, to convert their charters to national
or state bank charters. The Treasury Department has been studying the
development of a common charter for federal savings associations and commercial
banks. Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of
1996 ("EGRPRA"), if the thrift charter is eliminated after January 1, 1999, the
EGRPRA would require the merger of the BIF and the SAIF into a single Deposit
Insurance Fund on that date. In the absence of appropriate "grandfather"
provisions, legislation eliminating the thrift charter could have a material
adverse effect on the Bank and Central because, among other things, the
regulatory, capital, and accounting treatment for national and state banks and
savings associations differs in certain significant respects. We cannot
determine whether, or in what form, such legislation may eventually be enacted
and there can be no assurance that any legislation that is enacted would contain
adequate grandfather rights for the Bank and Central.

Year 2000 Compliance

The Federal Financial Institutions Examination Council has issued
interagency statements to the chief executive officers of all federally
supervised financial institutions regarding year 2000 project management
awareness. It is expected that unless financial institutions address the
technology issues relating to the coming of the year 2000, there will be major
disruptions in the operations of financial institutions. The statements provide
guidance to financial institutions, providers of data services, and all
examining personnel of the federal banking agencies regarding the year 2000
problem. The federal banking agencies intend to conduct year 2000 compliance
examinations, and the failure to implement a year 2000 program may be seen by
the federal banking agencies as an unsafe and unsound banking practice. If a
federal banking agency determines that the Bank is operating in an unsafe and
unsound manner, the Bank may be required to submit a compliance plan. Failure to
submit a compliance plan or to implement an accepted plan may result in
enforcement action being taken, which may include a cease and desist order and
fines.

ADVERTISING

We actively advertise primarily on Hispanic television and radio and
through newspaper and direct mail, targeting both our present and former
customers and potential customers who have used other sources of consumer
credit. We believe that our advertising contributes significantly to our ability
to compete effectively with other providers of consumer credit.

17
<PAGE> 18

EMPLOYEES

At December 31, 1998, we had 366 hourly employees, 68 salaried employees
and 94 employees paid on a commission basis, primarily in our travel and
insurance business. None of our employees are covered by a collective bargaining
agreement. We believe our relations with our employees are good.

BUSINESS CONSIDERATIONS AND CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS AND STOCK PRICE

Discussions of certain matters contained in this Annual Report may
constitute forward-looking statements under Section 27A of the Securities Act
and Section 21E of the Exchange Act. These statements may involve risks and
uncertainties. These forward-looking statements relate to, among other things,
expectations of the business environment in which we operate in, projections of
future performance, expectations regarding our efforts to resolve Year 2000
issues and the effects of a failure to resolve such issues, perceived
opportunities in the market and statements regarding our mission and vision. Our
actual results, performance and achievements may differ significantly from the
results, performance or achievements expressed or implied in such
forward-looking statements. The following is a summary of some of the important
factors that could affect our future results of operations and/or our stock
price, and should be considered carefully.

Credit Risk Associated With Customers; Lack of Collateral

Because we rely on the creditworthiness of our customers for repayment
and do not rely on collateral securing the debt, we experience actual rates of
losses higher than lenders who have collateral which they can repossess in the
event of a borrower's default. At December 31, 1998, net receivables, defined as
gross receivables less deferred interest, included the net finance receivables
(comprised of all receivables except those in the Automobile Finance and Premium
Finance Portfolios) of $99.2 million, or 95.7% of our total net receivables. At
December 31, 1998, the finance receivables had accounts with payments 31 days or
more past due as a percentage of end of period gross receivables of 4.3%, as
compared to 7.4% and 6.4%, at year-end 1997 and 1996, respectively. In 1998, the
portfolios comprising the finance receivables had net write-offs of $13.0
million, as compared to $10.9 million in 1997 and $7.3 million in 1996. The
provision for credit losses net of recoveries for such portfolios as a
percentage of average net finance receivables was 9.1% in 1998, as compared to
10.8% and 9.1% during 1997 and 1996, respectively. We cannot assure that we will
not experience increases in delinquencies and net write-offs which would require
additional increases in the provisions for credit losses. Such increases would
adversely affect results of operations if we were not able to increase the rate
charged on receivables to reflect the additional risks in its portfolios. Since
we presently charge the maximum allowable interest rates on our various loan
products, further increases in delinquencies and write-offs will adversely
affect results of operations. For information concerning our credit quality
experience, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of

18
<PAGE> 19

Operation -- Financial Trends," "-- Credit Quality" and "-- Delinquency
Experience and Allowance for Credit Losses."

General Economic Risk

The risks associated with our business become more significant in an
economic slowdown or recession. During periods of economic slowdown or
recession, we have experienced and may again experience a decreased demand for
our financial products and services and an increase in rates of delinquencies
and the frequency and severity of losses. Our actual rates of delinquencies and
frequency and severity of losses have been in the past and may be in the future
higher under adverse economic conditions than those generally experienced in the
consumer finance industry. Any sustained period of economic slowdown or
recession could materially adversely affect our financial condition and results
of operations. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Trends -- Portfolios," "--
Credit Quality" and "-- Delinquency Experience and Allowances for Credit
Losses."

Dependence on California Market

Substantially all of our facilities are located, and substantially all
of our revenues are generated in California. To date, substantially all of our
operations have been in Southern California. Therefore, our performance depends
upon economic conditions in California, and in Southern California in
particular, and may be adversely affected by social factors or natural disasters
in California. During the early 1990's, California experienced adverse economic
conditions. A decline in the California economy could have a material adverse
effect on our results of operations and financial condition.

Dependence of Consumer Product Portfolio on Banner

The Consumer Product Portfolio consists of consumer finance receivables
generated from products Banner sells. The performance of the Consumer Product
Portfolio therefore depends substantially upon the success of Banner's stores.
The Consumer Product Portfolio accounted for 31.3% of our gross receivables
portfolio as of December 31, 1998.

Seasonal Fluctuations in Quarterly Operating Results

We experience the highest demand for our financial products and services
between October and December, and experience the lowest demand for our financial
products and services between January and March. These significant seasonal
fluctuations in our business directly impact our operating results and cash
needs.

Interest Rate Risk

The net interest spread, which is the difference between the average
interest rate on average net receivables and the average interest rate on
average interest bearing liabilities (the "Net Interest Spread"), partially
determines our profitability. Because we pay a floating interest rate on
borrowings under our Line of Credit (as defined below), increases in such rate
have at times decreased, and in the future may decrease, our Net Interest
Spread. This may have a material adverse effect on our results of operations and
financial condition. We are required to maintain interest rate hedging
arrangements for at least 50% of our Senior Funded Debt (as defined in the Line
of Credit). However, this percentage may be reduced by the amount (expressed as
a percentage) of the ratio of any permitted fixed rate indebtedness issued by
Central to the total

19
<PAGE> 20

Senior Funded Debt (as defined in the Line of Credit). We
have a hedge on $40.0 million as of December 31, 1998. This hedging agreement is
for the period July 21, 1997 through July 21, 2000 and at a cost of $136,000.

The interest rate we are allowed to charge our customers on our small
loans is limited under California law. We presently charge the maximum interest
rate permitted in California. There is no corresponding interest rate limitation
on installment credit sales. Increases in the interest rate we charge our
customers could reduce demand for our financial products and services which, in
turn, could decrease our net income. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation" and "Business --
Regulation of the Company."

Need for Senior Credit Facility

Currently, we fund our business activities under a revolving loan
agreement with several banks and Wells Fargo Bank, N.A., as agent (the "Line of
Credit") which expires June 12, 2000. Although the Line of Credit permits us to
borrow up to $100.0 million, the amount of credit available at any one time is
limited to 70% of eligible contracts. At December 31, 1998, the total amount
available to us under the Line of Credit was $72.1 million of which
approximately $52.3 million was outstanding, including letters of credit. Credit
facilities are typically limited to a certain percentage of such eligible
contracts or receivables.

In addition, our inability at any time to renew or replace our Line of
Credit or other senior credit facilities on acceptable terms could have a
material adverse effect on our results of operations and financial condition.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Restrictions Imposed by the Line of Credit

We have pledged substantially all of our assets, including our
receivables, and the stock of all of our significant domestic subsidiaries as
collateral for the amounts we borrow under the Line of Credit. In addition, our
significant subsidiaries have guaranteed our borrowings under the Line of
Credit. As of December 31, 1998, we had approximately $52.3 million aggregate
principal amount outstanding under the Line of Credit, including letters of
credit of $0.3 million.

The Line of Credit requires, among other things, that we maintain
specific financial ratios and satisfy certain financial tests. Our ability to
meet these financial ratios and financial tests can be affected by events beyond
our control, and we cannot assure that we will meet these tests. The Line of
Credit also restricts, among other things, our ability to (1) incur additional
indebtedness, (2) pay indebtedness prior to the date when due, (3) pay
dividends, make certain other restricted payments or consummate certain asset
sales, (4) merge or consolidate with any other person, (5) enter into certain
transactions with affiliates, (6) incur indebtedness that is subordinate in
priority and right of payment to amounts outstanding under the Line of Credit,
and (7) make future acquisitions in excess of an aggregate amount. At December
31, 1998, we were in compliance with the financial ratios and tests. However,
the breach of any of these covenants could result in a default under the Line of
Credit. In the event of a default under the Line of Credit, the lenders could
seek to declare all amounts outstanding under the Line of Credit, together with
accrued and unpaid interest, to be immediately due and payable. If we were
unable to repay the amounts, the lenders under the Line of Credit could proceed
against the collateral that we granted to them to secure our indebtedness, which
is substantially all of our and

20
<PAGE> 21

our subsidiaries' assets. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

Ability of the Company to Execute its Business Strategy

Our financial performance will depend, in part, on our ability (1) to
integrate new locations into our operations, (2) to generate satisfactory
performance or enhance performance at these locations, (3) to integrate new
financial products and services into our operations; and (4) to enter into
arrangements with additional major retailers for distribution of our financial
products and services. As a result of an acquisition in March 1999, we have
added 24 new travel locations. Expansion of our business may negatively impact
our operating results, particularly during the periods immediately following the
expansions. In addition, we cannot assure that we will be able to profitably
implement our business strategy in new geographic areas. Furthermore, we may
compete for expansion and acquisition opportunities with companies that have
significantly greater financial and other resources than us. We cannot assure
that we will be able to locate suitable new locations or acquisition candidates,
or that any operations that we open or acquire will be effectively and
profitably integrated into our existing operations.

Our financial performance also depends, in part, on our ability to
manage our various portfolios and our ability to successfully introduce
additional financial products and services across multiple locations. We cannot
assure that we will introduce additional financial products and services or, if
introduced, that these financial products and services will be successful. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation -- Liquidity and Capital Resources."

Competition

Each of our businesses operate in highly competitive industries. We
compete against a large number of national and regional firms engaged in such
businesses, many of which have substantially greater resources than us. We
cannot assure that our present or future competitors will not exert significant
competitive pressures on us which could have a material adverse effect on our
results of operations and financial condition. See "Business -- Competition."

Impact of Government Regulation

Our operations are regulated by federal, state and local government
authorities and are subject to various laws and judicial and administrative
decisions imposing various requirements and restrictions. These requirements and
restrictions include, among other things, (1) regulating credit granting
activities, (2) establishing maximum interest rates and charges, (3) requiring
disclosures to customers, (4) governing secured transactions, (5) setting
collection, repossession and claims handling procedures, (6) regulating
insurance claims practices and procedures, and other trade practices. Although
we believe that we are in compliance in all material respects with applicable
local, state and federal laws, rules and regulations, we cannot assure that more
restrictive laws, rules and regulations will not be adopted in the future which
may make compliance more difficult or expensive, restrict our ability to
purchase or finance installment sales or small loans, further limit or restrict
the amount of interest and other charges imposed in installment sales or small
loans originated by retailers or the Company, or otherwise materially adversely
affect our business or prospects. See "Business -- Regulation of the Company."

21
<PAGE> 22

Dependence Upon Key Personnel

Our success depends substantially on certain members of our senior
management, in particular Mr. Cypres, our Chairman of the Board. The loss of the
services of Mr. Cypres could materially adversely affect our business and
financial condition. We do not maintain key man life insurance.

Risks Relating to Acquisition of the Bank

If the acquisition of the Bank is consummated, Central will become a
unitary savings and loan holding company. As such, Central will become subject
to a complex body of laws and regulations which could impose substantial
compliance burdens on the Company and expose it to material risks. Among others,
these regulations would restrict the extent of transactions that could be
entered into between the Bank and its subsidiaries, on the one hand, and Central
and its nonbank subsidiaries, on the other hand. In addition, the Company and
its other operating subsidiaries would be subject to the possibility of
examination and supervision by the OTS as an "affiliate" of the Bank. If the
Bank fails to satisfy certain requirements of applicable law and regulation
relating to the amount of its assets dedicated to residential mortgage finance
and credit card activities, the Bank could be converted to a commercial bank.
Central would then become a bank holding company subject to a more restrictive
body of law and regulation imposing even greater compliance burdens on the
Company and exposing it to greater risks than those applicable to the Company as
a unitary savings and loan holding company. See "Business -- Regulation and
Supervision of the Bank and Central."

Year 2000

We have computer systems that identify dates using only the last two
digits of the year. These systems must be prepared to distinguish dates such as
1900 from 2000. Computer system failures due to processing errors potentially
arising from calculations using Year 2000 dates are a known risk. We have
established processes to identify, prioritize, renovate or replace systems that
may be affected by Year 2000 dates. However, third party vendor dependency,
including government entities, may impact our efforts to successfully complete
Year 2000 compliance for all systems in a timely fashion. Computer system
failures or disruption as a result of the failure to be Year 2000 compliant
could have a material adverse effect on our business, financial condition and
results of operations. For further information regarding our Year 2000
compliance program and status, see "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Impact of the Year 2000
Issue."

Other Risks

From time to time, we detail other risks with respect to our business
and/or financial results in our filings with the Securities and Exchange
Commission (the "SEC").

ITEM 2. PROPERTIES

Our executive and administrative offices occupy approximately 17,000
square feet of a building which Holdings owns that is located at 5480 East
Ferguson Drive, Commerce, California 90022. We believe that our executive and
administrative offices are adequate for current needs and that additional space
in our headquarters is available for future expansion. Our payment centers
located in Banner's stores are adequate for our present and anticipated needs.
We own an 86,000 square foot property in Los Angeles on which we built a 10,000
square foot loan center. We also purchased in July 1998 a 4,000 square foot
building in Maywood, California and have converted that facility into one of our
finance centers. All of our other locations are leased pursuant to short-term
leases.

22
<PAGE> 23

ITEM 3. LEGAL PROCEEDINGS

We are involved in certain legal proceedings arising in the normal
course of our business. We do not believe the outcome of these matters will have
a material adverse effect on us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders during the
fourth quarter of 1998.

<PAGE> 24

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

NASDAQ NATIONAL MARKET LISTING

Our common stock is listed on the Nasdaq National Market and traded
under the symbol "CFAC." The following table sets forth, in the periods
indicated, the high and low sales prices per share of our common stock, as
reported by the Nasdaq National Market for the periods presented. As of March 5,
1999, there were approximately four holders of record of our common stock.

<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
Quarter ended March 31, 1997............... $20.00 $16.00
Quarter ended June 30, 1997................ $16.00 $8.875
Quarter ended September 30, 1997........... $11.875 $10.00
Quarter ended December 31, 1997............ $11.50 $9.25
Quarter ended March 31, 1998............... $12.375 $9.50
Quarter ended June 30, 1998................ $12.25 $8.625
Quarter ended September 30, 1998........... $9.00 $7.00
Quarter ended December 31, 1998............ $7.50 $4.00
</TABLE>

We received a letter dated February 26, 1999 from the Nasdaq Stock
Market advising us that based upon its review of price data for our common stock
covering the last 30 consecutive trading dates prior to the date of the letter,
our common stock had not maintained a market value of public float greater than
or equal to $5 million.

Market value of public float greater than or equal to $5 million is
required for continued listing of our common stock on the Nasdaq National
Market. Recognizing that this may be a temporary situation, Nasdaq advised us
that it is not taking delisting action with respect to the market value of
public float deficiency at this time. Rather, Nasdaq advised us that we will
have 90 calendar days, or until May 27, 1999, to rectify the deficiency.

If at any time within this 90 calendar day period, the closing bid price
of our common stock allows for the maintenance greater than $5 million of public
float for ten consecutive trading days, we will have complied with the market
value of the public float requirement. Nasdaq also advised us that if we are
unable to demonstrate compliance with the minimum $5 million market value of
public float requirement on or before May 27, 1999, our securities will be
delisted at the opening of business on June 1, 1999, unless prior to May 27,
1999 we avail ourself of available procedural remedies to stay the delisting of
our common stock.

Nasdaq defines public float as shares of common stock that are not held
directly or indirectly by any officer or director of the Company or by any other
person who is the beneficial owner of more than 10% of the total shares of
common stock outstanding. In July 1996, we sold approximately 29% of our
outstanding common shares, or 2,127,000 shares, to the public. However,
presently we believe that our public float is only

24
<PAGE> 25

approximately 1,081,000 shares of common stock as a result of a single
shareholder which has accumulated and has reported beneficial ownership of
approximately 1,019,000 common shares.

