UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: August 7, 1998
HOMEGOLD FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 0-8909 57-0513287
(State of other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
SUITE 750, 15 SOUTH MAIN STREET, GREENVILLE, SOUTH CAROLINA 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 235-8056
The Exhibit Index appears on page 3 hereof.
ITEM 5. OTHER EVENTS
------------
HomeGold Financial, Inc. (the "Company") announced on August 7, 1998, its
agreement to sell its Commercial unit and Sterling Lending Corporation, and its
second quarter 1998 operating results. The news release is filed herewith as
Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED. Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION. Not applicable.
(c) EXHIBITS.
99.1 News Release dated August 7, 1998.
<PAGE>
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 hereunto duly authorized.
EMERGENT GROUP, INC.
By: /s/ Kevin J. Mast
------------------------------
Kevin J. Mast
Vice President, Chief Financial
Officer, and Treasurer
<PAGE>
EXHIBIT INDEX
99.1 News Release dated August 7, 1998.
NEWS RELEASE
------------
Contacts: Kevin J. Mast Robert S. Davis
Chief Financial Officer Vice President-Administration
(864) 235-8056 (864) 235-8056
HOMEGOLD FINANCIAL, INC. ANNOUNCES
AGREEMENT TO SELL COMMERCIAL UNIT AND STERLING LENDING CORPORATION,
AND SECOND QUARTER 1998 OPERATING RESULTS
GREENVILLE, S.C. (August 7, 1998)- HomeGold Financial, Inc. (Nasdaq/NM:HGFN)
(formerly Emergent Group, Inc. - Nasdaq/NM:EMER) today announced that it has
reached an agreement in principle with a major financial services company for
the sale of the majority of the assets of HomeGold's small business loan
division at a purchase price which is expected to be approximately $85 million
in cash. The division operates under the name Emergent Business Capital, Inc.
The transaction includes all of the operations of the small business loan
division of HomeGold except for the asset based lending unit, which the Company
plans to sell separately. Total net assets of the small business loan division,
excluding the asset-based lending unit, at June 30, 1998 were $65 million, or
14% of the total Company. The transaction is subject to, among other things, the
approval of the Small Business Administration ("SBA") for the transfer of
certain SBA licenses held by the Company, no objection from the Federal Trade
Commission under the Hart-Scott-Rodino Act, legal documentation, and Board
approval. HomeGold expects to receive these approvals and plans to close the
sale by the end of September, although there can be no assurance of this. The
buyer plans to operate the division as a separate business unit headquartered in
Greenville, South Carolina. The division currently has approximately 85
employees, 40 of which are located in Greenville.
The sale will provide HomeGold with net proceeds of approximately $58
million, after repaying the related small business loan division's revolving
warehouse lines of credit. This net cash price represents approximately $6 per
share of cash on a consolidated basis. The sale is expected to result in a gain
of approximately $20 million to the Company upon closing of the transaction.
The planned sale includes Emergent Business Capital, Inc., which
originates, sells and services small business loans under the SBA's 7(a)
licensed guaranteed loan program; Emergent Commercial Mortgage, Inc., an SBA 504
lender; Emergent Business Capital Equity Group, Inc., (formerly known as
Emergent Equity Advisors, Inc.); and Reedy River Ventures, L.P., which holds a
license to operate as a Small Business Investment Corporation and provides loans
to small businesses.
Kevin J. Mast, Chief Financial Officer of HomeGold Financial, Inc., stated
"This is a great opportunity for both HomeGold and the small business loan
division. It completes the Company's plans to focus capital and management on
the large and growing non-conforming mortgage market. The Company completed the
sale of the majority of the
<PAGE>
assets of its auto lending division earlier this year to TranSouth Financial
Corporation, a division of Associates Financial Services Company, Inc. The sale
of the commercial unit provides HomeGold with over $58 million net proceeds,
which can be used as operating capital in building its core mortgage business.
This divestiture provides HomeGold with the opportunity to focus our management
and capital resources on our mortgage business."
The Company also announced an agreement was reached with First National
Security Corporation of Beaumont, Texas to sell the stock of Sterling Lending
Corporation, a small retail mortgage operation based in Baton Rouge, Louisiana.
