<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission file no. 0-20863
CAPITAL FACTORS HOLDING, INC.
------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
FLORIDA 65-0500757
------------------------------- --------------------
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
120 East Palmetto Park Road, 5th Floor, Boca Raton, Florida 33432
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(561) 368-5011
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
1799 West Oakland Park Boulevard, Fort Lauderdale, Florida 33311
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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.
x Yes No
---- -----
As of May 14, 1997 there were 12,300,000 shares of the registrant's Common
Stock outstanding.
================================================================================
Page 1 of 22 Pages
<PAGE> 2
ITEM 1.
PART I. FINANCIAL INFORMATION
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 30,213,477 $ 28,101,237
Restricted Cash 6,562,500 6,562,500
Receivables 526,584,180 490,977,592
Unearned discounts (3,025,605) (2,436,301)
Allowance for credit losses (3,394,054) (2,993,534)
------------- -------------
Receivables, net 520,164,521 485,547,757
Property and equipment, net 3,004,515 3,095,157
Other Assets 8,271,174 7,260,672
------------- -------------
TOTAL $ 568,216,187 $ 530,567,323
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to affiliates $ 1,921,075 $ 1,310,304
Capital Factors variable rate asset backed
certificates 175,000,000 175,000,000
Note payable to affiliate 97,270,000 70,131,000
Other borrowings 35,100,000 25,900,000
Due to factoring clients 189,985,413 191,488,668
Other liabilities 4,531,296 4,648,892
------------- -------------
Total liabilities 503,807,784 468,478,864
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 25,000,000
shares authorized; 12,300,000 issued and
outstanding at 3/31/97 and 12/31/96 123,000 123,000
Additional paid-in capital 27,151,932 27,151,932
Retained earnings 37,133,471 34,813,527
------------- -------------
Total stockholders' equity 64,408,403 62,088,459
------------- -------------
TOTAL $ 568,216,187 $ 530,567,323
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Factoring fees $ 6,824,377 $ 5,524,449
Interest income 9,394,155 7,655,698
Letter of Credit and other fees 959,936 672,210
Other 417,302 291,043
------------ ------------
Total revenues 17,595,770 14,143,400
EXPENSES
Interest expense 3,848,377 3,141,111
Interest expense to affiliates 1,465,725 1,415,197
Salaries and benefits 4,505,344 3,250,837
Provision for credit losses 1,400,000 1,100,000
Occupancy and other office
expenses 953,953 880,876
Depreciation and amortization 175,763 153,640
Professional fees 301,889 179,039
Other 1,015,661 824,218
------------ ------------
Total expenses 13,666,712 10,944,918
------------ ------------
INCOME BEFORE INCOME TAXES 3,929,058 3,198,482
PROVISION FOR INCOME TAXES 1,609,114 1,295,438
------------ ------------
NET INCOME $ 2,319,944 $ 1,903,044
============ ============
Earnings per common and common
equivalent share;
Primary $ 0.19 S 0.19
============ ============
Fully diluted $ 0.19 $ 0.19
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,319,944 $ 1,903,044
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 175,763 153,640
Deferred income taxes (302,573) 106,869
Provision for credit losses 1,400,000 1,100,000
Increase in restricted cash 0 (375,000)
Loss on sale of assets 0 884
Due to (from) affiliates 610,770 (5,202,506)
Other assets (944,864) (403,554)
Other liabilities (117,596) (280,288)
------------ ------------
Net cash provided by (used in)
operating activities 3,141,444 (2,996,911)
------------ ------------
INVESTING ACTIVITIES:
Loan to clients, net (3,733,955) 10,882,604
(Increase) decrease in asset based loans (4,322,946) 4,980,164
Net increase in factoring accounts receivable,
net of due to factoring clients (35,091,611) (44,588,233)
Sales of participations 5,995,834 1,228,458
Payments on participations (367,341) (561,784)
Purchase of property and equipment (58,603) (152,068)
------------ ------------
Net cash used in investing activities (37,578,622) (28,210,859)
------------ ------------
FINANCING ACTIVITIES:
Restricted proceeds from senior certificates 0 10,000,000
Proceeds from borrowing 57,764,000 24,042,000
Payments on borrowing (21,425,000) (6,548,000)
Payments of deferred financing costs (7,038) (66,523)
Amortization of deferred costs 217,456 171,485
------------ ------------
Net cash provided by financing activities 36,549,418 27,598,962
------------ ------------
NET INCREASE (DECREASE) IN CASH 2,112,240 (3,608,808)
CASH, BEGINNING OF PERIOD 28,101,237 20,326,814
------------ ------------
CASH, END OF PERIOD $ 30,213,477 $ 16,718,006
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest $ 5,355,831 $ 4,381,897
============ ============
Cash payments for income taxes $ 0 $ 6,025,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
Note 1: General
- ----------------
The accompanying unaudited consolidated financial statements of Capital Factors
Holding, Inc. and Subsidiaries (the "Company") have been prepared on a
consistent basis in conformity with the instructions to Form 10-Q and Article 10
of Regulation S-X and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the financial statements
reflect all adjustments (principally consisting of normal, recurring accruals)
necessary to present fairly the financial condition of the Company as of March
31, 1997 and December 31, 1996, the results of its operations for the three
month periods ended March 31, 1997 and 1996 and its cash flows for the three
months ended March 31, 1997 and 1996. All significant inter-company
transactions and balances have been eliminated. The statements are unaudited
except for the Consolidated Statements of Condition as of December 31, 1996.
The accounting policies followed for interim financial reporting are consistent
with the accounting policies set forth in Note 2 to the Consolidated Financial
Statements appearing in the Company's Form 10-K for the year ended December 31,
1996 as filed with the Securities and Exchange Commission.