DIVIDENDS

We have never paid and have no present intention of paying cash
dividends on our common stock. We anticipate that we will retain all earnings
for use in our business, and we do not anticipate paying cash dividends for the
foreseeable future. The Delaware General Corporation Law also restricts our
ability to pay dividends. The Delaware General Corporation Law provides that a
Delaware Corporation may pay dividends either (1) out of the corporation's
surplus (as defined by Delaware law), or (2) if there is no surplus, out of the
corporation's net profit for the fiscal year in which the dividend is declared
or the preceding fiscal year. Any determination in the future to pay dividends
will depend on our financial condition, capital requirements, results of
operations, contractual limitations, legal restrictions and any other factors
our Board of Directors deems relevant.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data with respect to our
consolidated financial position as of December 31, 1997 and 1998 and our results
of operations for the years ended December 31, 1996, 1997, and 1998 has been
derived from our audited consolidated financial statements appearing elsewhere
in this Annual Report. This information should be read in conjunction with such
consolidated financial statements and the notes thereto. The selected financial
data with respect to our consolidated financial position as of December 31,
1994, 1995 and 1996 and our results of operations for the year ended December
31, 1994 and 1995 has been derived from our audited consolidated financial
statements, which are not presented in this Annual Report.

<PAGE> 26

SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
------------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues:
Interest Income
Consumer Product Portfolio ............. $ 11,787 $ 12,508 $ 12,850 $ 10,822 $ 7,224
Small Loan Portfolio ................... 1,057 5,095 9,686 13,056 13,792
Automobile Finance Portfolio ........... -- 240 1,548 1,434 664
Other(1) ............................... -- 176 1,691 5,001 3,290
---------- ---------- ----------- ---------- ----------
Total Interest Income ......... 12,844 18,019 25,775 30,313 24,970
Travel services ........................ -- 371 2,449 8,716 8,961
Transaction fees on contracts purchased
from related party .................. 857 916 965 1,127 933
Other income(2) ........................ 1,868 2,857 7,238 11,884 12,024
---------- ---------- ----------- ---------- ----------
Total Revenues ................ 15,569 22,163 36,427 52,040 46,888
---------- ---------- ----------- ---------- ----------
Costs and Expenses:
Operating expenses ..................... 5,170 7,288 12,676 27,217 26,870
Provision for credit losses ............ 3,923 5,449 9,105 12,296 8,814
Interest expense ....................... 2,801 4,278 4,697 5,314 3,870
---------- ---------- ----------- ---------- ----------
Income before taxes ....................... 3,675 5,148 9,949 7,213 7,334
Income tax expense ........................ 1,493 2,079 3,979 2,823 2,933
---------- ---------- ----------- ---------- ----------
Net income before discontinued
operations ............................. 2,182 3,069 5,970 4,390 4,401
---------- ---------- ----------- ---------- ----------
Discontinued operations net
income (loss) .......................... -- 50 (91) -- --
---------- ---------- ----------- ---------- ----------
Net income ................................ $ 2,182 $ 3,119 $ 5,879 $ 4,390 $ 4,401
========== ========== =========== ========== ==========
PER SHARE DATA:
Basic earnings per share before
discontinued operations ................ $ 0.42 $ 0.60 $ 0.96 $ 0.60 $ 0.60
Net income (loss) per share discontinued
operations ............................. 0.00 0.01 (0.01) 0.00 0.00
---------- ---------- ----------- ---------- ----------
Net income per share ...................... $ 0.42 $ 0.61 $ 0.95 $ 0.60 $ 0.60
========== ========== =========== ========== ==========
Diluted earnings per share from continuing
operations ............................. $ 0.42 $ 0.60 $ 0.96 $ 0.60 $ 0.60

Earnings (loss) per share from discontinued
operations ............................. 0.00 0.01 (0.01) 0.00 0.00
---------- ---------- ----------- ---------- ----------
Net income per share ...................... $ 0.42 $ 0.61 $ 0.95 $ 0.60 $ 0.60
========== ========== =========== ========== ==========
Weighted average number of shares
outstanding ............................ 5,150,000 5,150,000 6,213,500 7,277,000 7,277,000
</TABLE>

- ------------------

(1) Other interest income includes interest earned on the Travel Finance
Portfolio and the Independent Retail Finance Portfolio and through our
insurance premium finance business.

(2) Other income includes administrative fees charged on certain small loan
contracts, late charges, revenue from the sale of insurance products, fees
charged for income tax preparations services and check cashing fees.

<PAGE> 27

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:

Cash .......................... $ 215 $ 57 $ 5,848 $ 4,794 $ 8,295
Net receivable ................ 56,337 94,674 119,074 102,498 96,195
Total assets .................. 73,942 101,730 145,357 135,149 129,085
Notes payable ................. 48,845 63,967 74,024 62,000 52,000
Stockholder's equity .......... 23,951 33,632 61,353 65,743 70,144
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
information under "Item 6. Selected Financial Data" and our Consolidated
Financial Statements and Notes thereto and other financial data, included
elsewhere in this Annual Report. Certain statements under this caption
constitute "forward-looking statements" under Section 27A of the Securities Act
and Section 21E of the Exchange Act which involve risks and uncertainties. Our
actual results may differ significantly from the results discussed in these
forward-looking statements. Factors that might cause such a difference, include
but are not limited to, credit quality, economic conditions, efforts to resolve
year 2000 issues and the effects of a failure to resolve such issues,
competition in the geographic and business areas in which we conduct our
operations, fluctuations in interest rates and government regulation. For
additional information concerning these factors, see "Item 1. Business --
Business Considerations and Certain Factors that May Affect Future Results of
Operations and Stock Price."

OVERVIEW

In pursuit of our business strategy, since 1992 we have expanded our
financing business by (1) offering consumer financing through additional
installment credit stores opened by Banner, (2) increasing the number and type
of products and services financed, and (3) offering new financial products and
services. In 1992, we began offering (1) small unsecured loans generally ranging
from $300 to $1,500 with average loan terms of 12 months, and (2) installment
credit finance to Banner's customers at three additional installment credit
stores in the greater Los Angeles area and one additional installment credit
store in San Francisco that Banner opened or acquired in 1994. In 1995, we
opened two finance centers offering small loans and travel finance and one
automobile sales location in the greater Los Angeles area, and began offering
consumer product finance to Banner's customers at one additional installment
credit store in the greater Los Angeles area that Banner opened in 1995. In
1995, we also began offering financing for the sale of used automobiles, which
was discontinued in May 1997. Beginning in late 1995, we expanded our indirect
consumer financing business by offering financing to consumers for the purchase
of products and services sold by independent retailers. At present, we have
retail installment financing arrangements with approximately 75 independent
retailers in the greater Los Angeles area. In 1996, we expanded our travel
business by acquiring 25 travel locations in June and 55 locations in December.
We presently have 71 travel locations, of which 65 are located in California. In
addition, we began our automobile insurance business in 1996 through 12
locations in the greater Los Angeles area and also began offering insurance
premium financing to our customers.

In May 1997, we introduced the Efectiva Card. The Efectiva Card
provides our customers with the ability to access their established lines of
credit with us by withdrawing cash from our cash dispensing

27
<PAGE> 28

machines. We have presently installed our cash dispensing machines in 25
locations owned or leased by the Company or Banner and 20 locations owned or
leased by unaffiliated parties.

In October 1997, we installed our cash dispensing machines at 10 K-Mart
locations in Southern California. In addition, in January 1998, we and K-Mart
agreed to expand the relationship and install cash dispensing machines in an
additional 9 K-Mart stores. In December 1998, we commenced discussions with
K-Mart to seek expansion opportunities for our K-Mart program and to explore
alternative means of compensating K-Mart.

In January 1998, we began to offer income tax return preparation and
electronic filing services to our customers. During the 1998 tax preparation
season which runs primarily from January through mid-April, we processed
approximately 3,000 tax returns. In January 1999, we began to offer income tax
refund anticipation loans of up to $2,500 in connection with the tax return
preparation and electronic filing services.

In February 1998, we entered into a definitive agreement to acquire
Mission Savings and Loan Association, a federally chartered savings association
based in Riverside, California (the "Bank") with deposits insured by the FDIC.
The cost of the acquisition to be paid in cash will equal 1.47 times the Bank's
adjusted stockholders' equity at the end of the month immediately prior to the
date of acquisition. This amount is currently estimated to be approximately $5.0
million. The acquisition is subject to, among other things, the approval of the
OTS. The agreement expires on May 31, 1999 unless extended by us and the Bank.
We cannot assure that the OTS will approve the acquisition or that the Bank will
agree to extend the agreement if the acquisition is not consummated by May 31,
1999. At December 31, 1998, the Bank had approximately $47.5 million in total
assets and $3.4 million in total stockholders' equity. The Bank had net income
of $0.2 million during 1998.

Historically, we have provided payroll check cashing services to our
customers free of charge when they come into our finance centers to pay on their
accounts. In mid-1998, we began to offer fee based check cashing services in
check cashing centers in both the retail stores operated by Banner and in
separate stand-alone check cashing centers or coupled with our finance centers.
By the end of 1998, we had established 24 check cashing centers.

In the third quarter of 1998, we established a mortgage loan business
and began to offer and write small second trust mortgage loans.

In March 1999, we completed the acquisition of the retail operations of
Panamericana Travel Systems, Inc. a travel service provider located in Southern
California. The asset purchase included 24 leased Panamericana travel center
stores and will add to our existing travel business making us the largest
provided of travel services to the Hispanic community in Southern California.

As a result of the changes in products and services offered and changes
in distribution channels, results of operations are not readily comparable from
year to year or from period to period, and are not necessarily indicative of
future operating results.

FINANCIAL TRENDS

Portfolios

The following sets forth certain information relating to our portfolios
for the periods indicated.

28
<PAGE> 29

CONSUMER PRODUCT PORTFOLIO
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE NET CONTRACT BALANCE)

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1994 1995 1996 1997 1998
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Gross receivable (at end of period) .................. $ 67,514 $67,811 $61,848 $38,814 $33,886
Deferred interest (at end of period) ................. 7,603 7,796 7,132 3,706 3,333
-------- ------- ------- ------- -------
Net receivable (at end of period) .................... 59,911 60,015 54,716 35,108 30,553
Deferred insurance revenues (at end of period) ....... 405 401 270 111 94
-------- ------- ------- ------- -------
Net carrying value ................................... $ 59,506 $59,614 $54,446 $34,997 $30,459
======== ======= ======= ======= =======
Average net receivable(1)............................. $ 53,656 $57,276 $55,742 $43,717 $30,656
Number of contracts (at end of period) ............... 76,984 84,555 81,361 61,868 62,897
Average net contract balance ......................... $ 778 $ 710 $ 673 $ 567 $ 496
Average interest bearing liabilities(2) .............. 37,549 39,284 33,489 N/A N/A
Total interest income(3) ............................. 11,787 12,508 12,850 10,822 7,224
Total interest expense(2) ............................ 2,579 3,242 2,688 2,101 1,230
Net interest income before provision for credit losses 9,208 9,266 10,162 8,721 5,994
Net provision for credit losses ...................... 3,332 3,852 4,955 3,129 2,304
Provision for credit loss as a percentage of
average net receivable ............................ 6.2% 6.7% 8.9% 7.2% 7.5%
Net write-offs ....................................... 2,949 3,310 4,257 3,128 3,352
Net write-off's as a percentage of average net
receivable ........................................ 5.5% 5.8% 7.6% 7.2% 10.9%
Average interest rate on average net receivable ...... 22.0% 21.8% 23.1% 24.8% 23.6%
Average interest rate on interest bearing
liabilities(4) .................................... 6.9% 8.3% 8.0% 8.3% 8.0%
Net Interest Spread .................................. 15.1% 13.5% 15.1% 16.5% 15.6%
</TABLE>

- ----------------

(1) Average net receivable is defined as the average gross receivable less the
average deferred interest.

(2) Amounts represent borrowings and related interest expense on our lines of
credit for the Consumer Product Portfolio, excluding amounts related to our
other borrowings. During 1997, the Company renegotiated and consolidated
its lines of credit under the single Line of Credit which is used by
Central and all our subsidiaries with Central as the borrower. Therefore,
the interest bearing liability is no longer specific to one portfolio. The
interest expense was allocated to each portfolio based on their respective
weighted average percent of the total finance portfolios.

(3) Amounts represent interest income on installment contracts, excluding
administrative fees, late charges and other charges, which are included in
other income in the consolidated statements of income appearing elsewhere
herein.

(4) Amount is determined in aggregate based on total average borrowings and
total interest paid by CFAC.

29
<PAGE> 30

SMALL LOAN PORTFOLIO
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE NET CONTRACT BALANCE)

<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Gross Receivable (at end of period) ....... $16,735 $37,868 $57,671 $ 58,659 $62,248
Deferred interest (at end of period) ...... 1,809 4,187 6,041 1,414 445
------- ------- ------- -------- -------
Net receivable (end of period) ............ 14,926 33,681 51,630 57,245 61,803
Deferred administrative fees, ATM
fees and insurance revenues
(at end of period) ..................... 392 576 978 1,668 2,169
------- ------- ------- -------- -------
Net carrying value ........................ $14,534 $33,105 $50,652 $ 55,577 $59,634
======= ======= ======= ======== =======
Average net receivable(1) ................. $ 5,662 $20,219 $38,847 $ 51,496 $55,312
Number of contracts (at end of period)(5) . 26,166 55,241 79,819 111,000 95,403
Average net contract balance .............. $ 570 $ 610 $ 647 $ 507 $ 558
Average interest bearing liabilities(2) ... 3,165 12,902 25,204 N/A N/A
Total administrative fee and ATM fee income 458 1,133 1,897 2,341 3,433
Total interest income(3) .................. 1,057 5,095 9,686 13,056 13,792
Total interest expense(2) ................. 222 1,036 2,009 3,073 2,471
Net interest income before provision
for credit losses ...................... 835 4,059 7,677 9,983 11,321
Net provision for credit losses ........... 591 1,547 3,349 5,000 5,321
Provision for credit losses as a percentage
of average net receivable .............. 10.4% 7.7% 8.6% 9.7% 9.6%
Net write-offs ............................ 155 896 2,606 5,000 8,235
Net write-offs as a percentage of average
net receivable ......................... 2.7% 4.4% 6.7% 9.7% 14.9%
Average interest rate on average
net receivable ......................... 18.7% 25.2% 24.9% 25.4% 24.9%
Average interest rate on interest .........
bearing liabilities(4) ................. 7.0% 8.0% 8.0% 8.3% 8.0%
Net Interest Spread ....................... 11.7% 17.2% 17.0% 17.1% 16.9%
</TABLE>

- ------------
(1) Average net receivable is defined as the average gross receivable less the
average deferred interest.

(2) Amounts represent borrowings and related interest expense on our lines of
credit for the Small Loan Portfolio, excluding amounts related to our other
borrowings. During 1997, the Company renegotiated and consolidated its
lines of credit under the single Line of Credit which is used by Central
and all our subsidiaries with Central as the borrower. Therefore, the
interest bearing liability is no longer specific to one portfolio. The
interest expense was allocated to each portfolio based on their respective
weighted average percent of the total finance portfolios.

(4) Amount is determined in aggregate based on total average borrowings and
total interest paid by CFAC.

30
<PAGE> 31

(5) In 1997, the number of contracts is skewed higher as a result of many
customers having more than one account open in the portfolios that comprise
the Small Loan Portfolio. In years other than 1997, the Small Loan
Portfolio was principally made up of only one loan product.

Travel Finance Portfolio

We began offering Company-financed sales of airline tickets in mid-1995.
At December 31, 1996, 1997 and 1998, the gross receivables of the Travel Finance
Portfolio was $5.6 million, $6.2 million and $5.0 million, respectively, and the
net receivables before allowance for credit losses was $5.2 million, $5.7
million and $4.6 million, respectively. In addition, the number of contracts
outstanding at December 31, 1996, 1997 and 1998 was 11,772, 14,435 and 12,250,
respectively, with an average net contract balance of approximately $438, $395
and $385, respectively. At December 31, 1996, 1997 and 1998, the average
interest rate on the average net portfolio was approximately 25.0%, 25.6% and
25.9%, respectively.

Independent Retail Finance Portfolio

We began purchasing and servicing consumer finance receivables generated
by independent retailers in 1996. At December 31, 1996, 1997 and 1998, the gross
receivables of the Independent Retail Finance Portfolio was $7.2 million, $5.2
million and $2.1 million, respectively, and the net receivables before allowance
for credit losses was $6.2 million, $4.6 million and $2.0 million, respectively.
In addition, the number of contracts outstanding at December 31, 1996, 1997 and
1998, was 12,053, 14,518 and 6,671, respectively, with an average net contract
balance of approximately $518, $314 and $293, respectively. At December 31,
1996, 1997 and 1998, the average interest rate on the average net portfolio was
approximately 31.5%, 34.7% and 36.5%, respectively.

Premium Finance Portfolio

We began offering insurance premium financing in late 1996. At December
31, 1996, 1997 and 1998, the gross receivables of the Premium Finance Portfolio
was $2.1 million, $5.0 million and $2.3 million, respectively, and the net
receivables, before allowance for credit losses was $2.0 million, $4.7 million
and $2.2 million, respectively. In addition, the number of contracts outstanding
at December 31, 1996, 1997 and 1998 was 2,615, 14,533 and 9,522, respectively,
with an average net contract balance of approximately $751, $325 and $228,
respectively. This portfolio yielded a 23.4% return on its average net
receivable in 1998.

Automobile Finance Portfolio

We began offering Company-financed sales of used automobiles in
mid-1995. In August 1996, we sold the used car sales business to Banner pursuant
to an Agreement to Transfer Business Operations among Banner, Central Consumer
Finance Company, Central Auto Sales, Inc. and Central (the "Automobile Financing
Agreement") which granted us the exclusive right to finance Banner's sales of
automobiles or purchase automobile finance contracts Banner generates. Our
decision to sell the used car sales business was due to capital considerations
and our determination that such business did not presently fit well into our
overall business strategy. At December 31, 1996, 1997 and 1998, the gross
receivables of the Automobile Finance Portfolio was approximately $11.0 million,
$6.4 million and $2.4 million, respectively, and the net receivables of the
portfolio was $8.7 million, $5.5 million and $2.3 million, respectively. In
addition, the number of contracts outstanding at December 31, 1996, 1997 and
1998 was 1,376, 1,185 and 791, respectively, with an average net contract
balance of approximately $8,000, $4,600 and $2,900, respectively. The average
interest earned on the average net receivable was 17.6% in 1998. Under the
Automobile Financing Agreement, all purchases of automobile finance receivables
were made with full recourse to Banner in the event the customer defaults.
Accordingly, we maintain no allowance for credit losses with respect to the
Automobile Finance

31
<PAGE> 32

Portfolio. Banner ceased selling used automobiles in May 1997 and, therefore, we
are not currently engaged in financing sales of used automobiles.

ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table separates the changes in net interest income between
changes in average balances ("Volume") and average rates ("Rate") for both
average net receivables and average interest bearing liabilities of the Consumer
Product Portfolio and the Small Loan Portfolio (dollars in thousands) for the
periods presented.

<TABLE>
<CAPTION>
Years Ended Years Ended Years Ended
December 31, 1996 December 31, 1997 December 31, 1998
versus versus versus
December 31, 1995 December 31, 1996 December 31, 1997
--------------------------- --------------------------- ---------------------------
Volume Rate Total Volume Rate Total Volume Rate Total
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
interest income:
Consumer Product Portfolio ... $ (354) $ 696 $ 342 $(2,978) $ 950 $(2,028) $(3,146) $ (452) $(3,598)
Small Loan Portfolio ......... 4,645 (54) 4,591 3,207 163 3,370 1,264 (528) 736
------- ------- ------- ------- ------- ------- ------- ------- -------
4,291 642 4,933 229 1,113 1,342 (1,882) (980) (2,862)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in
interest expense:
Bank of America Line of Credit (465) (87) (552) N/A N/A N/A N/A N/A N/A
Wells Fargo Line of Credit ... 980 (7) 973 440 177 617 (1,270) (174) (1,444)
------- ------- ------- ------- ------- ------- ------- ------- -------
515 (94) 421 440 177 617 (1,270) (174) (1,444)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in net
interest income .............. $ 3,776 $ 736 $ 4,512 $ (211) $ 936 $ 725 $ (612) $ (806) $(1,418)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

CREDIT QUALITY

We make provision for credit losses in the Consumer Product and Travel
Finance Portfolios at the time that the contract is purchased or the retail sale
is made. The provision for credit losses in the Small Loan, Independent Retail
Finance, Premium Finance and Mortgage Loan Portfolios is made following the
origination of the loans over the period that the events giving rise to the
credit losses are estimated to occur. Our portfolios comprise smaller-balance,
homogeneous loans that are evaluated collectively to determine an appropriate
allowance for credit losses. The allowance for credit losses is maintained at a
level considered adequate to cover losses in the existing portfolios. We pursue
collection of past due accounts, and when the characteristics of an individual
account indicates that collection is unlikely, the account is charged off and
turned over to a collection agency. Accounts are generally charged off when they
are between 91 and 150 days past due.

The allowance for loan losses is increased by charges to income and
decreased by charge-offs, net of recoveries. Our management's periodic
evaluation of the adequacy of the allowance is based on our past loan loss
experience, known and inherent risks in the portfolios, adverse situations that
may affect the borrower's ability to repay and current economic conditions.

For information concerning our provisions for credit losses and
chargeoff experience in the Consumer Product and Small Loan Portfolios, our two
largest portfolios, see "--Financial Trends-- Portfolios" above.

32
<PAGE> 33

DELINQUENCY EXPERIENCE AND ALLOWANCE FOR CREDIT LOSSES

Borrowers under our contracts are required to make monthly payments. The
following sets forth our delinquency experience for accounts with payments 31
days or more past due and allowance for credit losses for our finance
receivables.

FINANCE RECEIVABLES(1)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
December 31,
------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Past due accounts (gross receivable):
31-60 days ................... $2,340 $2,482 $4,115 $3,204 $2,138
61 days or more .............. 2,715 3,162 4,332 4,795 2,363
------ ------ ------ ------ ------
$5,055 $5,644 $8,447 $7,999 $4,501
Accounts with payments 31 days or more
past due as a percentage of end of
period gross receivable ........... 6.0% 5.2% 6.4% 7.4% 4.4%
Allowance for credit losses .......... $3,712 $4,955 $6,786 $7,471 $4,321
Allowance for credit losses as a
percentage of net receivables ..... 5.0% 5.1% 5.8% 7.4% 4.4%
</TABLE>

- -----------------

(1) Includes receivables in our Consumer Product, Small Loan, Travel Finance
and Independent Retail Portfolios.

In 1996, delinquencies and net write-offs in the Consumer Product
Portfolio increased to levels which were substantially higher than those we have
historically experienced in such portfolio. These trends continued during 1997.
The increases occurred primarily with respect to our existing customers, rather
than new credit customers. We believe these increases were a result of excessive
credit burdens for some customers, due to an aggregate overextension of credit
in the marketplace, coupled with uncertainty over legislative reforms
potentially impacting our customers and their extended families. Both the
accounts with payments 31 days or more past due as a percentage of end of period
gross receivables, and the allowance for credit losses as a percentage of net
receivables declined from 7.4% and 7.4% as of December 31, 1997 to 4.4% and 4.4%
as of December 31, 1998, respectively, due to our decision to write-off
substantially all of the receivables at year end which were more than 150 days
past due.

In late 1996 we took a number of steps to improve collections and credit
quality. We hired two senior executives in the credit and collections fields. In
December 1996, we installed an autodialer to assist our collections personnel in
successfully contacting past due borrowers. In November 1998, we completed
installation of our Lexon, front-end credit scoring system. This system allows
us to track new credit applications and capture and analyze customer credit data
more effectively. This system also eliminated the need for expensive data lines
and terminal which were replaced by fax machines to transmit applications to the
central input location at our corporation headquarters. Notwithstanding these
measures, we cannot assure that the trend in increased delinquencies and net
write-offs will not continue.

The Financing Agreement among us, Banner and Holdings permits us to
return to Banner during each of 1996, 1997 and 1998 up to $1.5 million of
contracts purchased from or contributed by Banner. As a result of increasing
delinquencies in the Consumer Product Portfolio, the Company and Banner amended
the Financing Agreement, to permit us for the year ended December 31, 1997 to
return more than $1.5 million of contracts purchased or contributed by Banner
and for Banner to have up to 18 months to reimburse the Company for amounts
transferred to Banner. All amounts unpaid at year end will bear interest at
Central's

33
<PAGE> 34

borrowing rate. Banner repurchased $1.5 million of delinquent receivables during
the second half of 1996, repurchased $5.8 million of delinquent receivables
during 1997 and repurchased $1.5 million of delinquent receivables at the end of
1998.

RESULTS OF OPERATIONS

Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997

Total revenues in the year ended December 31, 1998 decreased to $46.9
million from $52.0 million in the year ended December 31, 1997, a decrease of
$5.1 million or 9.9%.

Consumer Product Portfolio interest income in the year ended December
31, 1998 decreased to $7.2 million from $10.8 million in the year ended December
31, 1997. This decrease was primarily attributable to a decrease in the
portfolio which averaged $30.6 million in the year ended December 31, 1998,
compared to $43.7 million in the year ended December 31, 1997. In addition, the
average interest rate we charged on this portfolio decreased to 23.6% for the
year ended December 31, 1998, compared to 24.8% for the year ended December 31,
1997.

Small Loan Portfolio interest income in the year ended December 31, 1998
increased to $13.8 million from $13.1 million in the year ended December 31,
1997. The increase was primarily attributable to an increase in the portfolio
which averaged $56.7 million in the year ended December 31, 1998, compared to
$51.5 million in the year ended December 31, 1997. Most of the growth was due to
the growth of the Efectiva Card portion of this portfolio. The average interest
rate we charged on the Small Loan Portfolio was 24.3% for the year ended
December 31, 1998, compared to 25.4% for the year ended December 31, 1997.

Interest income on the Automobile Finance Portfolio in the year ended
December 31, 1998 decreased to $0.7 million from $1.4 million in the year ended
December 31, 1997. This decrease was due to a decrease in the overall portfolio
as a result of our decision to withdraw from the used car financing business.

Other interest income in the year ended December 31, 1998 decreased to
$3.3 million from $5.0 million in the year ended December 31, 1997, a decrease
of $1.7 million. Of this decrease, $1.0 million was attributed to a decrease in
interest income earned on our Independent Retail Finance Portfolio, $0.1 million
was attributed to a decrease in interest income earned on our Travel Finance
Portfolio, and $0.6 million was attributed to a decrease in interest income
earned on the Premium Finance Portfolio.

Revenues earned on the sales of travel services increased to $9.0
million for the year ended December 31, 1998 compared to $8.7 million for the
year ended December 31, 1997, an increase of $0.3 million. This net increase was
primarily attributable to improved operations in 1998.

Other income for the year ended December 31, 1998 increased to $12.0
million from $11.9 million in the year ended December 31, 1997, an increase of
$0.1 million. Other income primarily includes administrative fees earned on our
Small Loan Portfolio, ATM membership fees earned on our Efectiva Card, late and
extension charge income, transaction fees charged on consumer product
installment contracts and income earned on the sale of insurance products. Other
income in the year ended December 31, 1998 includes a decrease of $1.2 million
in administrative fee income earned on small loans, an increase of $2.3 million
in ATM membership fees, a $1.2 million decrease in late and extension charges,
and a decrease of $0.5 million in insurance product revenues and $0.7 million
increase in miscellaneous income.

34
<PAGE> 35

Operating expenses in the year ended December 31, 1998 decreased to
$26.9 million from $27.2 million in the year ended December 31, 1997, a decrease
of $0.3 million. Of this decrease, $0.7 million is attributable to the travel
business and $0.8 million to the insurance and premium finance business due to
improved operating efficiencies and the closure and consolidation of various
locations. These savings were partially offset by a combined increase of $0.5
million in the check cashing and income tax business attributable to their start
up, $0.6 million in the captive insurance business attributable to its revenue
growth and $0.1 million in the finance portfolio business.

The provision for credit losses in the year ended December 31, 1998
decreased to $8.8 million from $12.3 million in the year ended December 31,
1997, a decrease of $3.5 million or 28%. This decrease was primarily due to a
decrease in the provision for credit losses of $2.9 million in the Independent
Retail Finance Portfolio as a result of our decision in 1997 to phase out our
relationship with approximately 100 small retailers and a corresponding increase
in loss provision in that year. There was an $0.8 million and $0.4 million
decrease in the provision for the Consumer Product Portfolio and Premium Finance
Portfolio, respectively, resulting primarily from a decrease in the size of
these portfolios. An increase of $0.3 million in the provision in the Small Loan
Portfolio as a result of the increase in the portfolio and an increase of $0.4
million in the Travel Finance Portfolio offset the above decreases.

Interest expense in the year ended December 31, 1998 decreased to $3.9
million from $5.3 million in the year ended December 31, 1997. This decrease was
due to a decrease in the amounts borrowed under the lines of credit which
averaged $48.2 million in the year ended December 31, 1998, compared to $64.1
million in the year ended December 31, 1997.

As a result of the foregoing factors, net income in the year ended
December 31, 1998 remained constant at $4.4 million with the $4.4 million earned
in the year ended December 31, 1997.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Total revenues in the year ended December 31, 1997 increased to $52.0
million from $36.4 million in the year ended December 31, 1996, an increase of
$15.6 million or 42.9%.

Consumer Product Portfolio interest income in the year ended December
31, 1997 decreased to $10.8 million from $12.9 million in the year ended
December 31, 1996. This decrease was primarily attributable to a decrease in the
portfolio which averaged $43.7 million in the year ended December 31, 1997,
compared to $55.7 million in the year ended December 31, 1996. The average
interest rate we charged on this portfolio increased to 24.8% for the year ended
December 31, 1997, compared to 23.1% for the year ended December 31, 1996.

Small Loan Portfolio interest income in the year ended December 31, 1997
increased to $13.1 million from $9.7 million in the year ended December 31,
1996. The increase was primarily attributable to an increase in the portfolio
which averaged $51.5 million in the year ended December 31, 1997, compared to
$38.8 million in the year ended December 31, 1996. A portion of the increase in
the portfolio also related to the introduction of the Efectiva Card in May 1997.
The average interest rate we charged on this portfolio was 25.4% for the year
ended December 31, 1997, compared to 24.9% for the year ended December 31, 1996.

Interest income on the Automobile Finance Portfolio in the year ended
December 31, 1997 decreased to $1.4 million from $1.5 million in the year ended
December 31, 1996. This decrease was due to a decrease in interest recognized on
this portfolio as a result of utilizing the rule of 78's method. On May 30,
1997, Banner ceased the sale of used automobiles and, therefore, we are not
financing used automobile sales.

35
<PAGE> 36

Other interest income in the year ended December 31, 1997 increased to
$5.0 million from $1.7 million in the year ended December 31, 1996, an increase
of $3.3 million. Of this increase, $1.6 million was attributed to an increase in
interest income earned on our Independent Retail Finance Portfolio, $0.4 million
was attributed to an increase in interest income earned on our Travel Finance
Portfolio, and $1.3 million was attributed to an increase in interest income
earned on the Premium Finance Portfolio.

Revenues earned on the sales of travel services increased to $8.7
million for the year ended December 31, 1997 compared to $2.4 million for the
year ended December 31, 1996, an increase of $6.3 million. This increase was
primarily attributable to the 80 travel locations we acquired during the period
from May 1996 through December 1996.

Other income for the year ended December 31, 1997 increased to $11.9
million from $7.2 million in the year ended December 31, 1996, an increase of
$4.7 million. Other income primarily includes administrative fees earned on our
Small Loan Portfolio, ATM membership fees earned on our Efectiva Card, late and
extension charge income, transaction fees charged on consumer product
installment contracts and income earned on the sale of insurance products. Other
income in the year ended December 31, 1997 includes a decrease of $0.3 million
in administrative fee income earned on small loans, an increase of $0.7 million
in ATM membership fees, a $0.4 million increase in late and extension charges,
and an increase of $3.5 million in insurance product revenues and $0.4 million
increase in miscellaneous income.

Operating expenses in the year ended December 31, 1997 increased to
$27.2 million from $12.7 million in the year ended December 31, 1996, an
increase of $14.5 million. Of this increase, $6.1 million is attributable to
operating costs and expenses incurred in connection with the sale of airline
tickets and $2.3 million incurred in connection with the sale of auto insurance,
which business commenced in July 1996. This increase also includes $0.8 million
in expenses incurred in the introduction of the Efectiva Card, $0.4 million in
costs associated with our proposed offering of trust preferred securities (which
has been withdrawn), $0.3 million of expenses to modify computer software for
compliance with the year 2000 and $0.2 million in start up costs for the income
tax service company. The remaining increase of $4.4 million was primarily due to
the expansion of the small loan business and unaffiliated retailer business,
including an increase in the number of employees and related payroll expenses.

The provision for credit losses in the year ended December 31, 1997
increased to $12.3 million from $9.1 million in the year ended December 31,
1996, an increase of $3.2 million or 35.0%. This increase was primarily due to a
$1.8 million provision which we provided in connection with our decision to
phase out of our relationship with approximately 100 small retailers, a $1.6
million increase in the provision for the Small Loan Portfolio as a result of
increased receivables in the portfolio and increased delinquencies and a $0.7
million provision for the Premium Finance Portfolio which business commenced in
late 1996. The above increases were offset by a decrease in the provision for
the Consumer Product Portfolio as a result of a decline in this portfolio and
repurchase of $5.8 million of delinquent receivables by Banner in 1997.

Interest expense in the year ended December 31, 1997 increased to $5.3
million from $4.7 million in the year ended December 31, 1996. This increase was
due to an increase in the amounts borrowed under the lines of credit which
averaged $64.1 million in the year ended December 31, 1997, compared to $58.7
million in the year ended December 31, 1996.

As a result of the foregoing factors, net income in the year ended
December 31, 1997 decreased to $4.4 million from $5.9 million in the year ended
December 31, 1996, a decrease of $1.5 million or 25.3%.

36
<PAGE> 37

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Total revenues in the year ended December 31, 1996 increased to $36.4
million from $22.2 million in the year ended December 31, 1995, an increase of
$14.2 million or 64.4%.

Consumer Product Portfolio interest income in the year ended December
31, 1996 increased to $12.9 million from $12.5 million in the year ended
December 31, 1995, an increase of $0.4 million. Of this increase, $0.7 million
was attributable to a 1.3% increase in the average interest rate earned on this
portfolio in the year ended December 31, 1996 compared to the year ended
December 31, 1995, offset by a $0.3 million decrease in interest income as a
result of a decrease of $1.5 million in the size of the average Consumer Product
Portfolio for the year ended December 31, 1996 compared to the year ended
December 31, 1995.

Small Loan Portfolio interest income in the year ended December 31, 1996
increased to $9.7 million from $5.1 million in the year ended December 31, 1995,
an increase of $4.6 million or 90.1%. Substantially all of this increase was
attributable to an increase in the size of the Small Loan Portfolio, which
averaged $38.8 million in the year ended December 31, 1996 compared to $20.2
million in the year ended December 31, 1995. For the year ended December 31,
1996, we earned an average interest rate of 24.9% compared to 25.2% in the year
ended December 31, 1995. We currently charge the maximum interest rate permitted
under California law on our small loans.

Automobile Finance Portfolio interest income in the year ended December
31, 1996 increased to $1.5 million from $0.2 million in the year ended December
31, 1995, an increase of $1.3 million. Substantially all of this increase was
attributable to an increase in the size of the Automobile Finance Portfolio,
which averaged $7.2 million in the year ended December 31, 1996 compared to $1.1
million in the year ended December 31, 1995. We began our business of financing
automobiles in July 1995.