The sale is for $1.5 million, with $400,000 in cash payable at closing and the
balance payable in the form of a promissory note for $1.1 million. The Company
expects no significant gain or loss on this sale. The transaction is expected to
close before the end of the third quarter 1998, although no assurance of such
can be given. Sterling Lending Corporation currently has approximately 135
employees with 10 retail branch locations located predominately in the
southeastern part of the United States. In the first six months of 1998,
Sterling Lending Corporation originated an average of $5.4 million of mortgage
loans per month, which is less than 7% of the Company's total mortgage loan
production.
The Company also announced today a proforma net loss from continuing
operations before unusual items (on a fully-taxed basis) of $4.4 million, or
$0.45 per share for the second quarter ended June 30, 1998, compared with net
income of $4.8 million, or $0.51 per share for the year earlier period. This
pro-forma loss for the quarter is a result of the Company's loan production
volume being below capacity levels in relation to the general and administrative
structure. This compares to a proforma net loss from continuing operations
before unusual items (on a fully-taxed basis) of $4.5 million, or $0.46 per
share for the first quarter ended March 31, 1998. The proforma net loss before
unusual items in the second quarter 1998 is comparable to the first quarter 1998
even though revenues were negatively affected in the second quarter by
approximately $3.4 million relating to the Company's decision to sell all of its
loans on a whole-loan basis for cash rather than securitizing them. The negative
impact was primarily offset by cost savings in general and administrative
expenses in the second quarter compared to the first quarter.
The Company incurred significant non-recurring or unusual items in the
second quarter 1998, which negatively impacted its actual results. These items
include a writedown in the value of the residual receivables by $7.3 million due
to faster than anticipated prepayment speeds on its securitization pools and
$3.3 million in non-recurring expenses for pay adjustments, terminations of
personnel and other restructuring costs. Pre-tax losses on subsidiaries to be
sold were $2.6 million for the three months ended June 30, 1998. The Company
also recorded income tax expense of $2.6 million even though overall the Company
generated a pre-tax loss. The current tax is due on income called "excess
inclusion income" resulting from the securitization pools. As a result of the
above factors, the Company incurred a net loss of $23.0 million for the three
months ended June 30, 1998. The loss per share for the second quarter of 1998
was $2.37 on 9.7 million average shares outstanding. Revenues for the second
quarter of 1998 were $24.8 million, a decrease of 18% from 1997 second quarter
revenues of $30.2 million,
<PAGE>
principally as the result of lower loan origination volume and the decision to
not complete a loan securitization transaction during the quarter.
For the six months ended June 30, 1998, proforma net loss from continuing
operations before non-recurring or unusual items (on a fully taxed basis) was
$8.9 million ($0.91 per share) compared with net income of $5.2 million ($0.55
per share) for the prior year period. Revenues for the first six months of 1998
were $49.3 million, a decrease of 1% from the prior year period's revenues of
$49.9 million. Net loss including the impact of the non-recurring and unusual
items was $43.6 million for the six months ended June 30, 1998, or $4.49 per
share on 9.7 million average shares outstanding.
The Company's total loan originations for the three months ended June 30,
1998 decreased 12% to $237.3 million from $268.9 million in the first quarter of
1998. The Company's mortgage loan division accounted for $206.9 million, or 87%
of the total loan originations, with $30.4 million, or 13%, resulting from its
small business loan division. The mortgage loan division's retail operations
produced $113.8 million of loans for the second quarter 1998, representing 55%
of the total mortgage loans originated by the Company. The Company's wholesale
production origination channels generated the remaining 45% of the quarterly
originations for the mortgage loan division totaling $93.1 million. As currently
structured, the Company believes a 25% annualized growth rate in originations is
a reasonable monthly goal. To accomplish this, management is emphasizing
training and sales processing coordination. In the retail operations, monthly
originations per originator are up from approximately $110,000 in January 1998
to approximately $210,000 in June 1998. This is a positive trend and is one
illustration of efficiency improvements. The Company goal is to drive monthly
originations per originator to exceed $300,000. Management believes that its
broad distribution channels will provide origination growth as improved
processing flows are completely implemented. By building a solid retail
franchise operation, the Company believes it should be positioned for
sustainable growth in 1999.