Note 2: Receivables
- -------------------
Receivables consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
<S> <C> <C>
Nonrecourse $ 299,535,982 $ 269,812,980
Recourse 155,808,078 157,178,312
-------------- --------------
Factored accounts receivables 455,344,060 426,991,292
Loans to factoring clients 30,897,631 27,966,757
Asset based loans 40,342,489 36,019,543
-------------- --------------
$ 526,584,180 $ 490,977,592
============== ==============
</TABLE>
The Company also makes advances to factoring clients. Such advance payments,
which are interest earning, are recorded as reductions to the amounts due to the
factoring clients for the purchase of receivables. Average funds employed
(receivables less amounts due to factoring clients) were $316.9 million and
$286.2 million at March 31, 1997 and December 31, 1996, respectively.
5
<PAGE> 6
Changes in the Company's allowance for credit losses were as follows:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
---------------------------------------------- ---------------------------
% of % of % of
March 31, Factored March 31, Factored December 31, Factored
1997 Sales 1996 Sales 1996 Sales
------------ -------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $ 2,993,534 $ 2,980,778 $ 2,980,778
Allowance related to
acquisition of
TempFunds America, Inc. 100,000
Provision for credit losses 1,400,000 .19 1,100,000 .20 3,750,000 .14
Charge-offs (1,175,780) .16 (1,487,831) .26 (4,402,745) .17
Recoveries 176,300 .02 90,786 .02 565,501 .02
----------- -------- ----------- ------- ----------- ---------
Net charge-offs (999,480) .14 (1,397,045) .25 (3,837,244) .14
----------- -------- ----------- ------- ----------- ---------
Ending balance $ 3,394,054 $ 2,683,733 $ 2,993,534
============ =========== ===========
</TABLE>
The Company specifically considered approximately $1.3 million and $660,000 of
its client advances impaired at March 31, 1997 and December 31, 1996,
respectively, and has discontinued the accrual of interest income. The
allowance for credit losses related to these impaired loans for the same periods
was $150,000 and approximately $30,000, respectively.
The adequacy of the provision for credit losses recorded by the Company is
assessed by management based in part on the level of net charge-offs relative to
accounts receivable purchased. These statistics are believed to be significant
indicators of inherent losses because the receivables portfolio turns over
approximately seven times each year. Accounts receivable which are past due
will not be written off if, in the opinion of management, collection is likely
from the customer, client or collateral realization, if any. In making this
determination, management considers the quality of the collateral, the
creditworthiness of the customer and client, economic conditions and other
factors which may be relevant. This statistical assessment is supplemented by a
review of the recorded allowance for credit losses at each month end and
relative to total accounts receivable at month end, taking into consideration
specific potential problem accounts, accounts purchased with recourse where
payment has not been made by the Company to its client, and other factors which
may be relevant.
Historically, the provision for credit losses as a percentage of factored sales
and net charge-offs as a percentage of factored sales ranged from 0.11% to
0.30% and 0.05% to 0.30%, respectively. The provision for credit losses as a
percentage of factored sales decreased from .20% for the three months ended
March 31, 1996 to 0.19% for the three months ended March 31, 1997. Net
charge-offs as a percentage of factored sales also decreased from 0.25% to
0.14% for the same three month periods, respectively. The 1997 ratios listed
above, although lower than those experienced in 1996, reflect normal credit
losses consistent with the Company's historical experience and expectations.
Based on these relationships, and a review of the recorded allowance and
accounts receivable at each period end, management believes the provisions and
allowance to be adequate to absorb known and inherent losses in the accounts
receivable portfolio. Because the assessment of the adequacy of the allowance
and provisions for credit losses involves a significant degree of estimation
and is subject to change, future provisions for credit losses may be greater or
less than actual charge-offs.
6
<PAGE> 7
Note 3: Borrowings
- -------------------
Borrowings are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Variable rate asset backed certificates
due 1999 through 2001 $ 175,000,000 $ 175,000,000
Variable rate revolving credit line
from affiliate, due on demand 97,270,000 70,131,000
Variable rate revolver loan due 1999 25,100,000 15,900,000
7.95% subordinated notes due 2001 10,000,000 10,000,000
------------- -------------
Total borrowings $ 307,370,000 $ 271,031,000
============= =============
</TABLE>
Note 4: Subsequent Event
- -------------------------
On April 30, 1997, the trust (the "Trust") created in connection with
the securitization of factored advances (the "Securitized Financings") issued a
fourth series of variable rate asset-backed certificates (the "Variable Funding
Certificates"). Unlike the previously issued certificates which were fixed as
to principal amount, the Variable Funding Certificates provide for a monthly
settlement of principal, which may increase or decrease the outstanding amount.
The fourth series includes the issuance of $95.25 million of senior Variable
Funding Certificates and $4.75 million of senior subordinated Variable Funding
Certificates. Approximately $36.0 million and $1.8 million, respectively, were
funded at closing. Management believes that this type of Certificate will
provide a more efficient means of funding the seasonal fluctuations in the
Company's overall funding requirements. Under this series, the senior Variable
Funding Certificates bear interest at LIBOR plus 0.75% and the senior
subordinated Variable Funding Certificates bear interest at LIBOR plus 1.50%
(6.44% and 7.19%, respectively, at April 30, 1997). In connection with any
additional secured indebtedness to be incurred by the Company, the Securitized
Financings require that all additional secured lenders enter into an
intercreditor agreement with the holders of the Certificates and the trustee of
the Trust. The Securitized Financings permit future purchases to the extent that
the Company generates eligible Advances. Generally, all of the client advances
made by the Company, with the exception of those made by its healthcare
division, as well as certain asset-based loans, are eligible for transfer to the
Trust.