Other interest income in the year ended December 31, 1996 increased to
$1.7 million from $0.2 million in the year ended December 31, 1995, an increase
of $1.5 million. Of this increase, $0.8 million was attributed to an increase in
interest income earned on our Travel Finance Portfolio, and $0.6 million was
attributable to interest income earned on our financing of installment
receivables generated from the sale of consumer products sold to customers of
independent retailers. We began this business in early 1996.

For the year ended December 31, 1996, our Travel Finance Portfolio
averaged $4.9 million compared to $2.7 million in the year ended December 31,
1995. The average interest rate earned on this portfolio was 25.0% in the year
ended December 31, 1996 compared to 23.7% in the year ended December 31, 1995.

Revenues earned on the sales of travel services increased to $2.4
million in the year ended December 31, 1996 compared to $0.4 million in the year
ended December 31, 1995, an increase of $2.0 million. We began our travel
business in June 1995, and substantially expanded our operation through the
acquisition of 25 travel locations in May and June of 1996. In December 1996, we
acquired an additional 55 travel locations. However, such acquisition did not
materially contribute to 1996 revenues.

Other income for the year ended December 31, 1996 increased to $7.2
million from $2.9 million in the year ended December 31, 1995, an increase of
$4.3 million or 153.3%. Other income primarily includes administrative fees
earned on our Small Loan Portfolio, late and extension charge income and income
earned on the sale of insurance products. For the year ended December 31, 1996,
administrative fee income increased to $1.9 million compared to $1.1 million in
the year ended December 31, 1995, an increase of $0.8 million. For the year
ended December 31, 1996, late and extension charge income increased to $2.6
million from $1.0 million in the year ended December 31, 1995, an increase of
$1.6 million. This increase was primarily

37
<PAGE> 38

attributable to the State of California increasing the late charges we may
charge coupled with an increase in the size of our combined receivable
portfolios. For the year ended December 31, 1996, income from the sale of credit
life insurance, credit accident and health insurance, and credit property
insurance increased to $2.8 million from $0.8 million in the year ended December
31, 1995, an increase of $2.0 million. This increase was primarily attributable
to our beginning the sale of our insurance products on our small loan portfolio
in November 1995.

Operating expenses in the year ended December 31, 1996 increased to
$12.7 million from $7.3 million in the year ended December 31, 1995, an increase
of $5.4 million or 74.0%. Of this increase, $1.7 million and $0.9 million are
attributable to operating costs and expenses incurred in connection with the
sale of travel services, which business began in June 1995, and was expanded
through acquisitions in 1996, and the beginning of our automobile insurance
business. Of the remaining increase of $2.8 million, approximately $0.6 million
was attributable to increased costs of selling our insurance products with
substantially all of the remaining increase attributable to increased costs,
including the number of employees and related payroll to accommodate the
increased number of outstanding contracts associated with the expansion of our
businesses.

The provision for credit losses in the year ended December 31, 1996
increased to $9.1 million from $5.5 million in the year ended December 31, 1995,
an increase of $3.6 million or 67.1%. This increase was primarily due to the
growth experienced by our Small Loan Portfolio, which generated a provision of
$3.3 million in the year ended December 31, 1996 compared to $1.5 million in the
comparable period of 1995. The remaining increase of $1.8 million was primarily
attributable to an increase of $1.1 million in the provision for credit losses
on our Consumer Product Portfolio, as a result of increased write-offs and
delinquencies in such portfolio, and a $0.4 million provision for credit losses
provided on our Independent Retail Finance Portfolio. See "-- Financial Trends
- -- Credit Quality" above and "-- Delinquency Experience and Allowance for Credit
Losses" above.

Interest expense in the year ended December 31, 1996 increased to $4.7
million from $4.3 million, an increase of $0.4 million or 9.8%. This increase
was primarily due to a higher level of borrowings under our prior lines of
credit used to support the growth in our Small Loan Portfolio and Travel Finance
Portfolio.

As a result of the foregoing factors, net income in the year ended
December 31, 1996 increased to $5.9 million from $3.1 million in the year ended
December 31, 1995, an increase of $2.8 million or 88.5%.

LIQUIDITY AND CAPITAL RESOURCES

We primarily finance our operations through the cash flow generated from
operations and borrowings under our lines of credit. In June 1996, we completed
an initial public offering and prior to that we received periodic contributions
to capital by Holdings and related entities.

Net cash provided from operations totaled $19.7 million, $10.5 million
and $17.2 million for the years ended December 31, 1998, 1997 and 1996,
respectively. During these periods, the primary source of net cash provided from
operations was net income before non-cash charges, principally the provision for
credit losses.

In 1998, cash flow from operating activities of $19.7 million was
sufficient to pay down the Line of Credit by $10.0 million, pay off a note
payable of $0.9 million, fund fixed asset acquisitions of $1.5 million and fund
a net capital outlay of $3.9 million for installment contracts. These activities
resulted in a net increase in our cash balance of approximately $3.5 million.

38
<PAGE> 39

In 1997, cash flows from operating activities of $10.5 million and
increased collections of $3.4 million in our contract receivables were used to
pay down $12.0 million on our Line of Credit and fund fixed asset and capital
additions of $2.9 million. The aforementioned activities resulted in a net
decrease in cash of $1.0 million in 1997.

In 1996, cash flows from operations of $17.2 million were insufficient
to fund $7.4 million of acquisitions, $1.5 million of capital expenditures and
$34.4 million of growth experienced in our contract receivables during the year.
To fund these expenditures and support the growth in the combined contract
receivables portfolio, we relied on capital contributions from Holdings, the
proceeds from the initial public offering and bank borrowings made under our
credit facilities. Prior to the initial public offering, we made a return of
capital of $0.6 million to Banner. Net proceeds from the initial public offering
were $22.5 million while bank borrowings provided $10.1 million.

We require substantial capital to finance our business. Consequently,
our ability to maintain our current level of operations and to expand our
operations will be affected by the availability of financing and the terms
thereof. Currently, we fund financing activities and operations with borrowings
under the Line of Credit which expires June 12, 2000. Holdings and all of our
significant domestic subsidiaries are guarantors under the Line of Credit. In
addition, we have pledged substantially all of our assets, including our
receivables, and the stock of all of our significant subsidiaries as collateral
for the amounts we borrow under the Line of Credit. The maximum amount available
under the Line of Credit is $100.0 million. However, the amount of credit
available at any one time under the Line of Credit is limited to 70% of eligible
contracts. Credit facilities are typically limited to a certain percentage of
such eligible contracts or receivables. As of December 31, 1998, the total
amount available to us under the Line of Credit was $72.1 million, of which
approximately $52.3 million was outstanding, including letters of credit. We pay
commitment fees to the lenders for the unused portion of the Line of Credit.
These commitment fees are equal to 37.5 basis points per year times the average
daily amount by which the maximum amount available under the Line of Credit
exceeds the amount we have borrowed under the line.

Interest on amounts outstanding under the Line of Credit is, at the
option of Central, equal to either (a) 87.5 basis points above the higher of the
prime rate Wells Fargo Bank announces or the federal funds rate plus 50 basis
points or (b) 225 basis points above the interest rate per annum at which Wells
Fargo Bank offers deposits in dollars to prime banks in the London Eurodollar
market. The aggregate amount of indebtedness outstanding under the Line of
Credit at December 31, 1998 bore interest at the rate of 7.4%. We are required
to maintain interest rate hedging arrangements for at least 50% of our Senior
Funded Debt (as defined in the Line of Credit). However, this percentage may be
reduced by the amount (expressed as a percentage) of the ratio of any permitted
fixed rate indebtedness issued by Central to the total Senior Funded Debt (as
defined in the Line of Credit). We have a hedge on $40.0 million as of December
31, 1998. This hedging agreement is for the period July 21, 1997 through July
21, 2000 and at a cost of $136,000.

The Line of Credit restricts, among other things, our ability to (i)
incur additional indebtedness, (ii) pay indebtedness prior to the date when due,
(iii) pay dividends, make certain other restricted payments or consummate
certain asset sales, (iv) merge or consolidate with any other person, (v) enter
into certain transactions with affiliates, (vi) incur indebtedness that is
subordinate in priority and right of payment to amounts outstanding under the
Line of Credit, and (vii) make future acquisitions in excess of an aggregate
amount.

The Line of Credit also contains certain restrictive covenants that
require, among other things, us to maintain specific financial ratios and to
satisfy certain financial tests. These include: (a) Interest Coverage Ratio (as
defined in the Line of Credit) as of the end of each quarter of not less than
1.85 to 1.00 and

39
<PAGE> 40

(b) Leverage Ratio (as defined in the Line of Credit) as of the end of each
quarter of no more than 2.00 to 1.00. We are also required to maintain a
Tangible Net Worth (as defined in the Line of Credit) as of the end of each
quarter of not less than $50 million, plus an amount equal to 75% of Net Income
(as defined in the Line of Credit) earned in each quarter (with no deduction for
a net loss in a quarter), plus an amount equal to 75% of the aggregate increases
in stockholders' equity as a result of the sale of our capital stock. The breach
of any of these covenants or other terms of the Line of Credit could result in a
default under the Line of Credit, in which event the lenders could seek to
declare all amounts outstanding under the Line of Credit, together with accrued
and unpaid interest, to be immediately due and payable. At December 31, 1998, we
were in compliance with the financial ratios and tests.

In addition, our inability at any time to renew or replace our Line of
Credit or other senior credit facilities on acceptable terms could have a
material adverse effect on our results of operations and financial condition.
See "Item 1. -- Business Considerations and Certain Factors that May Affect
Future Results of Operations and Stock Price -- Restrictions Imposed by the Line
of Credit," and "-- Need for Senior Credit Facility."

In February 1998, we entered into a definitive agreement to acquire
Mission Savings and Loan Association, a federally chartered savings association
based in Riverside, California (the "Bank"). The cost of the acquisition will
equal 1.47 times the Bank's adjusted stockholders' equity at the end of the
month immediately prior to the date of acquisition. This amount, to be paid in
cash, is currently estimated to be approximately $5.0 million. The acquisition
is subject to, among other things, the approval of the OTS and the approval of
the shareholders of the Bank. At December 31, 1998, the Bank had approximately
$47.5 million in total assets and $3.4 million in total stockholders' equity.
The Bank had net income of $0.2 million during 1998. We expect to have
sufficient cash on hand or available under our Line of Credit to consummate the
acquisition.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards Number 128 (Earnings per Share) ("SFAS 128"),
Statement of Financial Accounting Standards Number 130 (Reporting Comprehensive
Income) ("SFAS 130") and Statement of Financial Accounting Standards Number 131
(Disclosures About Segments of an Enterprise and Related Information) ("SFAS
131"). We adopted SFAS 128, for the year ended December 31, 1997. The adoption
of SFAS 128, did not have a material effect on our financial position or our
results of operations in 1997 or 1998. We have adopted SFAS 130 and SFAS 131 for
the year ended December 31, 1998. The adoption of SFAS 130 and SFAS 131 did not
have a material effect on our financial position or our results of operations.

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards Number 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at fair value.
SFAS 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of earnings and
comprehensive income, and requires that a company formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
Management does not believe that adoption of SFAS 133 will have a material
effect on our financial position or results of operations.

40
<PAGE> 41

IMPACT OF THE YEAR 2000 ISSUE

State of Readiness

We are working to resolve the potential impact of the Year 2000 on the
ability of our computerized information systems to accurately process
information that may be date-sensitive. Any of our programs that recognize a
date using "00" as the Year 1900 rather than the Year 2000 could result in error
or system failures. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in normal business activities which
may have a material adverse effect on our financial condition, results of
operations or liquidity. We use a number of computer programs across our entire
operations. At this time, we are unable to predict with any certainty the
estimated lost revenue we may experience as a result of such failure or
disruption. We are addressing our Year 2000 issues under a three pronged
approach. These are identified as (1) material internally developed software,
(2) purchased software and (3) microcontrollers and computers.

In 1998, we engaged an outside consulting firm to evaluate, assess and
make compliant our material internally developed software with the Year 2000.
Our internally developed code is the principal software used to evaluate,
process, approve, initiate and collect on loans in our various finance
portfolios.

We with the assistance of outside consultants are responsible for
evaluating the existing software, modifying the code, delivering the revised
code and assisting in the installation and testing of the modified software.
Such modifications are primarily focused on our smaller declining portfolios.
Based on our testing, we believe our larger and growing Efectiva portfolio is
already substantially Year 2000 compliant. We received the required
modifications from the outside consultants for these smaller portfolios in
October 1998. We installed the modifications and have commenced testing. Testing
is expected to take about six months, is expected to be completed by June of
1999 and will include technical testing as well as user testing including
various dates both before and after the Year 2000.

Testing and compliance work began on our purchased software in 1998.
Most of the purchased software is ancillary in nature to our primary business
activities, supporting non-core business functions such as new product offerings
and peripheral activities. We initiated formal communications with our vendors
in August 1998 to determine the extent to which we may be affected by the
failure of these parties to correct their own Year 2000 issues. Our borrowers
and customers are generally consumers which mitigates much of the Year 2000
risk. We have already received compliance certification from most of the third
party developers or vendors and indications from most of the remaining vendors
that their software will be compliant by the Year 2000.

We have evaluated our mid range AS/400 computer, the various
microcontrollers and other computers and determined that relatively few systems
will need to be replaced to support the Year 2000. Where such replacements are
necessary, they will occur in the normal course of business prior to the Year
2000. We do not anticipate accelerating the placement of these systems due to
the Year 2000 issues.

Cost to Address the Company's Year 2000 Issues

We have budgeted expenditures of approximately $0.7 million in 1998 and
1999 to ensure that our systems are ready for processing information in the Year
2000. The majority of these expenditures relate to the cost of software
development and testing. We estimate that we have incurred approximately $0.5
million of our Year 2000 budget expenditures through December 31, 1998 and will
incur an additional $0.2 million by the end of 1999. In addition, we incurred,
and will continue to incur, certain costs relating to the temporary

41
<PAGE> 42

reallocation of our internal resources to address Year 2000 issues. These
expenditures have been and are expected to be funded by operating cash flows.

Risks Presented by the Year 2000 Issue

Should we and/or our third party developers or vendors fail to timely
identify, address and correct material Year 2000 issues, such failure could have
a material adverse impact on our ability to operate. The adverse impacts may
include the requirement to pay significant overtime to manually process certain
transactions and added costs to process certain financing activity. Despite our
activities in regards to the Year 2000 issue, there can be no assurance that
partial or total systems interruptions or the costs necessary to update hardware
and software will not have a material adverse effect on our business, financial
condition, results of operations and business prospects.

The Company's Year 2000 Contingency Plans

Our most reasonably likely worst case Year 2000 scenario is failure to
complete the required modifications to the declining portfolios. It is likely,
that if such a failure were to occur we would experience an inability to
correctly age accounts in these portfolios and may therefore experience some
deterioration in the customer receivable quality and an increase in credit
losses. We believe that we will successfully complete the installation and
testing of the required modifications to our internally developed software for
smaller declining portfolios prior to the Year 2000.

As a contingency, in the event we are unable to successfully complete
such installation and testing of the modifications for these smaller portfolios,
we will transfer them to our Efectiva portfolio which we believe at the present
time, based on our testing, is substantially Year 2000 compliant. We cannot
assume, however, that such contingency plans will be successful.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risk management discussion and the estimated amounts generated from
the analysis that follows are forward-looking statements of interest rate risk
assuming certain adverse market conditions occur. Actual results in the future
may differ materially from these projected results due to changes in our debt
mix and developments in the global financial markets. The analytical methods we
use to assess and mitigate these risks should not be considered projections of
future events or operating performances.

We are exposed to interest rate risk in the form of variable interest
rates on our Line of Credit. During 1998, the average interest rate charged on
the Line of Credit, which was $52.0 million at December 31, 1998, was 8.0%. We
have hedged our interest rate risk by purchasing a hedge agreement in the
nominal amount of $40.0 million. The interest rate hedge agreement caps our
interest rate at 8.75% against $40.0 million of the $52.0 million Line of Credit
which was outstanding at December 31, 1998. The remaining $12.0 million was
unprotected against interest rate fluctuations.

We have an interest rate risk exposure of 0.75% on the difference
between the interest rate cap of 8.75% and the 8.0% average interest rate for
1998 on the $40.0 million hedge agreement. We have additional interest rate risk
exposure on the $12.0 million amount above the interest rate hedge agreement.
The Line of Credit agreement terminates on June 12, 2000, and the interest rate
hedge agreement terminates on July 31, 2000.

42
<PAGE> 43

For an immediate 1.0% increase in interest rates, projected after-tax
earnings would decline approximately $0.3 in 1999 and $0.1 in 2000. An immediate
1.0% rise in interest rates is a hypothetical rate scenario, used to estimate
risk, and does not currently represent management's expectations of future
market developments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K" for our financial statements, and the notes thereto, and the financial
statement schedules filed as part of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

<PAGE> 44

PART III

The Securities and Exchange Commission (the "SEC") allows us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this Annual Report. We incorporate by reference in Items 10 to 13 below certain
sections of our definitive proxy statement, to be filed pursuant to Regulation
14A with the SEC within 120 days after December 31, 1998.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

We incorporate by reference in this Annual Report the information
required by this Item 10 contained in the sections entitled "Discussion of
Proposals Recommended by the Board -- Proposal 1: Elect Four Directors --
Nominees," "Information About Directors and Executive Officers," and
"Information About CFAC Common Stock Ownership -- Did Directors, Executive
Officers and Greater-Than-10% Stockholders Comply With Section 16(a) Beneficial
Ownership Reporting in 1998?" of our definitive proxy statement, to be filed
pursuant to Regulation 14A with the SEC within 120 days after December 31, 1998.