The Company sold a total of $245.3 million of loans in the second quarter
of 1998. The loan sales consisted of $229.6 million in whole-loan,
servicing-released cash sales of mortgage loans and $15.7 million of loans
related to the Company's small business loan division consisting of the sale of
the guaranteed portions of SBA loans into the secondary market. Total sales for
the second quarter 1998 represent a slight decrease from the comparable quarter
for 1997 of $253.7 million in loan sales and securitizations, of which 95%
related to the mortgage loan division.
The Company's overall credit quality is expected to improve with better
collection efforts and more stringent underwriting. Static pool delinquencies
were lower in June in each of the Company's pools other than the 1998-1 pool,
which is not yet a seasoned pool. These decreases are believed to be a result of
the Company's recent changes in management in the portfolio servicing and
collections department, and the enhancements in procedures and processes as a
result of these changes. Prior to these management changes, delinquencies were
continuing to increase during April and May 1998 from the March 1998 levels.
<PAGE>
The Company initiated a series of strategic steps in the first two
quarters of 1998 to improve operations and move toward profitability. Steps
undertaken to date include:
1. In January 1998, the Company replaced the senior management team in
the retail mortgage loan division.
2. In March 1998, the Company sold substantially all of the auto loan
portfolio at book value ($20.4 million), and terminated its auto
loan operations.
3. In April 1998, management implemented a new strategy to sell 100% of
its mortgage loans designated as "held for sale" loans for cash,
emphasizing cash flow. No mortgage loan securitization transaction
was done in the second quarter, and none is planned for the third
quarter of 1998. Cash flow will continue to be a primary focus for
management, as the Company believes that those with positive cash
flow should be better positioned for sustainable growth.
4. The Company tightened its underwriting guidelines in April 1998.
5. Management changed the base pay for retail sales originators in May
1998 to be more incentive oriented.
6. The Company reduced its workforce by approximately 200 associates in
May 1998 to streamline the organization and to increase
efficiencies. However, much of the reduction in costs resulting from
this will not be evident until the third quarter 1998 as the result
of severance and vacation paid with respect to terminated employees.
7. On June 30, 1998, the Company entered into a new 3 year revolving
warehouse line of credit facility to fund its mortgage loan
operations. The Company had approximately $24.9 million in
availability under its lines of credits at June 30, 1998 based on
the borrowing base calculations. Availability is expected to
increase as additional loan sales take place later this year.
Depending on the Company's liquidity position and capital needs, the
Company may, from time to time, repurchase some of its senior
unsecured debt on the open market utilizing excess working capital
generated.
8. In June 1998, the Company restructured the retail operations in an
effort to improve loan processing efficiency and speed.
9. Management has reduced general and administrative expenses ("G&A")
to approximately $7.5 million in July 1998 from an average of $9.9
million per
<PAGE>
month in the first quarter and $8.6 million per month in the second
quarter. Management expects third quarter G&A expenses to be $4.0
million lower than the second quarter. G&A expenses are expected to
be reduced by an additional $2.0 million per month after September
as a result of the sale of selected business units.
10. In July 1998, the Company entered into a letter of intent for the
sale of Sterling Lending Corporation for $1.5 million.
11. In July 1998, the Company entered into a letter of intent for the
sale of the majority of the small business loan division for net
cash proceeds of $58 million.
12. In August 1998, the Company consolidated the processing and closing
functions of its retail mortgage regional operating center in
Houston with another regional operating center, as well as
streamlining several other areas, providing additional cost savings
of $170,000 per month.
All of these steps are important initiatives and are designed to focus
attention on the mortgage loan division and build a much stronger organization
with the necessary systems, processes, procedures, and controls.
HomeGold Financial, Inc. is a financial services company, which
originates, services, and sells non-prime first and second lien residential
mortgage loans and loans to small businesses. HomeGold currently has
approximately 1,040 employees and operates in 42 states.