In connection with this transaction, the Company formed a new
wholly-owned subsidiary, CF Investor Corp. CF Investor Corp., through a limited
liability corporation, CF Two, LLC., acquired the junior subordinated
certificate issued by the Trust.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
Introduction
Capital Factors Holding, Inc. ("Holding") is a majority owned subsidiary of
Capital Bank (the "Bank"), a Florida commercial bank. The Bank is a
wholly-owned subsidiary of Capital Bancorp ("Bancorp"). Holding has three
wholly-owned subsidiaries, Capital Factors, Inc. ("Factors"), CF One, Inc. and
CF Investor Corp. Factors has two wholly-owned subsidiaries, CF Funding Corp.
and Capital TempFunds, Inc. Throughout this discussion, Holding, Factors, and
their subsidiaries are collectively referred to as the "Company".
The following discussion and analysis presents the significant changes in the
financial condition and results of operations for the periods indicated. In
addition, this Form 10-Q may contain certain "forward-looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning the Company's operations, performance, financial
condition, and growth. For this purpose, any statements contained in the Form
10-Q that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue," or the negative or other variation thereof
or comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
such as credit losses, dependence on availability of funding sources, dilution
of receivables, concentration of client base and client customer base,
dependence on management and key personnel, seasonality, and variability of
quarterly results, ability of the Company to continue its growth strategy,
competition, inability to directly collect healthcare receivables from Medicare
and Medicaid, dilution of healthcare receivables, control by majority
shareholder, and regulatory restrictions relating to potential new activities,
Bancorp and Capital Bank litigation, certain of which are beyond the Company's
control, and actual results may differ materially depending on variety of
important factors which are noted herein. The discussion should be read in
conjunction with the consolidated financial statements and notes included in
this report.
The Company provides fee-based services to its clients, including credit
protection, collection and management information services, and also makes
advances to many of its clients. Clients are generally manufacturers of goods
or providers of services in various industries. At the time the Company
purchases the factored receivables, the Company records a receivable and an
offsetting liability "due to factoring client." Advances, which are interest
earning and secured by the client's factored receivables, are recorded by the
Company as reductions to the amounts due to the factoring client for factored
receivables. Cash collections from the client's customers are used to repay
the client's loans. If, as a result of financial inability to pay, a client's
customer fails to pay a receivable that was credit-approved by the Company, the
Company will ultimately bear any loss with respect to such receivable. In the
event of dilution in excess of the unfinanced portion of receivables, where
factored receivables are not fully collected for a reason other than the
customer's financial inability to pay, such as breach of warranty, the Company
will in practice typically need to look to newer receivables of the client for
the collection of the outstanding obligation to the Company and may not be
repaid.
In contrast to the Company's purchase of factored receivables, when the Company
makes an asset-based loan, a client assigns its collateral (usually account
receivable and inventory) to the Company. Upon request of the client, the
Company may advance funds to the client as a loan in an amount based upon the
eligible collateral. When funds are advanced to the client, a loan receivable
balance is created, and cash is disbursed. Although the Company loans funds to
the client based on eligible collateral, the
8
<PAGE> 9
Company provides no credit protection and, accordingly, does not assume the
risk of loss from a client's customers' inability to pay, although the Company
may actually suffer a loss if all sources of repayment fail, including other
collateral and guarantees, if any. In connection with asset-based loans,
instead of a factoring fee, the Company earns a facility fee. Both factored
advances and asset-based loans bear interest at a rate tied to the prime rate.
The Company operates through four regional offices, and in January 1997, it
opened an office in Atlanta which specializes in asset-based loans. In May
1997, the Company's corporate headquarters and the Florida regional office
re-located to leased office space in Boca Raton. The Company's operations
center remains in Fort Lauderdale. The Company currently has over 400 clients
who generate annual sales from $500,000 to over $100 million, and services over
100,000 customers of those clients. The majority of the Company's customers
are large national or regional department store chains or specialty retailers.
At March 31, 1997, the largest amount due from any one customer, a national
department store chain, was approximately $22.2 million.
The Company's factored sales volume can be affected in several ways, including
new clients, client retention or losses, inflation and other economic
conditions. Additionally, fluctuations in the sales dollar volume of the
Company's clients, both positive and negative, have a direct impact on the
Company's factored sales volume and factoring fees. In this regard, the
Company has historically experienced seasonal fluctuations in its factored sales
volume and factoring fees as a result of the seasonality of the sales of
certain of the Company's clients, especially those in the apparel industry, who
typically ship more goods during the four-month period of August through
November in order to fill increased customer orders in anticipation of "back to
school" and the ensuing holiday season. The Company realized approximately 40%
of its annual factored sales volume during this 4-month period in 1996 and
1995.
Management believes that one of the essential tools in maintaining and managing
growth of the Company is the monitoring of certain key financial ratios. The
Company monitors the key components of its income statement data, such as
factoring fees, net interest income, other income, provision for credit losses
and operating expenses, as a percentage of its factored sales volume. These
key ratios allow the Company to monitor its performance in achieving its goals
of (i) obtaining higher gross margins on factoring fee income, (ii) increasing
fee income as a percentage of cash employed, (iii) reducing credit losses, (iv)
controlling costs, and (v) maximizing return to its investors. Management also
monitors both accounts receivable turnover and the aging of customers' accounts
receivable, with particular emphasis on amounts greater than 60 days past due.
Monitoring Asset Quality and Credit Losses
The monitoring of asset quality is a routine function performed by management
to control credit losses. Monitoring asset quality involves the periodic
review, sometimes daily, of such pertinent financial statistics as the aging of
the accounts receivable portfolio, accounts receivable turnover, dilution and
charge-offs. The Company's allowance for credit losses is determined after
evaluating the receivables portfolio, current market conditions, changes in the
nature and volume of the portfolio, past loss experience and other pertinent
factors.