ITEM 11. EXECUTIVE COMPENSATION

We incorporate by reference in this Annual Report the information
required by this Item 11 contained in the sections entitled "Information About
Directors and Executive Officers" and "Information About CFAC Common Stock
Ownership -- Compensation Committee Interlocks and Insider Participation" of our
definitive proxy statement, to be filed pursuant to Regulation 14A with the SEC
within 120 days after December 31, 1998.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

We incorporate by reference in this Annual Report the information
required by this Item 12 contained in the section entitled "Information About
CFAC Common Stock Ownership" of our definitive proxy statement, to be filed
pursuant to Regulation 14A with the SEC within 120 days after December 31, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We incorporate herein by reference in this Annual Report the information
required by this Item 13 contained in the section entitled "Information About
Directors and Executive Officers -- Certain Relationships and Related
Transactions" of our definitive proxy statement, to be filed pursuant to
Regulation 14A with the SEC within 120 days after December 31, 1998.

44
<PAGE> 45

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) FINANCIAL STATEMENTS. Reference is made to the Index to Consolidated
Financial Statements on page F-1 for a list of financial statements filed as
part of this report.

(2) FINANCIAL STATEMENT SCHEDULES. All financial statement schedules
are omitted because of the absence of the conditions under which they are
required to be provided or because the required information is included in the
financial statements listed above and/or related notes.

(3) LIST OF EXHIBITS. The following is a list of exhibits filed as a
part of this report, including any management contracts or compensatory plans or
arrangements required to be filed as an exhibit to this report. Such management
contracts or compensatory plans or arrangements are identified in the list
below.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.2(4) Agreement and Plan of Reorganization by and between Central
Financial Acceptance Corporation and Mission Savings and Loan
Association, a Federal Association, dated as of February 11, 1998.

3.1(1) Certificate of Incorporation of Central Financial Acceptance
Corporation.

3.2(1) By-laws of Central Financial Acceptance Corporation.

10.1(5)+ 1996 Stock Option Plan, as amended.

10.2(1)+ Indemnification Agreement between Central Financial Acceptance
Corporation and certain directors and officers of the Company.

10.3(1)+ Employment Agreement between Central Financial Acceptance
Corporation and Gary M. Cypres dated as of June 24, 1996.

10.4(1) Financing Agreement between Central Installment Credit Corporation,
Banner's Central Electric, Inc., Central Ram, Inc. and Banner
Holdings, Inc. dated as of June 24, 1996.

10.5(5) Option Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as
of June 24, 1996.

10.6(5) Operating Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.

10.7(5) Tax Sharing Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.
</TABLE>

45
<PAGE> 46

<TABLE>
<S> <C>
10.8(5) Indemnification Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.

10.9(5) Indemnification Agreement dated June 24, 1996 between Central
Financial Acceptance Corporation and Banner Holdings, Inc.

10.10 Reserved.

10.11 Reserved.

10.12(5)+ Central Financial Acceptance Corporation Supplemental Executive
Retirement Plan dated as of June 24, 1996.

10.13(5)+ Central Financial Acceptance Corporation Executive Deferred Salary
and Bonus Plan dated as of June 24 , 1996.

10.14 Reserved.

10.15 Reserved.

10.16 Reserved.

10.17 Reserved.

10.18 Reserved.

10.19 Reserved.

10.20 Reserved.

10.21 Reserved.

10.22(1)+ Adoption Agreement for the Qualified Benefits, Inc. Regional
Prototype Non-Standardized Profit Sharing Plan and Trust effective
as of November 1, 1989.

10.23 Reserved.

10.24 Reserved.

10.25 Reserved.

10.26(2)+ Employment Agreement between Central Financial Acceptance
Corporation and Anthony Fortunato dated October 25, 1996.

10.27(2)+ Employment Agreement between Central Financial Acceptance
Corporation and Gerard T. McMahon dated August 30, 1996.

10.28 Reserved.
</TABLE>

<PAGE> 47

<TABLE>
<S> <C>
10.29(2) Agreement to Transfer Business Operations among Banner's Central
Electric, Inc., Central Consumer Finance Company, Central Financial
Acceptance Corporation and Central Auto Sales, Inc. dated as of July
31, 1996.

10.30 Reserved.

10.31(2) Amendment One to Financing Agreement between Central Installment
Credit Corporation, Banner's Central Electric, Inc., Central Ram,
Inc. and Banner Holdings, Inc., dated as of July 1, 1996.

10.32 Reserved.

10.33 Reserved.

10.34(3) Revolving Loan Agreement, dated as of June 13, 1997, by and among
the Company, each Lender who is named therein or who may thereafter
become a party to the Revolving Loan Agreement and Wells Fargo Bank,
National Association, as Agent and Arranger and Notes executed by
the Company with each of the Lenders.

10.35(3) Security Agreement, dated as of June 13, 1997, by and among the
Company and each of the Persons listed on the signature pages
thereto, together with other Persons who may become a party thereto,
jointly and severally in favor of Wells Fargo Bank, National
Association, as Agent.

10.36(3) Pledge Agreement, dated as of June 13, 1997, by and among Banner
Holdings, Inc., Banner's Central Electric, Inc. the Company and each
of the Persons listed on the signature pages thereto, together with
other Persons who may become a party thereto, jointly and severally
in favor of Wells Fargo Bank, National Association as Agent under
the Revolving Loan Agreement, and in favor of each of the Lenders
named therein.

10.37(3) Trademark Collateral Assignment, dated as of June 13, 1997, by
Banner Holdings, Inc. each of the Persons listed on the signature
pages thereto, together with other Persons who may become a party
thereto, jointly and severally in favor of Wells Fargo Bank,
National Association, as Agent for the benefit of the Lenders that
are or become a party to the Revolving Loan Agreement.

10.38(3) Subsidiary Guaranty, dated as of June 13, 1997, by each of the
Persons listed on the signature pages thereto, together with each
other Person who may become a party thereto, jointly and severally
in favor of Wells Fargo Bank, National Association, as Agent for the
benefit of the Lenders that are a party to the Revolving Loan
Agreement.

10.39(5) Amendment No. 1 to Revolving Loan Agreement, dated as of November
17, 1997, by and among the Company, the Lenders party thereto and
Wells Fargo Bank, National Association, as Agent.
</TABLE>

47
<PAGE> 48

<TABLE>
<S> <C>
10.40(5) Amendment No. 2 to Revolving Loan Agreement, dated as of March 26,
1998, by and among the Company, the Lenders party thereto and Wells
Fargo Bank, National Association as Agent.

10.41 Amendment No. 3 to Revolving Loan Agreement, dated as of December
31, 1998, by and among the Company, the Lenders party thereto and
Wells Fargo Bank, National Association as Agent.

21(5) Subsidiaries of the Registrant.

27 Financial Data Schedule.
</TABLE>

- -------------

(1) Incorporated by reference to exhibits filed with the SEC in the Company's
Registration Statement on Form S-1 (Registration No. 333-3790).

(2) Incorporated by reference to exhibits filed with the SEC in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.

(3) Incorporated by reference to exhibits filed with the SEC in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.

(4) Incorporated by reference to the exhibit filed with the SEC on February 24,
1998 in the Company's Report on form 8-K.

(5) Incorporated by reference to the exhibits filed with the SEC in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit.

(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the fourth
quarter of 1998.

(d) ADDITIONAL FINANCIAL STATEMENTS. Not applicable.

<PAGE> 49

GLOSSARY

Set forth below are definitions of some of the terms used in this Annual
Report on Form 10-K.

"ARC" Airline Reporting Corporation.

"Automobile Finance Portfolio" The Company's portfolio of automobile
finance contracts.

"Bank" Mission Savings and Loan Association, a
Federal Association.

"Banner" Banner's Central Electric, Inc., an
affiliate of the Company.

"Code" Internal Revenue Code of 1986, as
amended.

"Company" Central Financial Acceptance
Corporation and its subsidiaries.

"Consumer Product Portfolio" The Company's portfolio of consumer
product contracts from sales by Banner.

"CRA" Community Reinvestment Act.

"EGRPRA" Economic Growth and Paperwork Reduction
Act of 1996.

"Exchange Act" Securities Exchange Act of 1934, as
amended.

"FDIC" Federal Deposit Insurance Corporation.

"FDICIA" Federal Deposit Insurance Corporation
Improvement Act of 1991.

"FHLB" Federal Home Loan Bank.

"HOLA" Home Owners' Loan Act, as amended.

"Holdings" Banner Holdings, Inc., the sole
shareholder of Banner.

"Independent Retail Finance Portfolio" The Company's portfolio of consumer
finance contracts from sales by
independent retailers.

"Line of Credit" Revolving loan agreement by and among
the Company and Wells Fargo Bank, N.A.,
as agent, and several banks.

"Mortgage Loan Portfolio" The Company's portfolio of mortgage
loan contracts.

"OTS" Office of Thrift Supervision.

"Premium Finance Portfolio" The Company's portfolio of insurance
premium finance contracts.

<PAGE> 50

"QTL" Qualified thrift lender.

"SAIF" Savings Association Insurance Fund.

"SEC" The Securities and Exchange Commission.

"Securities Act" Securities Act of 1933, as amended.

"Small Loan Portfolio" The Company's portfolio of loan
contracts.

"Travel Finance Portfolio" The Company's portfolio of travel
finance contracts.

"Unruh Act" California Retail Installment Sales
Act.

"West Coast" West Coast Private Equity Partners,
L.P.

<PAGE> 51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 29th day of March
1999.

CENTRAL FINANCIAL ACCEPTANCE CORPORATION

By: /s/ Gary M. Cypres
-------------------------------------
Gary M. Cypres
Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gary M. Cypres Chairman of the Board of Directors March 29, 1999
- -------------------------------- Principal Executive Officer)
Gary M. Cypres

/s/ Anthony S. Fortunato President March 29, 1999
- --------------------------------
Anthony S. Fortunato

/s/ Salvatore J. Caltagirone Director March 29, 1999
- --------------------------------
Salvatore J. Caltagirone

/s/ Jose de Jesus Legaspi Director March 29, 1999
- --------------------------------
Jose de Jesus Legaspi

/s/ William R. Sweet Director March 26, 1999
- --------------------------------
William R. Sweet

/s/ A. Keith Wall Vice President and Chief March 29, 1999
- -------------------------------- Financial Officer
A. Keith Wall (Principal Financial Officer)
</TABLE>

<PAGE> 52

EXHIBIT INDEX

3.1(1) Certificate of Incorporation of Central Financial Acceptance
Corporation.

3.2(1) By-laws of Central Financial Acceptance Corporation.

10.1(5)+ 1996 Stock Option Plan, as amended.

10.2(1)+ Indemnification Agreement between Central Financial Acceptance
Corporation and certain directors and officers of the Company.

10.3(1)+ Employment Agreement between Central Financial Acceptance
Corporation and Gary M. Cypres dated as of June 24, 1996.

10.4(1) Financing Agreement between Central Installment Credit Corporation,
Banner's Central Electric, Inc., Central Ram, Inc. and Banner
Holdings, Inc. dated as of June 24, 1996.

10.5(5) Option Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as
of June 24, 1996.

10.6(5) Operating Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.

10.7(5) Tax Sharing Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.
10.8(5) Indemnification Agreement between Central Financial Acceptance
Corporation, Banner's Central Electric, Inc. and Banner Holdings,
Inc. dated as of June 24, 1996.

10.9(5) Indemnification Agreement dated June 24, 1996 between Central
Financial Acceptance Corporation and Banner Holdings, Inc.

10.10 Reserved.

10.11 Reserved.

10.12(5)+ Central Financial Acceptance Corporation Supplemental Executive
Retirement Plan dated as of June 24, 1996.

10.13(5)+ Central Financial Acceptance Corporation Executive Deferred Salary
and Bonus Plan dated as of June 24 , 1996.
</TABLE>

<PAGE> 53

<TABLE>
<S> <C>
10.14 Reserved.

10.15 Reserved.

10.16 Reserved.

10.17 Reserved.

10.18 Reserved.

10.19 Reserved.

10.20 Reserved.

10.21 Reserved.

10.22(1)+ Adoption Agreement for the Qualified Benefits, Inc. Regional
Prototype Non-Standardized Profit Sharing Plan and Trust effective
as of November 1, 1989.

10.23 Reserved.

10.24 Reserved.

10.25 Reserved.

10.26(2)+ Employment Agreement between Central Financial Acceptance
Corporation and Anthony Fortunato dated October 25, 1996.

10.27(2)+ Employment Agreement between Central Financial Acceptance
Corporation and Gerard T. McMahon dated August 30, 1996.

10.28 Reserved.

10.29(2) Agreement to Transfer Business Operations among Banner's Central
Electric, Inc., Central Consumer Finance Company, Central Financial
Acceptance Corporation and Central Auto Sales, Inc. dated as of July
31, 1996.

10.30 Reserved.

10.31(2) Amendment One to Financing Agreement between Central Installment
Credit Corporation, Banner's Central Electric, Inc., Central Ram,
Inc. and Banner Holdings, Inc., dated as of July 1, 1996.

10.32 Reserved.

10.33 Reserved.

<PAGE> 54

<TABLE>
<S> <C>
10.35(3) Security Agreement, dated as of June 13, 1997, by and among the
Company and each of the Persons listed on the signature pages
thereto, together with other Persons who may become a party thereto,
jointly and severally in favor of Wells Fargo Bank, National
Association, as Agent.

10.39(5) Amendment No. 1 to Revolving Loan Agreement, dated as of November
17, 1997, by and among the Company, the Lenders party thereto and
Wells Fargo Bank, National Association, as Agent.

10.40(5) Amendment No. 2 to Revolving Loan Agreement, dated as of March 26,
1998, by and among the Company, the Lenders party thereto and Wells
Fargo Bank, National Association as Agent.

10.41 Amendment No. 3 to Revolving Loan Agreement, dated as of December
31, 1998, by and among the Company, the Lenders party thereto and
Wells Fargo Bank, National Association as Agent.

21(5) Subsidiaries of the Registrant.

27 Financial Data Schedule.
</TABLE>

- -------------

(1) Incorporated by reference to exhibits filed with the SEC in the Company's
Registration Statement on Form S-1 (Registration No. 333-3790).

(2) Incorporated by reference to exhibits filed with the SEC in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.

(3) Incorporated by reference to exhibits filed with the SEC in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.

(4) Incorporated by reference to the exhibit filed with the SEC on February 24,
1998 in the Company's Report on form 8-K.

<PAGE> 55

(5) Incorporated by reference to the exhibits filed with the SEC in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit.

<PAGE> 56

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants........................................ F-2

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets at December 31, 1998 and 1997..................... F-3

Consolidated Statements of Income for the Years Ended December 31, 1998,
1997 and 1996.............................................................. F-4

Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996........................................... F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 1998,
1997 and 1996.............................................................. F-6

Notes to Consolidated Financial Statements.................................... F-7
</TABLE>

F-1

<PAGE> 57

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Central Financial Acceptance Corporation:

We have audited the accompanying consolidated balance sheets of Central
Financial Acceptance Corporation, a Delaware corporation, and subsidiaries, (the
"Company") as of December 31, 1998 and 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years ending December 31, 1998. 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 the Company as of December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years ending December 31, 1998 in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Los Angeles, California
March 12,1999

F-2
<PAGE> 58

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash .................................................... $ 8,295,000 $ 4,794,000
Restricted cash ......................................... 1,195,000 930,000
Finance receivables, net ................................ 96,195,000 102,498,000
Prepaid expenses and other current assets ............... 1,686,000 2,063,000
Note receivable from affiliate .......................... 2,478,000 4,992,000
Deferred income taxes ................................... 2,442,000 3,845,000
Income taxes receivable ................................. 1,458,000 786,000
Property and equipment, net ............................. 6,677,000 5,880,000
Intangible and other assets, net ........................ 8,659,000 9,361,000
------------ ------------
TOTAL ............................................. $129,085,000 $135,149,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable ........................................... $ 52,000,000 $ 62,000,000
Accrued expenses and other current liabilities .......... 6,941,000 6,556,000
Long-term debt .......................................... -- 850,000
------------ ------------
Total liabilities ............................. 58,941,000 69,406,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized; no shares outstanding ........... -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; 7,277,000 shares issued and outstanding 73,000 73,000
Paid-in capital ....................................... 47,903,000 47,903,000
Retained earnings ..................................... 22,168,000 17,767,000
------------ ------------
Total stockholders' equity ........................ 70,144,000 65,743,000
------------ ------------
TOTAL ............................................. $129,085,000 $135,149,000
============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated balance sheets.

F-3
<PAGE> 59

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Interest income
Consumer product portfolio .................... $ 7,224,000 $10,822,000 $ 12,850,000
Small loan portfolio .......................... 13,792,000 13,056,000 9,686,000
Automobile finance portfolio .................. 664,000 1,434,000 1,548,000
Other ......................................... 3,290,000 5,001,000 1,691,000
----------- ----------- ------------
Total interest income ......................... 24,970,000 30,313,000 25,775,000
Travel services, net ............................ 8,961,000 8,716,000 2,449,000
Transaction fees from affiliate ................. 933,000 1,127,000 965,000
Other income .................................... 12,024,000 11,884,000 7,238,000
----------- ----------- ------------
Total revenues ................................ 46,888,000 52,040,000 36,427,000
----------- ----------- ------------

COSTS AND EXPENSES:
Operating expenses .............................. 26,870,000 27,217,000 12,676,000
Provision for credit losses, net of recoveries .. 8,814,000 12,296,000 9,105,000
Interest expense ................................ 3,870,000 5,314,000 4,697,000
----------- ----------- ------------
Total costs and expenses ............................. 39,554,000 44,827,000 26,478,000
----------- ----------- ------------
Income before taxes and discontinued operations . 7,334,000 7,213,000 9,949,000
Income tax expense .............................. 2,933,000 2,823,000 3,979,000
----------- ----------- ------------
Income from continuing operations .................... 4,401,000 4,390,000 5,970,000
Discontinued operations net loss ................ -- -- (91,000)
----------- ----------- ------------
Net income ........................................... $ 4,401,000 $ 4,390,000 $ 5,879,000
=========== =========== ============
PER SHARE DATA: (NOTE 3)

Basic earnings per share from continuing operations .. $ 0.60 $ 0.60 $ 0.96
Basic loss per share from discontinued operations .... -- -- (0.01)
----------- ----------- ------------
Basic earnings per share ............................. $ 0.60 $ 0.60 $ 0.95

Diluted earnings per share from continuing operations. $ 0.60 $ 0.60 $ 0.96
Diluted loss per share from discontinued operations .. -- -- (0.01)
----------- ----------- ------------
Diluted earnings per share ........................... $ 0.60 $ 0.60 $ 0.95

Weighted average common shares outstanding ........... 7,277,000 7,277,000 6,213,500
Supplementary basic earnings per share (unaudited) ... -- -- $ 0.88
Supplementary weighted average number of common
shares outstanding (unaudited) .................. -- -- 7,277,000
</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.