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET FORTH
IN THIS DOCUMENT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN
THE FORWARD-LOOKING STATEMENTS. FOR MORE COMPLETE INFORMATION CONCERNING FACTORS
WHICH COULD AFFECT THE COMPANY'S FINANCIAL RESULTS, REFERENCE IS MADE TO THE
COMPANY'S REGISTRATION STATEMENTS, REPORTS AND OTHER DOCUMENTS FILED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
(f/k/a Emergent Group, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
<S> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEAR ENDED
--------------------- ------------------ DECEMBER 31,
1998 1997 1998 1997 1997
---- ---- ---- ---- ------------
(UNAUDITED) (UNAUDITED) (AUDITED)
Revenues:
Interest income $10,516 $ 8,817 $19,190 $ 15,024 $34,008
Servicing income 3,379 1,940 7,601 3,085 8,514
Cash gain on sale of loans 4,530 5,493 7,979 7,296 14,153
Non-cash gain on sale of loans 112 6,396 3,181 10,811 38,675
Loan fee income 5,359 7,337 8,961 13,215 30,207
Other revenues 880 196 2,418 433 1,399
------------ -------- --------- --------- --------
Total revenues 24,776 30,179 49,330 49,864 126,956
Expenses:
Interest expense 9,952 6,055 18,385 9,782 25,133
Provision for credit losses 2,111 2,599 6,940 4,671 10,030
Unrealized loss on residual
receivables 7,330 0 8,910 0 0
General and administrative expense 25,791 18,429 55,444 31,715 84,284
------------ -------- --------- --------- --------
Total expenses 45,184 27,083 89,679 46,168 119,447
------------ -------- --------- --------- --------
Income (loss) before income taxes
and minority interest (20,408) 3,096 (40,349) 3,696 7,509
Provision (benefit) for income taxes 2,566 (1,667) 3,244 (1,625) (3,900)
------------ -------- --------- --------- --------
Income (loss) before minority interest (22,974) 4,763 (43,593) 5,321 11,409
Minority interest in (earnings)
loss of subsidiaries (2) -- 2 (156) (156)
------------ -------- --------- --------- --------
Net income (loss) ($22,976) $ 4,763 $(43,591) $ 5,165 $ 11,253
============ ======== ========= ========= ========
Basic earnings (loss) per share $ (2.37) $ 0.52 $ (4.49) $ 0.56 $ 1.20
============ ======== ========= ========= ========
Diluted earnings (loss) per share $ (2.37) $ 0.51 $ (4.49) $ 0.55 $ 1.17
============ ======== ========= ========= ========
Weighted average number of
shares outstanding 9,708,083 9,147,570 9,705,055 9,145,385 9,406,221
============ ======== ========= ========= ========
Weighted average number of
shares, options and warrants
outstanding 9,708,083 9,310,153 9,705,055 9,318,050 9,598,811
============ ======== ========= ========= ========
</TABLE>
(MORE TABLES FOLLOW)
<PAGE>
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
(f/k/a Emergent Group, Inc.)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
JUNE 30,
--------------------- DECEMBER 31,
1998 1997 1997
------ ------ ------
(UNAUDITED) (AUDITED)
ASSETS
Cash and cash equivalents $ 43,628 $ 2,445 $ 7,561
Loans receivable - held for investment 87,370 117,182 100,379
Loans receivable - held for sale 226,844 192,881 197,236
---------- ---------- ----------
Total loans receivable 314,214 310,063 297,615
Less allowances for loan losses 8,385 4,621 6,528
Less unearned discount, dealer reserves
and deferrals 4,380 3,803 2,658
Net loans receivable 301,449 301,639 288,429
Accrued interest receivable and other
receivables 11,514 7,505 15,087
Residual receivables (net of allowance
for loss of $12,861, $6,214 and
$14,255, respectively) 67,679 29,077 63,202
Property and equipment, net 21,559 10,348 18,080
Real estate and personal property acquired
through foreclosure 4,140 4,063 3,295
Excess of cost over net assets of acquired
businesses, net 2,294 2,627 2,874
Debt origination costs, net 6,657 490 4,767