9
<PAGE> 10
Set forth below are those ratios and statistics utilized by management in
monitoring asset quality for the three months ended March 31, 1997 and March
31, 1996:
<TABLE>
<CAPTION>
As of March 31,
------------------------
1997 1996
------- --------
(Unaudited, Dollars in Thousands)
<S> <C> <C>
Provision for credit losses $ 1,400 $ 1,100
Charge-offs net of recoveries $ 999 $ 1,397
Allowance for credit losses-specific $ 662 $ 736
Allowance for credit losses-general $ 2,732 $ 1,948
------- -------
Total allowance for credit losses $ 3,394 $ 2,684
Accounts receivable turnover in days 54 51
Accounts receivable past due more
than 60 days as a percentage of
total factored receivables 8.12% 7.18%
Accounts receivable part due more
than 90 days as a percentage of
total factored receivables 5.01% 4.97%
Credit-approved accounts receivable
past due more than 60 days as a
percentage of credit approved
receivables (1) 1.94% 1.57%
Credit-approved accounts receivable
past due more than 90 days as a
percentage of credit approved
receivables (1) 0.58% 0.16%
Provision for credit losses as a
percentage of factored sales 0.19% 0.20%
Net charge-offs to factored sales 0.14% 0.25%
Average receivables $498,168 $365,918
Provision for credit losses as a
percentage of average receivables 0.28% 0.30%
Net charge-offs as a percentage of
average receivables 0.20% 0.38%
Non-accruing advances $1,287 $2,436
Non-accruing advances as a percentage
of receivables 0.24% 0.61%
Average funds employed (2) $316,900 $243,000
Provision for credit losses as a percentage
of average funds employed (2) (3) 1.77% (6) 1.81% (6)
Net charge-offs as a percentage of
average funds employed (2)(4) 1.26% 2.30% (6)
Non-accruing advances as a percentage
of funds employed (2) (5) 0.38% 0.94%
</TABLE>
- ---------------------------
(1) Management considers the aging of credit-approved receivables a more
meaningful measure of exposure to credit risk than the aging of total
receivables.
(2) Funds employed are receivables less amounts due to factoring clients.
(3) Computed by dividing provision for credit losses by average funds
employed for each period presented. The provision for credit losses as a
percentage of average advanced for each of the period presented was lower
than the provision for credit losses as a percentage of average funds
employed.
(4) Computed by dividing net charge-offs by average funds employed for each
period presented. Net charge-offs as a percentage of average advances
for each of the periods presented was lower than net charge-offs as a
percentage of average funds employed.
10
<PAGE> 11
(5) Computed by dividing non-accruing advances by funds employed at the end
of each respective period indicated. Non-accruing advances as a
percentage of advances during each period presented was lower than
non-accruing advances as a percentage of funds employed.
(6) Computed on an annualized basis.
The Company regularly reviews its outstanding accounts receivable and other
extensions of credit, such as advances to clients, to determine the adequacy of
its allowance for credit losses. Factors such as the level of related credit
balances of clients and the impact of economic conditions on the
creditworthiness of the Company's clients and the client's customers are given
significant consideration in determining the adequacy of the Company's
allowance for credit losses. The Company's methodology for calculating its
reserve for doubtful accounts has remained consistent for the periods shown
above, and includes a specific and general component. Specific reserves are
established for receivables and client advances which the Company's management
deems to be wholly or partially uncollectible. The general reserve represents
0.75% of those receivables (other than healthcare receivables and asset-based
loans, which have a lower general reserve) that are not specifically reserved
for but for which the Company has provided credit guarantees.
The provision for credit losses as a percentage of factored sales decreased
from 0.20% for the three months ended March 31, 1996 to 0.19% for the three
months ended March 31, 1997. The provision for credit losses as a percentage
of average receivables and the provision for credit losses as a percentage of
average funds employed decreased from 0.30% and 1.81%, respectively, for the
three months ended March 31, 1996, to 0.28% and 1.77%, respectively for the
three months ended March 31, 1997, reflecting a lower net charge-off rate.
Net charge-offs as a percentage of factored sales decreased from 0.25% for the
period ended March 31, 1996 to 0.14% for the period ended March 31, 1997. In
1997, Factors charged off $750,000 due to a client's bankruptcy filing during
the first quarter and $249,000 in customer bad debts. In 1996 the Company
charged off $1.1 million in customer bad debts, including a charge-off of
$600,000 related to the bankruptcy of a large Northeastern regional chain store
customer. Net charge-offs as a percentage of average receivables and net
charge-offs as a percentage of average funds employed decreased 0.18% and 1.04%,
respectively, for the three months ended March 31, 1997 as compared to the same
period in 1996 due primarily to the $600,000 charge-off described above. Net
charge-offs as a percentage of factored sales ranged from 0.05% to 0.30% in the
1992-1996 period.
Non-accruing advances as a percentage of funds employed have historically
remained below 1.00% and during the three months ended March 31, 1997 and 1996,
were at 0.38% and 0.94%, respectively. Non-accruing advances as a percentage
of receivables decreased from 0.61% to 0.24%, for the same three month periods
ended March 31, 1996 and 1997, respectively. Management believes that
non-accruing advance fluctuations below 1.0% are a normal part of the Company's
ongoing business and are not significant.
Credit-approved accounts receivable past due more than 60 days as a percentage
of credit-approved factored receivables and accounts receivable past due more
than 90 days as a percentage of credit-approved factored receivables equaled
1.94% and 0.58%, respectively at March 31, 1997 as compared to 1.57% and 0.16%,
respectively, at March 31, 1996. Accounts receivable past due more than 60 days
as a percentage of total factored receivables and accounts receivable past due
more than 90 days as a percentage of total factored receivables equaled 8.12%
and 5.01%, respectively, for the three month period ended March 31, 1997 as
compared to 7.18% and 4.97%, respectively, for the three month period ended
March 31, 1996. The increase in these ratios was due to an increase in
healthcare factored receivables, from $14.3 million in March 31, 1996 to $22.7
million at March 31, 1997, that are slower paying with higher delinquency
ratios. Healthcare factored receivables are not credit-approved thus the
Company does not guarantee payment of the receivables.