F-4
<PAGE> 60

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ........ 5,150,000 $52,000 $ 26,082,000 $ 7,498,000 $ 33,632,000
Net income ...................... 5,879,000 5,879,000
Capital withdrawal .............. (615,000) (615,000)
Net proceeds from public offering 2,127,000 21,000 22,436,000 22,457,000
--------- ------- ------------ ----------- ------------
Balance, December 31, 1996 ...... 7,277,000 73,000 47,903,000 13,377,000 61,353,000
Net income ...................... - 4,390,000 4,390,000
--------- ------- ------------ ----------- ------------
Balance, December 31, 1997 ...... 7,277,000 73,000 47,903,000 17,767,000 65,743,000
Net income ...................... 4,401,000 4,401,000
--------- ------- ------------ ----------- ------------
Balance, December 31, 1998 ...... 7,277,000 $73,000 $ 47,903,000 $22,168,000 $ 70,144,000
========= ======= ============ =========== ============
</TABLE>

The accompanying notes are an integral part of
these consolidated financial statements.

F-5
<PAGE> 61

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income .............................................. $ 4,401,000 $ 4,390,000 $ 5,879,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ........................... 1,254,000 831,000 224,000
Provision for credit losses ............................. 10,138,000 13,192,000 10,008,000
Deferred income taxes ................................... 1,403,000 (309,000) (1,229,000)
Note receivable from affiliate .......................... 2,514,000 (4,205,000) (787,000)
Changes in assets and liabilities:
Prepaid expenses and other current assets ............... (295,000) 1,113,000 (3,762,000)
Restricted cash ......................................... (265,000) (930,000) --
Net assets of discontinued operations ................... -- -- 1,033,000
Other intangible assets ................................. 184,000 (1,002,000) --
Accrued expenses and other current liabilities .......... 385,000 (2,574,000) 5,849,000
------------ ------------ ------------
Net cash provided by operating activities .......... 19,719,000 10,506,000 17,215,000
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Installment contracts and other contract receivables
(originated and acquired) collected, net of recoveries (3,882,000) 3,384,000 (34,408,000)
Capital expenditures .................................... (1,486,000) (2,770,000) (1,492,000)
Acquisitions ............................................ -- (150,000) (7,423,000)
------------ ------------ ------------
Net cash (used in) provided by investing activities (5,368,000) 464,000 (43,323,000)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Capital withdrawal ...................................... -- -- (615,000)
Net proceeds from public offering ....................... -- -- 22,457,000
Repayment of long-term debt ............................. (850,000) -- --
Repayment of notes payable, net ......................... (10,000,000) (12,024,000) 10,057,000
------------ ------------ ------------
Net cash (used in) provided by financing activities (10,850,000) (12,024,000) 31,899,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH ............................. 3,501,000 (1,054,000) 5,791,000
CASH, BEGINNING OF YEAR ..................................... 4,794,000 5,848,000 57,000
------------ ------------ ------------
CASH, END OF YEAR ........................................... $ 8,295,000 $ 4,794,000 $ 5,848,000
============ ============ ============

CASH PAID DURING THE YEAR FOR:
INTEREST ................................................ $ 3,857,000 $ 5,375,000 $ 4,531,000
INCOME TAXES ............................................ $ 1,933,000 $ 4,870,000 $ 5,909,000
</TABLE>

The accompanying notes are an integral part of
these consolidated financial statements.

F-6
<PAGE> 62

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation -- Central Financial Acceptance Corporation ("CFAC
or the Company") was formed in April 1996 and was a wholly owned subsidiary of
Banner"s Central Electric, Inc ("Banner"). Banner"s Central Electric, Inc. is
wholly owned by Banner Holdings, Inc. ("Holdings") and is a consumer products
retailer that provides its customers with financing for the merchandise it
sells. On June 24, 1996, CFAC, Banner and Holdings entered into an agreement
(the "Reorganization Agreement") whereby Holdings contributed to Banner its
investments in certain wholly owned subsidiaries, along with the subsidiaries"
operations, (the "Holding Subsidiaries") and Banner contributed to CFAC its
investments in the Holdings Subsidiaries and the finance portion of its consumer
products business, and cash in such amount so as to leave CFAC with $500,000 of
cash on hand. Pursuant to the Reorganization Agreement, the intercompany
accounts between CFAC, Banner and Holdings that arose as a result of the
Reorganization Agreement and from other transactions, except with respect to
income taxes, were forgiven and reclassified as stockholder"s equity.

In addition to the Reorganization Agreement, CFAC, Banner and Holdings
entered into certain agreements for the purpose of defining the ongoing
relationships among them (see Note 11). The transactions and agreements entered
into pursuant to the Reorganization Agreement are referred to herein as the
"Reorganization." Management of CFAC believes that such agreements provide for
reasonable allocations of costs between the parties.

The Reorganization was accounted for at historical cost in a manner
similar to a pooling of interests. The accompanying consolidated financial
statements reflect the combined historical operations of CFAC and its
subsidiaries as if the Reorganization had taken place at the beginning of the
periods presented, except for the contribution of cash in such amount so as to
leave CFAC with $500,000 upon the Reorganization.

On July 2, 1996, CFAC consummated its initial public offering when it
sold 2.127 million shares of common stock, which resulted in net proceeds to the
Company of approximately $22.5 million.

On August 1, 1996, Central Auto Sales, Inc. was sold to CFAC"s parent
company for net book value. The 1996 consolidated statements of income have been
restated to reflect this business as a discontinued operation.

Nature of Operations --The Company (i) purchases and services consumer
finance receivables generated by the Company's customers for purchases of high
quality brand name consumer products, appliances and furniture sold by Banner,
and by independent retailers; (ii) provides unsecured small loans to its
customers; (iii) originates and services consumer finance receivables generated
by the Company's customers for purchases of airline tickets sold by the Company;
(iv) provides insurance products and insurance premium financing to its
customers; (v) provided financing for purchases of used automobiles sold by
Banner through May 30, 1997; and (vi) provides income tax preparation, check
cashing services and mortgage loan financing for its customers. The majority of
the Company"s business is focused in Southern California and the Company
experiences the highest demand for its financial products and services between
October and December.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of Central Financial Acceptance Corporation and
its wholly owned subsidiaries: Central Installment Credit Corporation, Central
Consumer Finance Company, Inc., Centravel, Inc., CFAC Accident and Health
Reinsurance Ltd., Central Financial Reinsurance Co., Ltd., Central Check
Cashing, Inc., Central Income Tax Services, Inc., Central Financial
Acceptance/Insurance Agency, Central Premium Finance Company and BCE Properties
I, Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.

Finance Receivables -- CFAC's finance receivables include installment
contracts that are purchased from Banner, (referred to herein as the "Consumer
Product Portfolio"), receivables that arise from unsecured, small loans,
(referred to herein as the "Small Loan Portfolio"), installment contracts that
are originated when customers buy used cars and travel tickets, (referred to
herein as the "Automobile Finance Portfolio" and the "Travel Finance Portfolio,"
respectively), and installment contracts purchased from unaffiliated third party
retailers that sell products or services, receivables that arise

F-7

<PAGE> 63

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from automobile insurance premium contracts and mortgage loan receivables,
(referred to herein as the "Other Portfolio"). Add-on interest of 11% to 13% per
annum is included in the face amount of the finance receivables (except for a
portion of the Small Loan Portfolio of $56,555,000) together with administrative
fees that are charged on certain small loan contracts. The annual percentage
rate varies depending on the length of the contract and the amount of
administrative fees. The contracts provide for scheduled monthly payments and
mature generally from 1 to 24 months in the Consumer Product Finance Portfolio,
from 1 to 12 months in the Non-Efectiva portion of the Small Loan Portfolio and
Travel Finance Portfolios, from 36 to 42 months in the Automobile Finance
Portfolio, and from 1 to 60 months in the Other Portfolio. The Efectiva portion
of the Small Loan Portfolio is a revolver type loan and requires minimum monthly
payments equal to 5% of the outstanding balance.

Certain direct loan origination costs are capitalized and recognized
into expense over the life of the related loan using a method that approximates
the interest method.

Based on previous experience, the Company provides an allowance for
credit losses in the Consumer Product and Travel Finance Portfolios at the time
the contract is purchased or the retail sale is made. The allowance for credit
losses in the Small Loan Portfolio and Other Portfolio is provided for following
the origination of the loans when the events giving rise to the credit losses
are estimated to occur. The Company's portfolios comprise smaller-balance,
homogeneous loans that are evaluated collectively to determine an appropriate
allowance for credit losses. The allowance for credit losses is maintained at a
level considered adequate by management to cover losses in the existing
portfolios. Collection of past due accounts is pursued by the Company, and when
the characteristics of an individual account indicates that collection is
unlikely, the account is charged off and turned over to a collection agency.
Accounts are generally charged off when they are between 91 and 150 days past
due.

Allowance for credit losses is increased by charges to income and
decreased by chargeoffs, net of recoveries. Management's periodic evaluation of
the adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay and current economic conditions. The
Company's customers are typically between the ages of 21 and 45 and earn less
than $25,000 per year, have little or no savings and limited short-term
employment histories. In addition, the Company's customers typically have no
prior credit histories and are unable to secure credit from traditional lending
sources. The Company makes its credit decisions primarily on its assessment of a
customer's ability to repay the obligation. In making a credit decision, in
addition to the size of the obligation, the Company generally considers a
customer's income level, type and length of employment, stability of residence,
personal references and prior credit history with the Company. As a result, the
Company is more susceptible to the risk that its customers will not satisfy
their repayment obligations than are less specialized consumer lending companies
or consumer finance companies that have more stringent underwriting criteria.
Because the Company relies on the creditworthiness of its customers for
repayment and does not rely on collateral securing the debt, the Company
experiences actual rates of losses higher than lenders who have collateral which
they can repossess in the event of a borrower's default.

The Company calculates its provision for credit losses based on changes
in the present value of expected future cash flows of its loans discounted at
the loan's effective interest rate in accordance with Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards No. 114
"Accounting by Creditors for Impairment of a Loan" as amended by FASB Statement
No. 118 "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure."

If a loan is charged-off, the Company does not record any investment
relating to those loans. The amount of recoveries on impaired loans are
recognized as an addition to the allowance for credit losses on the cash basis
of accounting at the time the payment is received. Expenses related to
recoveries are included in operating expenses. Recoveries for the years ended
December 31, 1998, 1997, and 1996 amounted to $1,324,000, $896,000, and
$903,000, respectively.

Deferred insurance revenue arises from the deferral of the recognition
of revenue from certain credit insurance contracts. Insurance premium revenue is
recognized over the life of the related contract using a method that
approximates the interest method.

Property and Equipment -- Property and equipment are carried at cost.
Long-lived property is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such an asset may not be
recoverable in accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of

F-8
<PAGE> 64

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long Lived Assets." If the carrying amount of the asset exceeds the estimated
undiscounted future cash flows to be generated by the asset, an impairment loss
would be recorded to reduce the asset's carrying value to its estimated fair
value. Depreciation and amortization are computed primarily using the
straight-line method over the estimated lives of the assets, as follows:

<TABLE>
<S> <C>
Furniture, equipment and software............. 5 to 10 years
Leasehold improvements........................ Life of lease
Building improvements........................ 7 to 39 years
</TABLE>

Intangible Assets -- Intangible assets primarily arose in connection
with the Company's acquisition of the net assets of certain travel and
automobile insurance businesses during 1996 and deferred line of credit costs
related to Wells Fargo Line of Credit (see Note 8). The excess of the purchase
price over the fair value of net assets acquired is being amortized using the
straight-line method over 30 years. The deferred line of credit costs are
amortized over 3 years. The recoverability of the excess of the purchase price
over the fair value of net assets acquired is analyzed annually based on
undiscounted future cash flows. If the carrying value of the intangible asset
exceeds the estimated undiscounted future cash flows, an impairment loss would
be recorded to reduce the asset's carrying value to its estimated fair value. No
impairment loss was recorded during 1998, 1997 or 1996.

Income Recognition -- Interest income on the Consumer Product,
Automobile Finance, Travel Finance Portfolios and a portion of the Small Loan
Portfolio is deferred (recorded as an off-set to finance receivables - see Note
5) and recognized over the lives of the contracts using a method that
approximates the interest method. Interest income on the Independent Retail
Portfolio is deferred and recognized using the interest method. Transaction fees
on contracts purchased from a related party are deferred and recognized using
the interest method. ATM membership fees are deferred and recognized using the
straight line method. Commissions income and broker fee income from the sale of
automobile insurance products is deferred and recognized over the terms of the
contracts, typically 12 months. Administrative fees are deferred and recognized
over the estimated life of the Small Loan Portfolio using a method that
approximates the interest method. Administrative fees are included in other
income in the consolidated statements of income. Premiums and commissions for
credit life insurance are deferred and recognized as revenue using the interest
method. Premiums and commissions for credit accident and health insurance are
recognized over the terms of the contracts based on the means of the straight
line and interest method and are included in other income in the consolidated
statements of income.

Other income consists of:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OTHER INCOME:
Late charges .............................. $ 1,870,000 $ 3,038,000 $ 2,627,000
ATM membership fees and administrative fees 3,433,000 2,341,000 1,897,000
Insurance products and other .............. 6,721,000 6,505,000 2,714,000
----------- ----------- -----------
$12,024,000 $11,884,000 $ 7,238,000
=========== =========== ===========
</TABLE>

Travel Services -- Revenues from the sale of travel tickets represent
airline commissions deducted from the gross ticket price and incentives paid to
the Company.

Insurance Liabilities -- The liability for losses and loss-adjustment
expenses, included in accrued expenses and other current liabilities, is based
on an amount determined from loss reports and individual cases and an amount,
based on past experience, for losses incurred but not reported. Such liabilities
are based on estimates and, while management believes that the amount is
adequate, the ultimate liability may be in excess of or less than the amounts
provided. The methods for making such estimates and for establishing the
resulting liability are continually reviewed, and any adjustments are reflected
in earnings in the current period.

Income Taxes -- The Company follows SFAS No. 109 "Accounting for Income
Taxes." Under SFAS No. 109, income tax expense includes income taxes payable for
the current year and the change in deferred income tax assets and liabilities
for the future tax consequences of events that have been recognized in the
Company's financial statements or income tax returns. A valuation allowance is
recognized to reduce the carrying value of the deferred tax assets if it is more
likely than not that some or all of the deferred tax assets will not be
realized.

F-9
<PAGE> 65

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Advertising -- The Company advertises primarily on Hispanic television
and radio, and through newspapers and direct mail. All advertising costs are
expensed as incurred. Advertising expense for the years ended December 31, 1998,
1997 and 1996 were $1,242,000, $1,723,000 and $557,000, respectively.

Concentration of Credit Risk -- The Company places its temporary cash
and cash investments with high quality financial institutions. Management
monitors the financial creditworthiness of these financial institutions. As of
December 31, 1998, such investments were in excess of insured limits.

Fair Value of Financial Instruments -- The carrying value of the
Company's finance receivables approximates their fair value due to their short
term nature and generally stable rates of interest currently being charged in
comparison to the rates reflected in the existing portfolios. The carrying value
of the Company's notes payable approximates their fair value, as these notes
represent a series of short-term notes at floating interest rates not to exceed
interest of 8.75% (LIBOR) for amounts outstanding of $40 million or less.
Management believes that the fair value of the Company's financial instruments
approximates their carrying values as of December 31, 1998 and 1997.

Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions. Such estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Restricted Cash -- At December 31, 1998 and 1997 cash of $1,195,000 and
$930,000, respectively, was held in a trust account, in accordance with
statutory regulations for insurance companies. This cash balance was classified
as restricted cash on the balance sheet.

Accounting for Stock Based Compensation -- The Company has elected to
continue to utilize the accounting method prescribed by Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25"),
under which no compensation cost has been recognized, and adopt the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." As a
result, SFAS No. 123 has no effect on the financial condition or results of
operations of the Company at December 31, 1998, 1997 and 1996 (see Note 12 for
required disclosures).

Accounting Changes -- The Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards No. 131 (Disclosures About
Segments of an Enterprise and Related Information) ("SFAS 131"). The Company
adopted the provisions of SFAS No. 131 in 1998. The provisions of SFAS 131 are
disclosure oriented and do not change the measurement of net income.
Accordingly, the implementation of SFAS 131 did not have an impact on the
Company's consolidated financial position or results of operations (see Note 14
for required disclosures).

In January 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 98-1 - ("Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") which
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. The Company implemented SOP 98-1 during 1998. There
was no material effect of such change on the accompanying consolidated financial
statements. Costs incurred to develop and install management information systems
have been capitalized and amortized over a period of five to seven years in
accordance with the requirements of SOP 98-1.

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at fair value. SFAS 133 will be effective in the year 2000.
SFAS 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of income, and
requires that a company formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. Management does not
believe that adoption of SFAS 133 will have a material effect on the Company's
financial position or results of operations.