Deferred income tax asset 4,151 2,795 4,151
Servicing asset 1,289 -- 1,468
Other assets 5,523 3,999 7,238
---------- ----------- -----------
Total assets $ 469,883 $ 364,988 $ 416,152
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving warehouse lines of credit $ 167,763 $ 174,353 $ 77,605
Mortgage note payable 3,446 0 0
Senior unsecured debt 125,000 0 125,000
Investor savings debentures 138,091 124,890 134,315
Other liabilities 15,606 8,590 15,858
---------- ---------- -----------
Total liabilities 449,906 307,833 352,778
Minority interest 68 0 0
Shareholders' equity 19,909 57,155 63,374
---------- ---------- -----------
Total liabilities and
shareholders' equity $ 469,883 $ 364,988 $ 416,152
========== ========== ===========
</TABLE>
(MORE TABLES FOLLOWS)
<PAGE>
HGFN Announces Second Quarter Results
Page 8
August 7, 1998
- ------------------------------------------------------------------------------
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
(f/k/a/ Emergent Group, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEAR ENDED
---------------- ---------------- DECEMBER 31,
1998 1997 1998 1997 1997
----- ----- ------ ------ ---------
(UNAUDITED) (UNAUDITED) (AUDITED)
Operating Cash Income:
Servicing fees received and
excess cash flow from
securitization trusts $ 2,143 $ 1,352 $ 4,871 $ 2,322 $ 3,687
Interest received 10,867 7,733 20,234 13,913 31,716
Cash gain on sale of loans 4,530 5,493 7,979 7,296 14,153
Cash loan origination fees
received 5,959 9,135 9,842 15,068 31,843
Securitization hedge gains 0 0 38 0 0
Other cash income 1,016 209 2,565 447 1,875
--------- -------- --------- --------- ---------
Total operating cash income 24,515 23,922 45,529 39,046 83,274
Operating Cash Expenses:
Securitization costs 0 764 851 1,664 3,646
Securitization hedge losses 0 1,606 0 1,606 2,125
Cash operating expenses 24,882 17,814 53,635 31,060 81,594
Interest paid 7,230 5,037 18,769 8,596 20,980
Taxes paid 1,280 498 1,467 566 1,581
--------- -------- --------- --------- ---------
Total operating cash expenses 33,392 25,719 74,722 43,492 109,926
--------- -------- --------- --------- ---------
CASH FLOW DUE TO OPERATING CASH INCOME
AND EXPENSES (8,877) (1,797) (29,193) (4,446) (26,652)
Other cash flows from operating activities:
Cash provided by (used in) other
payables and receivables (9,817) (1,096) 639 (211) (5,355)
Cash provided by (used in) loans
held for sale 14,982 (101,313) (51,058) (118,779) (114,282)
--------- -------- --------- --------- ---------
Net cash provided by (used in)
operating activities (3,712) (104,206) (79,612) (123,436) (146,289)
Net cash provided by (used in) investing
activities (106) (6,440) 18,174 (5,900) (11,588)
Net cash provided by (used in) financing
activities 41,403 111,665 97,505 130,505 164,162
--------- -------- --------- --------- ---------
Net increase in cash and cash
equivalents 37,585 1,019 36,067 1,169 6,285
Cash and cash equivalents,
beginning of period 6,043 1,426 7,561 1,276 1,276
--------- -------- --------- --------- ---------
Cash and cash equivalents, end of
period $43,628 $ 2,445 $ 43,628 $ 2,445 $ 7,561
========= ========= ========= ======== ===========
</TABLE>
(MORE TABLES FOLLOW)
<PAGE>
HGFN Announces Second Quarter Results
Page 9
August 7, 1998
- -------------------------------------------------------------------------------
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
OTHER SELECTED FINANCIAL DATA
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEAR ENDED
----------------- ----------------- DECEMBER 31,
1998 1997 1998 1997 1997
------ ------ ------ ------ ------
LOAN ORIGINATION VOLUME:
- -----------------------
Mortgage Loan Division:
Retail $113,764 $148,534 $238,526 $239,594 $562,709