11
<PAGE> 12
Financial Condition - March 31, 1997 as compared to December 31, 1996
Total assets increased to $568.2 million at March 31, 1997 from $530.6 million
at December 31, 1996. The $37.6 million increase was due primarily to a $34.6
million dollar increase in net receivables.
Factored accounts receivables increased $28.4 million primarily as a result of
increased factored sales. The Company's factored sales volume increased during
March, as the Company's apparel clients typically ship more goods in order to
fill increased customer orders in anticipation of the Spring season. The
Company's factored accounts receivable are due from clients' customers
geographically located throughout the United States, principally retailers,
manufacturers and distributors. Asset based loans, which represent loans
provided to clients principally collateralized by accounts receivable, increased
$4.3 million from December 31, 1996 to March 31, 1997.
The increase in assets was principally funded by an increase in its debt
outstanding under the Company's $150 million debt facility with Capital Bank and
its $40 million revolving credit facility with an unaffiliated bank. Outstanding
debt under the Capital Bank facility increased to $97.3 million at March 31,
1997 from approximately $70.1 million at December 31, 1996. On April 30, 1997,
the Company used the net proceeds from the issuance of the Variable Funding
Certificates, approximately $37 million, to reduce the Company's indebtedness
to Capital Bank. At March 31, 1997 and December 31, 1996 the Company had $25.1
million and $15.9 million, respectively, outstanding under its $40 million
facility, which bears interest at LIBOR plus 2.15%. This increase in debt was
collateralized by increased asset-based loans and healthcare receivables.
Stockholders' equity increased approximately $2.3 million during the first
three months of 1997 as a result of net income earned by the Company.
Results of Operations - Three Months Ended March 31, 1997 Compared to Three
Months Ended March 31, 1996
Net income increased 21.9% to approximately $2.3 million for the three month
period ended March 31, 1997 from approximately $1.9 million for the comparable
period in 1996 due primarily to an increase in operating revenues. Operating
revenues (total revenues less interest expense) increased from approximately
$9.6 million for the three month period ended March 31, 1996 to approximately
$12.3 million for the comparable period in 1997, a 28.1% increase. These
increases were primarily a result of a 29.5% increase in the Company's factored
sales volume from $564.0 million to $730.2 million for the three month period
ended March 31, 1996 and March 31, 1997, respectively, and the resulting
increase in interest income and factoring fees. The factored sales volume
increases were attributable to continued growth of the Company's client base,
in all four regional offices.
Factoring fee income increased to approximately $6.8 million for the three
month period ended March 31, 1997 as compared to approximately $5.5 million for
the three month period ended March 31, 1996 as a result of a 29.5% increase in
factored sales. Factoring fee income as a percentage of factored sales for the
three month periods decreased from 0.98% in 1996 to 0.93% in 1997. This
decrease was due to lower factoring commission rates charged due to competitive
pricing on larger clients and lower average commission rates charged on
healthcare clients. Healthcare volume for the three months ended March 31,
1997 increased 43.3% over the same period in 1996.
Net interest income (interest income less interest expense) increased to
approximately $4.1 million for the three months ended March 31, 1997 from
approximately $3.1 million for the comparable period in 1996, a 31.6% increase.
The increase is principally as a result of the $17.6 million of net proceeds
raised by the Company's issuance of common stock in July 1996 which were used
to reduce the debt outstanding under a debt facility with Capital Bank. The
interest rate on this facility was 8.25% at March 31, 1997. Additionally, the
Company entered into a $40.0 million revolving loan agreement bearing
12
<PAGE> 13
interest at LIBOR plus 2.15% in April 1996 with an unaffiliated bank. Average
borrowings from the revolving loan during the three month period ended March
31, 1997 equaled approximately $17.1 million and had an effective interest rate
of 7.99% for the three month period. Interest income also increased due to an
increase of $73.9 million in average outstanding funds employed for three
months ended March 31, 1997 as compared to the same period in the prior year.
Letter of credit and other fee income increased to approximately $960,000
for the three months ended March 31, 1997 from $672,000 for the three months
ended March 31, 1996, a 42.8% increase. Letter of credit fees increased
approximately 53.3% or $133,800 and overadvance fees increased 106.0% or $83,000
during the three month period. Overadvances represent loans to clients in
excess of the factored accounts receivable, substantially all of which are
collateralized by assets other than receivables. Other fee income, such as wire
and audit fees, increased by approximately $126,000 due to the increased
factoring volume and asset-based lending activities, and growth in the Company's
healthcare division.
The provision for credit losses equaled $1.4 million for the three months ended
March 31, 1997 and $1.1 million for the three months ended March 31, 1996. Of
the 1997 provision, $900,000 related to amounts charged-off and reserves
established due to a client's bankruptcy filing during the first quarter. The
remainder of the 1997 provision relates primarily to customer accounts
receivable, with net charge-offs of $249,000 compared to $1.1 million in the
first quarter of 1996. Provisions for credit losses as a percentage of factored
sales decreased to 0.19% for the three months ended March 31, 1997 as compared
to 0.20% for the comparable period in 1996, reflecting a slightly lower net
charge-off rate for the quarter (see "Monitoring Asset Quality and Credit
Losses").
Operating expenses increased from $6.4 million to $8.4 million for the three
month period ended March 31, 1996 as compared to the three months ended March
31, 1997. This $2.0 million or 30.7% increase is primarily the result of
expansion in the regional offices and the healthcare division, start-up costs
in the Atlanta office, and expenses related to Capital TempFunds, Inc. which
was acquired in August 1996.