Reclassifications -- Certain reclassifications have been made to
previously reported amounts to conform to the current year presentation.

F-10
<PAGE> 66

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. EARNINGS PER SHARE

The Company reports earnings per share according to the provisions of
SFAS No 128, "Earnings per Share." The following table presents a reconciliation
of basic earnings per share and diluted earnings per share. Options to purchase
425,000 shares of common stock at prices ranging from $12.00-$18.25, were
outstanding during the second half of 1997 and 1996. Options to purchase 586,000
shares of common stock at a repriced value of $5.00-$12.00, which all expire on
December 31, 2008, were still outstanding at the end of 1998. None were included
in the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the common shares.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- -------------------------
Basic Diluted Basic Diluted Basic Diluted
Earnings Earnings Earnings Earnings Earnings Earnings
Per Share Per Share Per Share Per Share Per Share Per Share
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Numerator- income from continuing operations . $4,401,000 $4,401,000 $4,390,000 $4,390,000 $ 5,970,000 $ 5,970,000
Numerator-discontinued operations net loss ... -- -- -- -- (91,000) (91,000)
---------- ---------- ---------- ---------- ----------- -----------
Numerator-net income ......................... $4,401,000 $4,401,000 $4,390,000 $4,390,000 $ 5,879,000 $ 5,879,000
Denominator-weighted average share outstanding 7,277,000 7,277,000 7,277,000 7,277,000 6,213,500 6,213,500
Basic and diluted earnings per share from
continuing operations ..................... $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.96 $ 0.96
Loss per share from discontinued operations .. -- -- -- -- (0.01) (0.01)
---------- ---------- ---------- ---------- ----------- -----------
Basic and diluted earnings per share ......... $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.95 $ 0.95
========== ========== ========== ========== =========== ===========
</TABLE>

Supplementary net income per share is based upon 5,150,000 shares of
Common Stock issued by the Company pursuant to the Reorganization and 2,127,000
shares of Common Stock sold by the Company in its initial public offering as if
all such shares were outstanding as of January 1, 1996.

4. ACQUISITIONS

During 1996, the Company acquired the business of, and assumed the
leasehold interest to 80 travel locations, and 10 automobile insurance agencies
for an aggregate purchase price of approximately $7.5 million.

These acquisitions were accounted for as purchases and the results of
their operations have been included since the applicable acquisition dates.

5. FINANCE RECEIVABLES

Finance receivables consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Consumer Product Portfolio ................................... $ 33,886,000 $ 38,814,000
Small Loan Portfolio ......................................... 62,248,000 58,659,000

Automobile Finance Portfolio ................................. 2,445,000 6,382,000

Travel Finance Portfolio ..................................... 4,988,000 6,165,000
Other ........................................................ 4,715,000 10,194,000
------------ ------------
108,282,000 120,214,000

Less deferred interest ....................................... 4,657,000 7,402,000

Less allowance for credit losses ............................. 4,649,000 7,835,000
Less deferred administrative, ATM membership and
transaction fees and insurance revenues ................... 2,263,000 1,780,000
Less credit insurance and reserves for policyholder's benefits 518,000 699,000
------------ ------------
$ 96,195,000 $102,498,000
============ ============
</TABLE>

F-11
<PAGE> 67

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Customers are required to make monthly payments on installment
contracts. The aggregate gross balance of accounts with payments 31 days or more
past due are:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
CONSUMER PRODUCT PORTFOLIO:
Past due 31-60 days ................. $ 762,000 $1,511,000
Past due 61 days or more ............ 804,000 960,000
---------- ----------
$1,566,000 $2,471,000
========== ==========
SMALL LOAN PORTFOLIO:
Past due 31-60 days ................. $1,227,000 $1,252,000
Past due 61 days or more ............ 1,422,000 3,352,000
---------- ----------

$2,649,000 $4,604,000
========== ==========
TRAVEL FINANCE PORTFOLIO:
Past due 31-60 days ................. $ 64,000 $ 134,000
Past due 61 days or more ............ 66,000 483,000
---------- ----------
$ 130,000 $ 617,000
========== ==========
OTHER:
Past due 31-60 day .................. $ 181,000 $ 574,000
Past due 61 days or more ............ 408,000 633,000
---------- ----------
$ 589,000 $1,207,000
========== ==========
</TABLE>

Note: Included in the other category is delinquencies on canceled automobile
insurance premium contracts. Since we seek recovery of unearned premiums from
the insurance companies, which can take up to 90 days, loans are not considered
delinquent until more than 90 days past due. The amount greater than 90 days was
$267,000 and $545,000 at December 31, 1998 and 1997, respectively.

The allowance for credit losses includes the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Allowance for credit losses, beginning of year $ 7,835,000 $ 6,786,000 $ 4,955,000
Provision for credit losses ............... 10,138,000 13,192,000 10,008,000
Charge-off's .............................. (14,648,000) (13,039,000) (9,080,000)
Recoveries ................................ 1,324,000 896,000 903,000
------------ ------------ ------------
Allowance for credit losses, end of year ..... $ 4,649,000 $ 7,835,000 $ 6,786,000
============ ============ ============
</TABLE>

F-12
<PAGE> 68

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PROPERTY AND EQUIPMENT

Property and equipment, net consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Land .............................................. $ 1,936,000 $ 1,568,000
Improvements ...................................... 263,000 103,000

Furniture, equipment and software ................. 5,652,000 4,722,000
----------- -----------
7,851,000 6,393,000

Less accumulated depreciation and amortization .... 1,174,000 513,000
----------- -----------
$ 6,677,000 $ 5,880,000
=========== ===========
</TABLE>

7. INTANGIBLE ASSETS AND OTHER ASSETS

Intangible assets, net consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Excess of purchase price over the fair value of net
assets acquired ................................ $ 9,263,000 $ 9,235,000
Deferred line of credit costs ..................... 807,000 953,000
Other intangible assets ........................... 11,000 49,000
Less accumulated amortization ..................... 1,422,000 876,000
----------- -----------
$ 8,659,000 $ 9,361,000
=========== ===========
</TABLE>

8. NOTES PAYABLE

Notes payable consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Line of credit .................................... $52,000,000 $62,000,000
=========== ===========
</TABLE>

F-13
<PAGE> 69

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company had a line of credit agreement with Bank of America National
Trust and Savings Association (the "Bank of America Line of Credit") that, as
amended, provided for the issuance of notes up to $60,000,000, subject to an
allowable borrowing base. The amounts outstanding under these notes bear
interest at rates that are determined by the type of borrowing. Borrowings under
the notes were collateralized by the Consumer Product Portfolio and Banner was a
guarantor. The Bank of America Line of Credit was repaid on June 13, 1997.
Borrowings under the facility bore interest at a weighted average rate of 9.13%
per annum as of December 31, 1996.

The Company had a line of credit agreement with Wells Fargo Bank
National Association (the "Old Wells Fargo Line of Credit") that, as amended,
provided for the issuance of notes up to $50,000,000, subject to an allowable
borrowing base. The amounts outstanding under these notes bear interest at rates
that are determined by the type of borrowing. Borrowings under the notes were
collateralized by the Small Loan, Automobile Finance and Travel Finance
Portfolios. The Old Wells Fargo Line of Credit was repaid on June 13, 1997.
Borrowings under the facility bore interest at a weighted average rate of 7.89%
per annum as of December 31, 1996.

The Company entered into a credit agreement with several banks and Wells
Fargo Bank National Association, as Agent, (the "Wells Fargo Line of Credit") on
June 13, 1997 that provides for the issuance of notes up to $100,000,000 subject
to an allowable borrowing base. The amounts outstanding under these notes bear
interest at rates that are determined by the type of borrowing. Borrowings under
the notes are collateralized by all receivables of the Company. The Wells Fargo
Line of Credit expires on June 12, 2000. The credit facility contains certain
restrictive covenants that require, among other things, the maintenance of
certain financial ratios and amounts. The Wells Fargo Line of Credit was amended
on December 31, 1998, whereby certain ratios are no longer required to be
maintained, except for specific levels of tangible net worth, cash flow to
interest coverage ratio and a specified ratio of debt to tangible net worth. In
addition, effective February 1, 1999, the Company is required to charge-off the
entire amount due on any loans that are more than 150 days past due. The Company
was in compliance with the covenants as of December 31, 1998. Borrowings under
the facility bore interest at a weighted average rate of 8.0% at December 31,
1998. The Company has $300,000 in Letters of Credit outstanding for various
purposes at December 31, 1998. The amount of unused credit under the facility
was limited by the allowable borrowing base and was approximately $19.8 million
at December 31, 1998.

The Company is required to pay a commitment fee of 0.375% per annum for
unused portions of its lines of credit. These fees totaled $251,000 for the year
ended December 31, 1998 and $150,000 for the year ended December 31, 1997, and
are included with operating expenses in the consolidated statements of income.

The Company is exposed to interest rate risk in the form of variable
interest rates on the Wells Fargo Line of Credit. During 1998, the average
interest rate charged was 8%. The Company has hedged their interest rate risk by
purchasing a hedge agreement, which expires on July 31, 2000, in the nominal
amount of $40 million. The interest rate hedge agreement caps the Company's
interim rate at 8.75% against $40 million of the outstanding portion of the
Wells Fargo Line of Credit. The remaining $12 million was unprotected against
interest rate fluctuations. The Company has an interest rate exposure of 0.75%
on the difference between the interest rate cap of 8.75% and an 8.0% average
interest rate for 1998 on the $40 million hedge agreement. The Company has an
additional interest rate risk exposure on the $12 million amount above the
interest rate hedge agreement.

9. LONG-TERM DEBT

Long-term debt consisted of a promissory note payable to a bank that
bore interest at a floating variable rate which was paid off on July 1, 1998.

F-14

<PAGE> 70

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. INCOME TAXES

The Company has agreed to indemnify Holdings for all federal, state, and
other income taxes for periods prior to July 2, 1996, when it was included as
part of Holdings consolidated tax group.

Subsequent to July 2, 1996, the Company and its subsidiaries began to
file a consolidated federal income tax return. For California and certain other
states, the Company will continue to file on a combined or separate company tax
basis, as appropriate. The income tax provisions as presented in the
accompanying consolidated financial statements are based upon the amount the
Company would have paid as if it filed separate income tax returns for the
entire periods presented.

The provision for income taxes from continuing operations consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
CURRENTLY PAYABLE:

Federal ..................... $1,299,000 $ 2,531,000 $ 4,127,000
State ....................... 231,000 601,000 1,081,000
---------- ----------- -----------
1,530,000 3,132,000 5,208,000
---------- ----------- -----------
DEFERRED:

Federal ..................... 1,140,000 (186,000) (1,041,000)
State ....................... 263,000 (123,000) (188,000)
---------- ----------- -----------
1,403,000 (309,000) (1,229,000)
---------- ----------- -----------
Provision for income taxes $2,933,000 $ 2,823,000 $ 3,979,000
========== =========== ===========
</TABLE>

A reconciliation of the provision for income taxes from continuing operations to
the statutory rates is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Federal income taxes at statutory rates .......................... 35.0% 35.0% 35.0%
State franchise taxes, net of federal benefit .................... 4.5 4.3 5.8

Amortization of the excess purchase price over the fair
value of assets acquired ...................................... 0.3 0.3 0.2

Other ............................................................ 0.2 (0.5) (1.0)
---- ---- ----
40.0% 39.1% 40.0%
==== ==== ====
</TABLE>

The tax effects of temporary differences giving rise to the deferred income tax
assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
DEFERRED INCOME TAX ASSETS

Allowance for credit losses .......... $ 2,013,000 $ 3,243,000
Deferred revenue ..................... 942,000 529,000
Fixed Assets ......................... (378,000) (128,000)
Other ................................ (135,000) 201,000
----------- -----------
$ 2,442,000 $ 3,845,000
=========== ===========
</TABLE>

F-15
<PAGE> 71

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. RELATED PARTY TRANSACTIONS

In connection with its formation, the Company, Banner and Holdings,
entered into the Reorganization Agreement and certain other agreements (the
"Financing Agreement," the "Option Agreement," and the "Operating Agreement").

The Financing Agreement, as amended, grants the Company exclusive right
to provide financing to Banner customers for a term of fifteen years from the
date of the Reorganization and provides that any contracts purchased pursuant to
this Agreement will be at face value less a transaction fee, which is subject to
renegotiation at six month intervals. The Agreement also provides that for the
year ended December 31, 1997, up to $1.5 million of contracts purchased can be
returned to Banner at amortized principal balance. The Company can terminate the
Financing Agreement at any time upon one year's prior written notice to Banner.
As a result of increasing delinquencies in the Consumer Products Portfolio, the
Company and Banner amended the Financing Agreement, effective July 1, 1997 to
permit the Company for the year ended December 31, 1997 to return to Banner an
amount greater than $1.5 million. In 1998, the Agreement was again amended and
allowed Banner to repurchase $1.5 million in the year ended December 31, 1998.
During 1998 and 1997, Banner repurchased $1.5 million and $5.8 million,
respectively. No gains or losses are recorded on these repurchases.

In the accompanying consolidated financial statements the transaction
fee was computed based upon 1.6% of average net receivables in the Consumer
Products Portfolio prior to July 2, 1996 and 2.5% thereafter. During 1998,
Banner sold approximately $35.5 million of Consumer Products Receivables, net of
$1.5 million, which the Company returned pursuant to the Financing Agreement.
All unpaid amounts ($2.5 million, net at December 31, 1998) are due within 18
months and bear interest at the Company's borrowing rate. Interest income earned
on the amount due from Banner was $415,000, $98,000 and $0 for the years ended
December 31, 1998, 1997 and 1996, respectively.

Pursuant to the Option Agreement, Holdings granted the Company an
option, exercisable for a two-year period commencing one year from the date of
the Reorganization, to acquire all of the outstanding capital stock of Banner
(the "Option") at an exercise price equal to the book value of Banner for the
month ended immediately preceding the exercise. If the Company exercises the
Option, the exercise price is payable in cash or in shares of the Company's
common stock.

The Operating Agreement provides, among other things, that Banner,
Holdings or their affiliates are obligated to provide to the Company, and the
Company is obligated to utilize, certain services, including accounting,
management information systems and employee benefits. If such services involve
an allocation of expenses, such allocation shall be made on a reasonable basis.
To the extent that such services directly relate to the finance portion of the
consumer products business contributed by Banner to the Company, or to the
extent that other costs are incurred by Banner, Holdings or their affiliates
that directly relate to the Company, the Company is obligated to pay Banner,
Holdings or their affiliates; actual cost of providing such services or
incurring such costs. Employee benefit expenses are allocated to the Company
based on the ratio of actual payroll expenses of employees in the consumer
products business contributed by Banner to the Company compared to total actual
payroll expenses of Banner before such allocation. Accounting expenses are
allocated 50% to the Company. The operating costs of Banner's management
information systems function are allocated initially 50% to the Company for a
period of five years, subject to adjustment from time to time to reflect
changing costs and usage. Except for management information systems services,
the Operating Agreement continues until terminated by either the Company,
Holdings or Banner upon one year's prior written notice. Termination may be made
on a service-by-service basis or in total. Such allocated expenses totaled
$2,074,000, $1,618,000 and $1,338,000 for the years ended December 31, 1998,
1997 and 1996, respectively.

In August 1996, following CFAC's initial public offering, CFAC, Central
Auto Sales, Inc., Central Consumer Finance Company and Banner entered into an
Agreement to Transfer Business Operations (the "Automobile Financing
Agreement"), under which CFAC sold its used car sales business to Banner for
approximately its net book value, or $865,000. Under the provisions of the
Automobile Financing Agreement, Banner will operate the used car sales business
while the Company will have the exclusive right for a fifteen year period to
provide financing for all cars that Banner sells or to purchase automobile
finance contracts generated by Banner. In addition, all financing extended by
the Company on automobiles sold by Banner will be with full recourse back to
Banner in the event of default by the customer. Accordingly, Banner will not
provide any dealers discount for cars sold pursuant to the Automobile Financing
Agreement. On May 30, 1997, Central Auto Sales Inc. discontinued its business.

F-16
<PAGE> 72

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCK OPTION PLAN

In connection with its initial public offering the Company adopted the
1996 Stock Option Plan, under which 700,000 shares of authorized common stock
have been reserved for issuance pursuant to terms and conditions as determined
by the Board of Directors. The options have a maximum duration of ten years and
are subject to certain vesting and cancellation provisions, and may not be
granted at less than the market value of the Company's Common Stock on the date
of grant of the option. During 1996 the Company granted options to purchase
425,000 shares of stock at prices ranging from $12.00 to $18.25 per share.
During 1997 no options were granted, exercised or forfeited. In 1998 an
additional 161,000 shares net of forfeitures of 58,000 shares were issued at
prices ranging from $5.00 to $12.00 per share. At December 31, 1998, options to
purchase 586,000 shares were outstanding at a repriced value of $5.00 to $12.00.
No options have been exercised since the options vest in five years.

In October 1995, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for employee stock compensation plans, but allows for the
continuation of the intrinsic value based method of accounting to measure
compensation cost prescribed by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25"). For companies electing
not to change their accounting, SFAS 123 requires pro-forma disclosures of
earnings and earnings per share as if the change in accounting provision of SFAS
123 has been adopted.

Had compensation cost for this plan been determined consistent with SFAS
123, the Company's net income and earnings per share would have been reduced to
the following pro forma amounts.