Wholesale 93,096 134,513 198,780 234,667 520,107
--------- -------- -------- -------- --------
Total Mortgage Loan Division 206,860 283,047 437,306 474,261 1,082,816
Small Business Loan Division 30,407 21,490 65,863 30,996 81,018
Auto Loan Division 0 4,052 2,983 8,488 15,703
--------- -------- -------- -------- ---------
Total loan origination volume $237,267 $308,589 $506,152 $513,745 $1,179,537
========= ======== ======== ======== =========
LOAN SALES AND SECURITIZATIONS:
Mortgage Loan Division:
Whole loan sales $229,624 $118,611 $293,515 $158,480 $435,333
Securitizations 0 121,214 92,173 198,740 487,563
-------- -------- --------- --------- ---------
Total Mortgage Loan Division 229,624 239,825 385,688 357,220 922,896
Small Business Loan Division:
7(a) Participations 15,654 13,862 26,192 17,646 41,232
Securitizations 0 0 1,827 4,626 24,286
-------- -------- --------- --------- ---------
Total Small Business Loan Division 15,654 13,862 28,019 22,272 65,518
Auto Loan Division (sale of loans) 0 0 20,578 0 0
-------- -------- --------- --------- ---------
Total loan sales and securitizations $245,278 $253,687 $434,285 $379,492 $ 988,414
======== ======== ========= ========= =========
TOTAL SERVICED PORTFOLIO, INCLUDING LOANS SERVICED FOR OTHERS WITHOUT CREDIT RISK:
Mortgage Loan Division $752,866 $444,472 $752,866 $444,472 $768,556
Small Business Loan Division 239,505 169,891 239,505 169,891 198,876
Auto Loan Division 578 22,556 578 22,556 21,284
-------- -------- --------- --------- ---------
Total serviced portfolio $992,949 $636,919 $992,949 $636,919 $988,716
========= ======== ======== ======== ==========
TOTAL SERVICED UNGUARANTEED PORTFOLIO, EXCLUDING LOANS SERVICED FOR OTHERS
WITHOUT CREDIT RISK:
Mortgage Loan Division $752,866 $444,472 $752,866 $444,472 $700,248
Small Business Loan Division 99,825 63,043 99,825 63,043 78,822
Auto Loan Division 578 22,556 578 22,556 21,284
-------- -------- --------- --------- ---------
Total serviced portfolio $853,269 $530,071 $853,269 $530,071 $800,354
========= ======== ======== ======== ==========
</TABLE>
(MORE TABLES FOLLOWS)
<PAGE>
HGFN Announces Second Quarter Results
Page 10
August 7, 1998
- -------------------------------------------------------------------------------
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
UNAUDITED ASSET QUALITY STATISTICS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
JUNE 30, 1998 MARCH 31, 1998 DECEMBER 31, 1997
--------------- ---------------- -----------------
TOTAL COMPANY: $ % $ % $ %
-------- ------- -------- ------ -------- -------
Delinquencies as a percent of total
unguaranteed serviced loans:
30-59 days $34,702 4.07% $ 34,115 3.73% $29,174 3.65%
60-89 days 13,076 1.53% 11,527 1.26% 10,009 1.25%
90 days or more and
loans in foreclosure
process 38,556 4.52% 31,934 3.49% 22,147 2.76%
-------- ----- -------- ------ -------- ------
Total greater than
30 days $ 86,334 10.12% $ 77,576 8.48% $61,330 7.66%
======== ===== ======== ====== ======== ======
YTD net charge-offs as percentage
of average unguaranteed
serviced loans (annualized) $ 3,849 0.85% $ 2.432 1.10% $ 6,811 1.38%
======== ===== ======== ====== ======== ======
Total allowances for credit
losses as percentage
of total unguaranteed
serviced loans $ 21,246 2.49% $ 23,801 2.60% $ 20,783 2.60%
======== ===== ======== ====== ======== ======
MORTGAGE LOAN DIVISION:
Delinquencies as a percent of total
unguaranteed serviced loans:
30-59 days $ 32,977 4.38% $ 32,100 3.90% $ 25,424 3.63%
60-89 days 12,881 1.71% 11,472 1.40% 9,383 1.34%
90 days or more and
loans in foreclosure
process 36,830 4.89% 30,053 3.65% 21,233 3.03%
======== ===== ======== ====== ======== ======
Total greater than
30 days $ 82,688 10.98% $ 73,625 8.95% $ 56,040 8.00%