Liquidity and Capital Resources
The Company's principal source of funding is its asset securitization program,
the Securitized Financings. This funding is supplemented by the Company's line
of credit with the Bank and a revolving credit facility with an unaffiliated
bank.
Through March 31, 1997, the trust created in connection with the Securitized
Financings (the "Trust") had issued three series of asset-backed certificates
(each, a "Certificate") aggregating $175 million, including $100 million in
June 1994, $25 million in December 1994 and $50 million in July 1995. All of
the Certificates were issued to life insurance companies. Initially, the
Certificates were rated "AA" by Duff & Phelps Credit Rating Company and "A" by
Fitch Investors Services, Inc. Approximately one year after its initial rating,
Fitch Investor Services, Inc. upgraded its rating of the Certificates to "AA".
The scheduled maturity date of the Certificates corresponding to each series
is December 1999 ($100 million), June 2000 ($25 million), and January 2001 ($50
million), respectively. The Certificates issued under each series bear
interest at LIBOR plus 1.25% (6.69% at March 31, 1997, excluding annualized
transaction costs of 0.37%). Interest is payable monthly. However, an early
amortization event will occur if the Company fails to satisfy certain financial
covenants. The principal financial covenants contained in the Securitized
Financing agreements that the Company must satisfy include, (i) consolidated
net worth in excess of $18.5 million, (ii) tangible equity ratio of at least 6%
(iii) accounts receivable non-payment percentage of no more than 18%, (iv)
60-day accounts receivable percentage of no more than 10% of total accounts
receivable, (v) 90-day accounts receivable percentage of no more than 4.5% of
total accounts receivable, (v) 90-day accounts receivable percentage of no more
than 4.5% of total accounts receivable, (vi) weighted average factoring fee of
at least 0.75%, (vii) weighted average accounts receivable turnover of less
than 70 days, (viii) accounts receivable dilution of no more than 11%, (ix)
accounts receivable payment ratio for three consecutive periods of more than
40%, (x) aggregate amount of subordinated certificates of no more than 25% of
senior certificates, (xi) subordinated certificates equal to or greater than 7%
of total
13
<PAGE> 14
certificates and (xii) value of accounts receivable transferred to the Trust,
of no less than 135% of aggregate certificates. In addition, there are other
covenants relating to the collateral, including required capital levels,
maximum dilution and delinquency ratios and minimum subordination levels. The
Company is in material compliance with these and all other covenants contained
in the Securitized Financing agreements. The Company may continue to use the
Securitized Financings for funding, provided eligible advances are available
for transfer to the Trust. As of March 31, 1997, the Company had transferred
to the Trust client advances aggregating nearly $280.7 million.
On April 30, 1997 the Trust issued a fourth series of variable rate asset-backed
certificates (the "Variable Funding Certificates") in connection with the
Securitized Financings. Unlike the previously issued Certificates which were
fixed as to principal amount, the Variable Funding Certificates provide for a
monthly settlement of principal, which may increase or decrease the outstanding
amount. The fourth series includes the issuance of $96.25 million of senior
Variable Funding Certificates and $4.75 million of senior subordinated Variable
Funding Certificates. Approximately $36.0 million and $1.8 million,
respectively, were funded at closing. Management believes that this type of
Certificate will provide a more efficient means of funding the seasonal
fluctuations in the Company's overall funding requirements. Under this series,
the senior Variable Funding Certificates bear interest at LIBOR plus 0.75% and
the senior subordinated Variable Funding Certificates bear interest at LIBOR
plus 1.50% (6.44% and 7.19%, respectively, at April 30, 1997). In connection
with any additional secured indebtedness to be incurred by the Company, the
Securitized Financings require that all additional secured lenders enter into an
intercreditor agreement with the holders of the Certificates and the trustee of
the Trust. The Securitized Financings permit future purchases to the extent that
the Company generates eligible Advances. Generally, all of the client advances
made by the Company, with the exception of these made by its healthcare
division, as well as certain asset-based loans, are eligible for transfer to the
Trust.
In connection with this transaction, the Company formed a new wholly-owned
subsidiary, CF Investor Corp. CF Investor Corp., through a limited liability
corporation, CF Two, LLC., acquired the junior subordinated certificate issued
by the Trust.
In March 1996, the Company entered into a $40.0 million revolving credit
facility with an unaffiliated bank which was closed in April 1996. The
indebtedness under this facility is secured by advances not transferred to the
Trust or eligible for transfer to the Trust, most of which were made by the
Company's healthcare division or were asset-based loans, as well as all of the
equipment used by the Company in its operations. In order for this facility to
be fully funded, the Company would have to pledge an amount in excess of $57
million in advances. The indebtedness under this facility may not exceed 70%
of the value of the advances pledged by the Company as collateral for such
indebtedness. At March 31, 1997, the Company had outstanding borrowings of
$25.1 million. The indebtedness under this revolving facility bears interest
at a rate of LIBOR plus 2.15% (7.59% at March 31, 1997), payable monthly. The
indebtedness under this facility matures upon termination in March 1999,
although it will be automatically renewed for additional one year periods
unless the Company or the lender terminates it. This facility contains certain
financial covenants and ratios, including those relating to the Company's debt
to net worth (no less than 1 to 1), profitabiilty ($5.2 million of annual
consolidated net income) and positive net cash flows (more than $1 per
quarter). Funds borrowed under this facility were used by the Company to pay
down indebtedness under the Company's line of credit with the Bank, and to fund
certain of the Company's healthcare financing activities and asset-based
lending activities.
The Company also has a $150.0 million unsecured revolving line of credit with
Capital Bank, pursuant to which the Company had outstanding borrowings of
approximately $97.3 million at March 31, 1997. Amounts borrowed under this
facility are subject to the Banks overall statutory limitation on investments
in and advances to subsidiaries of 10% of assets. Based on the statutory
limitation, the maximum amount which could be outstanding under this line was
approximately $116 million at March 31, 1997. Indebtedness under this facility
bears interest at the prime rate, as published in The Wall Street Journal
(8.25% at March 31, 1997), is subject to annual review by the Bank
14
<PAGE> 15
each June and is due on demand. The Facility has been in place since 1985 and
historically has been renewed for one-year periods in June of each year.