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Income....................... As Reported $ 4,401,000 $ 4,390,000 $ 5,879,000
Pro Forma $ 3,816,000 $ 4,007,000 $ 5,496,000

Basic EPS........................ As Reported $ 0.60 $ 0.60 $ 0.95
Pro Forma $ 0.52 $ 0.55 $ 0.88
</TABLE>

The fair value of each option grant is estimated on the date of grant
using an option pricing model with the following weighted average assumptions
used for grants: dividend yield of 0.0%, expected volatility of 67.9%, risk free
interest rate of 4.8% and lives of ten years. The weighted average remaining
contractual life is 9.0 years. The weighted average exercise price of the
options was $6.82 and $14.40 at December 31, 1998 and 1997.

13. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

During 1996, the Company adopted a Supplemental Executive Retirement
Plan (the "SERP Plan") which will provide supplemental retirement benefits to
certain key management employees. To vest in the SERP Plan, an employee must
have at least ten years of service with the Company, including five years
subsequent to the adoption of the plan.

The unfunded Supplemental Executive Retirement Plan expense for the
years ended December 31, 1998, 1997 and 1996, amounted to approximately $77,000
each year.

F-17
<PAGE> 73

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. INDUSTRY SEGMENTS

Effective January 1, 1998, the Company adopted the provisions of SFAS
131 "Disclosures About Segments of an Enterprise and Related Information". The
Company has identified three reportable segments through which it conducts its
continuing operations: Finance Portfolio, Travel Business and Corporate and
Other. The factors for determining the reportable segments were based on the
distinct nature of their operations. They are managed as separate business units
because each requires and is responsible of executing a unique business
strategy. The Finance Portfolio includes the Consumer Product Portfolio, Small
Loan Portfolio, Independent Retail Loan Portfolio, Automobile Finance Portfolio,
Travel Finance Portfolio, Premium Finance Portfolio and the Mortgage Loan
Portfolio. The Travel Business includes the Company's travel locations, and
Corporate and Other includes the Company's insurance business including the
captive insurance company, the income tax preparation business and the check
cashing business. Substantially all of the operations of the above businesses
are concentrated in Southern California.

The accounting policies of these reportable segments are the same as
those described in the summary of significant accounting policies. Management
evaluates and monitors segment performance primarily through revenues and
earnings before interest and taxes. Results of operations and financial position
of the reporting segments are discussed below.

Revenues for the Finance Portfolios for the years ended December 31,
1998, 1997 and 1996 were $32.4 million, $37.4 million and $31.8 million,
respectively. Revenues for the Travel Business for the years ended December 31,
1998, 1997 and 1996 were $9.0 million, $8.7 million and $2.5 million,
respectively. Revenues for Corporate and Other for the years ended December 31,
1998, 1997 and 1996 were $5.5 million, $5.9 million and $2.1 million,
respectively.

Earnings Before Interest and Taxes ("EBIT") for the Finance Portfolios
for the years ended December 31, 1998, 1997 and 1996 were $10.0 million, $12.1
million and $14.0 million, respectively. EBIT for the Travel Business for the
years ended December 31, 1998, 1997 and 1996 were $1.6 million, $0.7 million and
$0.5 million, respectively. EBIT for Corporate and Other for the years ended
December 31, 1998, 1997 and 1996 were $1.3 million, $2.2 million and $0.7
million, respectively. EBIT does not include any charges relating to unallocated
corporate overhead of $1.7 million, $2.5 million and $0.5 million for the years
ended December 31, 1998, 1997 and 1996, respectively.

Assets in the Finance Portfolio as of December 31, 1998, 1997 and 1996
were $110.9 million, $116.2 million and $132.9 million, respectively. Assets in
the Travel Business as of December 31, 1998, 1997 and 1996 were $8.5 million,
$6.6 million and $7.3 million, respectively. Assets in Corporate and Other as of
December 31, 1998, 1997 and 1996 were $5.8 million, $5.1 million and $5.2
million, respectively.

Depreciation and amortization for the Finance Portfolios for the years
ended December 31, 1998, 1997 and 1996 were $0.8 million, $0.5 million and $0.2
million, respectively. Depreciation and amortization for the Travel Business for
the years ended December 31, 1998, 1997 and 1996 were $0.3 million, $0.3 million
and $0.0 million, respectively. Depreciation and amortization for Corporate and
Other for the years ended December 31, 1998, 1997 and 1996 were $0.2 million,
$0.1 million and $0.0 million, respectively.

Capital additions for the Finance Portfolios for the years ended
December 31, 1998, 1997 and 1996 were $0.4 million, $2.4 million and $1.1
million, respectively. Capital additions for the Travel Business for the years
ended December 31, 1998, 1997 and 1996 were $0.1 million, $0.1 million and $0.3
million, respectively. Capital additions for Corporate and Other for the years
ended December 31, 1998, 1997 and 1996 were $1.0 million, $0.3 million and $0.1
million, respectively.

F-18
<PAGE> 74

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES

The Company is allocated 50% of the cost of various computer equipment
operating leases from Banner. These leases expire at various times from 1998
through 2002. The Company's stand-alone loan and travel centers are leased under
noncancelable operating leases that generally have two to five-year terms with
options to renew.

Aggregate minimum lease commitments under the location leases and
one-half of the computer equipment minimum lease commitments of Banner are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, BANNER OTHERS
----------------------- ---------- ----------
<S> <C> <C>
1999 ................... $ 437,000 $ 873,000
2000 ................... 395,000 547,000
2001 ................... 341,000 293,000
2002 ................... 84,000 158,000
2003 ................... -- 19,000
---------- ----------
$1,257,000 $1,890,000
========== ==========
</TABLE>

Aggregate rental expense for the years ended December 31, 1998, 1997 and
1996 were $1,819,000, $2,519,000, and $1,039,000, respectively.

The Company has an employment agreement with the Chairman of the Board
of Directors for a period of five years, expiring in June 2001, at a base salary
of $220,000 per year with eligibility to participate in the Company's executive
compensation plans. Any changes to the agreement require approval of the Board
of Directors.

The Company has an agreement with the Company's President, formerly
Executive Vice President of Operations, for a period of three years, expiring in
October 1999, at a base salary of $225,000, $250,000 and $275,000 per year,
respectively, with eligibility to participate in the Company's executive
compensation plans.

The Company is from time to time involved in routine litigation
incidental to the conduct of its business. Management of the Company believes
that litigation currently pending will not have a material adverse effect on the
Company's financial position or results of operations.

In February 1998, CFAC entered into a definitive agreement to acquire
Mission Savings and Loan Association (the "Bank"), a federally chartered savings
association based in Riverside, California with deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). The cost of the acquisition will
equal 1.47 times the Bank's adjusted stockholders' equity at the end of the
month immediately prior to the date of acquisition. This amount is currently
estimated to be approximately $5.0 million to be paid in cash. The acquisition
is subject to, among other things, the approval of the Office of Thrift
Supervision (the "OTS") and the approval of the shareholders of the Bank. The
acquisition agreement expires on May 31, 1999, and the acquisition must be
completed by that date unless both parties to the agreement extend the date. At
December 31, 1998, the Bank had approximately $47.5 million in total assets and
$3.4 million in total stockholders' equity. During 1998 the Bank's net income
was $0.2 million.

Although the Company expects the Bank to continue to accept deposits and
provide other financial services, the primary purpose of the acquisition is to
offer checking accounts and other financial services, and to expand the
Company's consumer lending business through the issuance of credit cards
substantially similar to the Company's Efectiva Card.

F-19
<PAGE> 75

CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. SUBSEQUENT EVENT

In March 1999, the Company completed the acquisition of the retail
operations of PanAmericana Travel Systems, Inc., a travel service provider
located in Southern California. The asset purchase included 24 leased
PanAmericana travel center stores.

* * * * * *

F-20

<PAGE> 1
EXHIBIT 10.41

AMENDMENT NO. 3 TO
REVOLVING LOAN AGREEMENT

This Amendment No. 3 to Revolving Loan Agreement (this "Amendment
No. 3"), dated as of December 31, 1998, is entered into with reference to the
Revolving Loan Agreement dated as of June 13, 1997 among Central Financial
Acceptance Corporation, a Delaware corporation ("Borrower"), the Lenders party
thereto, and Wells Fargo Bank, National Association, as Agent (as amended from
time to time, the "Loan Agreement"). Capitalized terms used but not defined
herein are used with the meanings specified for such terms in the Loan
Agreement. Section references herein relate to the Loan Agreement unless stated
otherwise.

R E C I T A L S

A. Borrower has advised the Lenders that Borrower and its Subsidiaries
intend to chargeoff approximately $4,000,000 in past due Contracts (the
"Anticipated Chargeoffs") during the Fiscal Quarter ending December 31, 1998.
Borrower represents and warrants to the Lenders that (i) the amounts outstanding
under such Contracts have been reserved previously by Borrower and its
Subsidiaries pursuant to their customary accounting practices and, after giving
effect to this Amendment No. 3, in a manner permitted by the Loan Agreement and
(ii), while having little or no effect on the consolidated balance sheet and
income statement of Borrower and its Subsidiaries, the Anticipated Chargeoffs,
should they occur, will create a significant tax benefit for Borrower and its
Subsidiaries.

B. Notwithstanding the foregoing, one or more covenant violations under
the Loan Agreement might occur as a result of the Anticipated Chargeoffs.

C. In connection with the foregoing matters, Borrower has requested that
the Lenders amend the Loan Agreement on the terms and subject to the conditions
set forth herein.

A G R E E M E N T

Borrower and the Agent, acting with the consent of the Requisite
Lenders pursuant to Section 11.2 of the Loan Agreement, agree as follows:

1. Section 1.1 - Amended Definitions. The definition of
"Borrowing Base" in Section 1.1 is amended and restated to read as follows:

"Borrowing Base" means, as of any date of determination,
an amount determined by the Agent based on the most recent
Borrowing Base Certificate to be equal to the product of (a) Net
Unpaid Balances of Eligible Contracts, less the then applicable
amount of Reserves, if any,

-1-

<PAGE> 2

multiplied by (b) seventy percent (70%); provided, however, that
(i) the maximum total amount owing (as opposed to the Net Unpaid
Balance) on Auto Contracts included as Eligible Contracts in
clause (a) shall not exceed $10,000,000, (ii) so long as Premium
Finance is a Borrowing Base Subsidiary, no more than 10% of the
Eligible Contracts included in clause (a) shall constitute
Insurance Premium Contracts and (iii) if on such date the most
recent Borrowing Base Certificate is as of a date more than 45
days from such date, Borrowing Base shall mean such amount as may
be determined by the Agent in its sole discretion.

2. Section 5.17 - Chargeoff Policy. New Section 5.17 is hereby
added to the Loan Agreement as follows:

"5.17 Chargeoff Policy. Effective as of February 1, 1999,
Borrower shall have established and at all times thereafter
maintain, and shall cause each of the other Borrowing Base
Parties to have established and at all times thereafter maintain,
written chargeoff policies regarding their Contracts, pursuant to
which policies Borrower and the other Borrowing Base Parties will
immediately chargeoff the entire amount due on any Contract with
respect to which any payment thereon is more than 150 days past
due, whether as a result of acceleration or otherwise.

3. Section 6.11 - Operating Leases. Section 6.11 is amended and
restated to read as follows:

"6.11 Operating Leases. Permit rentals due under leases of
real or personal Property, other than Capital Lease Obligations
subject to Section 6.9(e), to exceed $4,000,000 in the aggregate
for Borrower and its Subsidiaries for any one Fiscal Year."

4. Section 6.13 - Past Due Receivables Ratio. The text of Section
6.13 of the Loan Agreement is hereby deleted in full and replaced with the text
"Reserved".

5. Section 6.14 - Credit Loss Allowance Ratio. The text of
Section 6.14 of the Loan Agreement is hereby deleted in full and replaced with
the text "Reserved".

6. Section 6.16 - Credit Loss/Net Chargeoff Percentage. The text
of Section 6.16 of the Loan Agreement is hereby deleted in full and replaced
with the text "Reserved".

7. Exhibit C - Compliance Certificate. Exhibit C (Compliance
Certificate) to the Loan Agreement is amended and restated by Annex 1 attached
to this Amendment No. 3.

-2-

<PAGE> 3

8. Conditions Precedent. The effectiveness of this Amendment No.
3 shall be conditioned upon the receipt by the Agent of the following documents,
each properly executed by a Responsible Official of each party thereto and dated
as of the date hereof:

(a) counterparts of this Amendment No. 3 executed by all
parties hereto;

(b) a consent and reaffirmation executed by all of the
Guarantors in the form of Exhibit A to this Amendment No. 3; and

(c) written consent of the Requisite Lenders as required
under Section 11.2 of the Loan Agreement in the form of Exhibit B to
this Amendment No. 3.

9. Amendment Fee. In addition to the conditions precedent
specified above, the effectiveness of this Amendment No. 3 shall be further
conditioned upon the receipt by the Agent, for the accounts of the Lenders pro
rata according to their Pro Rata Share of the Commitment, an amendment fee equal
to $25,000.00.

10. Representations and Warranties. Borrower represents and
warrants to the Agent and the Lenders that, after giving effect to this
Amendment No. 3, no Default or Event of Default has occurred and remains in
effect.

11. Recitals Incorporated. The Recitals set forth above are
incorporated into and made a part of this Amendment No. 3.

12. Confirmation. In all respects, the terms of the Loan
Agreement and the other Loan Documents, in each case as amended hereby, are
hereby confirmed.

-3-

<PAGE> 4

IN WITNESS WHEREOF, Borrower and the Agent have executed this
Amendment No. 3 as of the date first set forth above by their duly authorized
representatives.

CENTRAL FINANCIAL ACCEPTANCE
CORPORATION, a Delaware corporation

By: /s/ Gary M. Cypres
----------------------------------
Gary M. Cypres
Chief Executive Officer

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as the Agent

By: /s/ Perry Moreth
----------------------------------
Perry Moreth
Vice President

-4-

<PAGE> 5

Exhibit A to Amendment No. 3

CONSENT AND REAFFIRMATION OF GUARANTORS

Each of the undersigned Guarantors hereby consents to the
execution, delivery and performance by Borrower and the Agent of the foregoing
Amendment No. 3 ("Amendment No. 3"). In connection therewith, each of the
undersigned expressly and knowingly reaffirms its liability under the Guaranty
to which it is a party executed and delivered by such Guarantor in favor of the
Agent (on behalf of the Lenders), and expressly agrees to be and remain liable
under the terms of such Guaranty for the Guarantied Obligations described
therein and acknowledges that it has no defense, offset or counterclaim
whatsoever against the Agent or the Lenders with respect to such Guaranty.

Each of the undersigned further agrees that such Guaranty shall
remain in full force and effect and is hereby ratified and confirmed.

Each of the undersigned further agrees that the execution of this
Consent and Reaffirmation of Guarantors is not necessary for the continued
validity and enforceability of such Guaranty, but is executed to induce the
Agent and the Lenders to approve of and otherwise enter into the Amendment No.
3.

IN WITNESS WHEREOF, each of the undersigned, intending to be
legally bound hereby, has caused this Consent and Reaffirmation of Guarantors to
be executed as of December 31, 1998.

BANNER HOLDINGS, INC.,
a Delaware corporation

By: /s/ Gary M. Cypres
--------------------------------
Gary M. Cypres
Chief Executive Officer

CENTRAL CONSUMER FINANCE
COMPANY, a Delaware corporation

By: /s/ Gary M. Cypres
--------------------------------
Gary M. Cypres
Chief Executive Officer

-5-

<PAGE> 6

CENTRAVEL, INC., a California
corporation

By: /s/ Gary M. Cypres
--------------------------------
Gary M. Cypres
Chief Executive Officer

CENTRAL PREMIUM FINANCE COMPANY,
a California corporation

By /s/ Gary M. Cypres
--------------------------------
Gary M. Cypres
Chief Executive Officer

BCE PROPERTIES, INC., a California
corporation

By: /s/ Gary M. Cypres
--------------------------------
Gary M. Cypres
Chief Executive Officer

-6-

<PAGE> 7

Exhibit B to Amendment No. 3

CONSENT OF LENDER

Reference is hereby made to that certain Revolving Loan Agreement
dated as of June 13, 1997 among Central Financial Acceptance Corporation, a
Delaware corporation, as Borrower, the Lenders party thereto, and Wells Fargo
Bank, National Association, as Agent (as amended from time to time, the "Loan
Agreement").

The undersigned Lender hereby consents to the execution and
delivery of Amendment No. 3 to Revolving Loan Agreement by Wells Fargo Bank,
National Association, as Agent, on its behalf, substantially in the form of a
draft dated on or about December 31, 1998, presented to the undersigned Lender.

Dated: As of December 31, 1998. California Bank & Trust
fka Sumitomo Bank of California

----------------------------------------
[Name of Institution]

By: /s/ Charles F. Bronaugh
-----------------------------------

Charles F. Bronaugh, Vice President
-----------------------------------
[Printed Name and Title]

By:
-----------------------------------

-----------------------------------
[Printed Name and Title]

-7-

<PAGE> 8

Exhibit B to Amendment No. 3

CONSENT OF LENDER

Dated: As of December 31, 1998.
Union Bank of California, N.A.

----------------------------------------
[Name of Institution]

By: /s/ Robert C. Nagel
-----------------------------------

Robert C. Nagel, Vice President
-----------------------------------
[Printed Name and Title]

By:
-----------------------------------

-----------------------------------
[Printed Name and Title]

-8-

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,295,000
<SECURITIES> 0
<RECEIVABLES> 96,195,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,677,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 129,085,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 73,000
<OTHER-SE> 70,071,000
<TOTAL-LIABILITY-AND-EQUITY> 129,085,000
<SALES> 0
<TOTAL-REVENUES> 46,888,000
<CGS> 0
<TOTAL-COSTS> 26,870,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,814,000
<INTEREST-EXPENSE> 3,870,000
<INCOME-PRETAX> 7,334,000
<INCOME-TAX> 2,933,000
<INCOME-CONTINUING> 4,401,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,401,000
<EPS-PRIMARY> .60
<EPS-DILUTED> .60

</TABLE>