Interest is payable monthly. The Company generally has used the Facility with
the Bank to make advances to its clients.
In May 1996, CF One sold $10 million of subordinated notes (the "CF One
Notes"), which are collateralized by subordinated certificates that were issued
in connection with the Company's Securitized Financings. The CF One Notes,
which are due and payable in July 2001, bear interest at an annual fixed rate
of 7.95% and are rated "BBB" by both Duff & Phelps Credit Rating Company and
Fitch Investors Services, Inc. The principal purpose for the issuance of the
CF One Notes was to allow CF One to obtain additional financing by taking
advantage of the favorable financing terms resulting from an increase in the
value of the subordinated certificates held by CF One which are collateralized
by assets held by the Trust. The increase in the value of the subordinated
certificates held by CF One was the result of the favorable performance of the
receivables and other assets held in the Trust's portfolio.
In addition to the continued availability of the above financing, the Company's
future liquidity will continue to be dependent upon its ability to collect the
accounts receivable purchased from its clients. Of the Company's approximately
$526.6 million of customer accounts receivable outstanding at March 31, 1997,
approximately $237.4 million of customer receivables balances exceeded $1
million. These customers are primarily large national or regional department
store chains or specialty retailers. At March 31, 1997, the largest amount due
from any one customer, a national chain store, was approximately $22.2 million.
In addition, the Company's accounts receivable turned over in an average of 51
days and 54 days during the three months ended March 31, 1996 and 1997,
respectively.
The Company had no material commitments for capital expenditures as of March 31,
1997. Management believes that it has the corporate infrastructure in place to
support its earnings growth for the foreseeable future. Management also
believes that funds available under the Company's current credit facilities
(assuming such facilities are renewed or replaced with similar facilities) and
cash flow from operations will be sufficient to satisfy the Company's working
capital requirements for the next 12 months.
Effects of Inflation
The Company believes that inflation has not had a material impact on its results
of operations.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company
From time to time, the Company has been a party to lawsuits and claims,
including lender liability claims, which management considers incidental to
normal operations. The Company is currently a party to one lawsuit that was
dismissed after trial. The plaintiff is currently appealing the dismissal.
Management, after review, including consultation with counsel, believes that
any ultimate liability which could arise from this current lawsuit would not
materially affect the financial position of the Company.
Bancorp and Capital Bank Legal Proceedings
Nathan J. Esformes, Stanley I. Worton, M.D., and Leonard Wien, as individual
shareholders and on behalf of all other shareholders of Capital Bancorp v. Abel
Holtz, Fana Holtz, Daniel M. Holtz, Javier J. Holtz, Capital Bank and Capital
Bancorp, Circuit Court for the 11th Judicial District in and for Dade County,
Florida Case No. 95-02515.
A motion to dismiss this derivative action was filed by Bancorp in January 1997.
A hearing on such motion commenced on May 9, 1997 and is currently ongoing.
Regulatory Matter
The administrative hearing regarding the application by Daniel Holtz, Chairman
of the Board, Chief Executive Officer and President of Bancorp, Fana Holtz, the
Vice-Chairman of the Board, and Javier Holtz, an executive officer of Bancorp,
to acquire and/or maintain a controlling interest in the Bank through their
ownership and control of Bancorp, commenced in August 1996 and ended on November
8, 1996. An order has not yet been entered on the application but is anticipated
in the second or third quarter of 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 - Second Amendment to Employment Agreement among John W.
Kiefer, the Registrant, and Capital Factors, Inc.
Exhibit 11.1 - Statement re: Calculation of Earnings Per Share
Exhibit 27.1 - Financial Data Schedule
(b) No Current Reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1997.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 1997 By: /s/ Dennis A. McDermott
---------------------------
DENNIS A. MCDERMOTT
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
----------------------------------------
This Second Amendment to Employment Agreement is made and entered into
effective as of the 28th day of April, 1997, by and between CAPITAL FACTORS
HOLDING, INC., a Florida corporation (the "Company"), CAPITAL FACTORS, INC., a
Florida corporation ("Factors"), and JOHN W. KIEFER (hereinafter called the
"Executive").
RECITALS
--------
WHEREAS, the Company and the Executive entered into an Employment
Agreement (the "Employment Agreement") pursuant to which the Executive renders
certain services to the Company; and
WHEREAS, the Company and the Executive desire to amend the Employment
Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, and other good and valuable consideration, the
parties to this Amendment agree as follows:
1. All capitalized terms in this Amendment shall have the same
meaning as in the Employment Agreement, unless otherwise specified.
2. Section 3.3(f) of the Agreement is hereby amended to read as
follows:
"(f) The Executive shall be entitled to receive the estimated
amount of the Incentive Compensation (the "Estimated Incentive
Compensation"), net of any withholding and other taxes, within
fifteen (15) days after the end of each year during the Term,
such Estimated Incentive Compensation to be determined by the
Compensation Committee based on the Company's unaudited
consolidated financial statements as reviewed and approved by
the Board. In no event shall the Estimated Incentive
Compensation exceed the amount, if
<PAGE> 2
any, by which (i) $1,000,000 exceeds (ii) all remuneration,
other than the Incentive Compensation, payable to the
Executive that is required to be taken into account in
determining the maximum amount of such remuneration that may
be deducted by the Company under Section 162(m) of the Code
for the year for which the Incentive Compensation is payable.
The Estimated Incentive Compensation will be subject to upward
or downward adjustment based on the Company's annual audited
consolidated financial statements from the Company's
independent certified public accountants (the "Adjustment").
The Adjustment shall be paid by the Executive to the Company,
or shall be paid by the Company to the Executive, as the case
may be, within fifteen (15) days of receipt of the Company's
audited consolidated financial statements, but in no event
prior to the date on which the Compensation Committee of the
Company has certified in writing that the performance goals
upon which the Incentive Compensation is based have been met.
In the event the Executive does not reimburse the Company for
any Adjustment within such fifteen-day period, the Company
shall have the right to offset the Adjustment against any
other payments due to the Executive hereunder."
3. A new paragraph (g) is hereby added to Section 3.3 of the
Agreement, to read as follows:
"(g) For purposes of determining the Executive's Incentive
Compensation for any year during the Term:
(i) the Executive's Base Salary taken into account
shall be equal to the Executive's Base Salary as of March 31
of the calendar year for which the Incentive Compensation is
payable, and
(ii) the maximum amount of Base Salary that may be
taken into account shall be $600,000."
4. Section 3.4 of the Agreement is hereby amended by adding the
following paragraphs to the end thereof:
"For purposes of determining the Deferred
Compensation earned for any year during the Term:
(i) the Executive's Base Salary taken into account
shall be equal to the Executive's Base Salary as of the March
31 of the calendar year for which the Deferred Compensation is
payable, and
-2-
<PAGE> 3
(ii) the maximum amount of Base Salary that may be
taken into account shall be $600,000.
In no event shall any Deferred Compensation earned
for any year be paid prior to the date on which the
Compensation and Benefits Committee of the Company has
certified in writing that the performance goals upon which the
Deferred Compensation is based have been met."
5. Section 3.6 of the Agreement is hereby amended to read as
follows:
"3.6 EVENT OF NON-DEDUCTIBILITY.
SECTION 162(M) LIMITS. Notwithstanding any other
provision of this Agreement, if the Company becomes a separate
publicly-held corporation (a "Separate Publicly Held
Corporation") for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended, and the regulations
thereunder (collectively, "Section 162(m)"), then for each
calendar year that ends after the first regularly scheduled
meeting of the Company's shareholders that occurs more than 12
months after the Company becomes a Separate Publicly Held
Corporation, payment of the portion (the "Section 162(m)
Portion") of the Executive's Incentive Compensation and
Deferred Compensation that would not otherwise be deductible
by reason of Section 162(m) (determined after taking into
account all other remuneration required to be taken into
account under Section 162(m) for the year), shall be subject
to the following conditions: (i) the performance goals set
forth in Sections 3.3 and 3.4 that must be satisfied in order
for the Section 162(m) Portion to be earned for that year
shall be subject to the approval of, and may be modified by,
the Compensation Committee of the Company, at such times as
may be required for the Section 162(m) Portion to be
deductible under Section 162(m); (ii) payment of the Section
162(m) Portion shall be subject to the approval by the
shareholders of the Company of the material terms of the
performance goals relating to the Section 162(m) Portion
before the Section 162(m) Portion is paid; and (iii) the
maximum amount of Incentive Compensation and Deferred
Compensation payable to the Executive is as set forth in
Sections 3.3 and 3.4 and Exhibits "C" and "D". In addition,
the grant of options to purchase shares of Common Stock
pursuant to Section 4.5 hereof shall be subject to and
conditioned upon (i) the approval by either the Stock Option
Committee of Capital Bancorp before the Company becomes a
Separate Publicly Held Corporation or the Compensation
Committee of the Company after the Company becomes a Separate
Publicly Held Corporation, and (ii) the approval by
shareholders of the Company after the Company becomes a
-3-
<PAGE> 4
Separate Publicly Held Corporation, of a stock option plan
pursuant to which the options shall be granted.
6. All other terms and conditions of the Employment Agreement
shall remain the same.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed effective as of the day and year first above written.
COMPANY:
CAPITAL FACTORS HOLDING, INC.
By: /s/ Javier J. Holtz
-----------------------------
FACTORS:
CAPITAL FACTORS, INC.
By: /s/ Javier J. Holtz
-----------------------------
EXECUTIVE:
/s/ John W. Kiefer
---------------------------------
JOHN W. KIEFER
-4-
<PAGE> 1
Exhibit 11.1
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 30,
Primary 1997 1996
- ------- ---------- ----------
<S> <C> <C>
Weighted average number of common shares
outstanding 12,300,000 10,000,000
Common equivalent shares outstanding - options 0 0
----------- -----------
Total common and common equivalent shares
outstanding 12,300,000 10,000,000
=========== ===========
Net income 2,319,944 1,903,044
----------- -----------
Primary earnings per share $ 0.19 $ 0.19
=========== ===========
Fully diluted
- -------------
Weighted average number of common shares
outstanding 12,300,000 10,000,000
Common equivalent shares outstanding - options 233,978 0
----------- -----------
Total common and common equivalent shares
outstanding 12,533,978 10,000,000
=========== ===========
Net income 2,319,944 1,903,044
----------- -----------
Fully diluted earnings per share $ 0.19 $ 0.19
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 36,775,977
<SECURITIES> 0
<RECEIVABLES> 523,558,575
<ALLOWANCES> (3,394,054)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,004,515
<DEPRECIATION> 679,185
<TOTAL-ASSETS> 568,216,187
<CURRENT-LIABILITIES> 0
<BONDS> 307,370,000
0
0
<COMMON> 123,000
<OTHER-SE> 58,596,164
<TOTAL-LIABILITY-AND-EQUITY> 568,216,187
<SALES> 0
<TOTAL-REVENUES> 17,595,770
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,952,610
<LOSS-PROVISION> 1,400,000
<INTEREST-EXPENSE> 5,314,102
<INCOME-PRETAX> 3,929,058
<INCOME-TAX> 1,609,114
<INCOME-CONTINUING> 2,319,944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,319,944
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