======== ===== ======== ====== ======== ======
YTD net charge-offs as percentage
of average unguaranteed
serviced loans
(annualized) $ 2,729 0.68% $ 1,893 0.98% $ 1,305 0.32%
======== ===== ======== ====== ======== ======
Total allowances for credit
losses as percentage
of total unguaranteed
serviced loans $ 15,227 2.02% $ 17,569 2.14% $ 13,839 1.98%
======== ===== ======== ====== ======== ======
SMALL BUSINESS LOAN DIVISION:
Delinquencies as a percent of total
unguaranteed serviced loans:
30-59 days $ 1,671 1.68% $ 1,949 2.11% $ 2,253 2.86%
60-89 days 134 0.13% 0 0.00% 348 0.44%
90 days or more
and loans in foreclosure
process 1,495 1.50% 1,526 1.66% 686 0.87%
Total greater than
30 days $ 3,300 3.31% $ 3,475 3.77% $ 3,287 4.17%
======== ===== ======== ====== ======== ======
YTD net charge-offs as percentage
of average unguaranteed
serviced loans
(annualized) $ 462 1.04% $ (10) (0.05%) $ 1,683 2.74%
======== ===== ======== ====== ======== ======
Total allowances for credit
losses as percentage
of total unguaranteed
serviced loans $ 5,730 5.74% $ 5,861 6.35% $ 5,330 6.76%
======== ===== ======== ====== ======== ======
</TABLE>
-MORE-
<PAGE>
HGFN Announces Second Quarter Results
Page 11
August 7, 1998
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED DIVISIONAL STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
CONTINUING DISCONTINUED DISCONTINUED
MORTGAGE MORTGAGE COMMERCIAL
OPERATIONS OPERATIONS OPERATIONS TOTAL
------------- ------------ ------------- -------
Revenues:
Interest income $ 15,200 $ 10 $ 3,980 $ 19,190
Servicing income 5,986 0 1,615 7,601
Cash gain on sale of loans 4,545 1,355 2,079 7,979
Non-cash gain on sale of loans 2,907 0 274 3,181
Loan fee income 7,099 1,474 388 8,961
Other revenues 1,422 193 803 2,418
--------- -------- ---------- ----------
Total revenues 37,159 3,032 9,139 49,330
Expenses:
Interest expense 16,032 112 2,241 18,385
Provision for credit losses 5,776 0 1,164 6,940
Unrealized loss on residual
receivables 8,350 0 560 8,910
General and administrative expense 43,155 4,872 7,417 55,444
--------- -------- ---------- ----------
Total expenses 73,313 4,984 11,382 89,679
--------- -------- ---------- ----------
Loss before income taxes and
minority interest (36,154) (1,952) (2,243) (40,349)
Provision (benefit) for income taxes 3,813 (51) (518) 3,244
--------- -------- ---------- ----------
Loss before minority interest (39,967) (1,901) (1,725) (43,593)
Minority interest in loss
of subsidiaries 2 0 0 2
--------- -------- ---------- ----------
Net loss $ (39,965) $(1,901) $ (1,725) $(43,591)
========= ======= ========= ==========
</TABLE>
-MORE-
<PAGE>
HGFN Announces Second Quarter Results
Page 12
August 7, 1998
- -------------------------------------------------------------------------------
HOMEGOLD FINANCIAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED DIVISIONAL BALANCE SHEETS
JUNE 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
CONTINUING DISCONTINUED DISCONTINUED
MORTGAGE MORTGAGE COMMERCIAL
OPERATIONS OPERATIONS OPERATIONS ELIMINATIONS TOTAL
---------- ---------- ------------ ------------ -----
ASSETS
Cash and cash equivalents $ 41,790 $ 0 $ 1,838 $ 0 $43,628
Loans receivable held for
investment 53,082 0 34,288 0 87,370
Loans receivable held for sale 186,342 0 40,502 0 26,844
--------- --------- ---------- ------------- ---------
Total loans receivable 239,424 0 74,790 0 314,214
Less allowances for loan losses 5,747 0 2,638 0 8,385
Less unearned discount, dealer
reserves and deferrals 3,060 0 1,320 0 4,380
--------- --------- ---------- ------------- ---------
Net loan receivables 230,617 0 70,832 0 301,449
Accrued interest receivable and
other receivables 9,395 0 2,119 0 11,514
Intercompany receivables and
investment in affiliates 49,487 0 0 (49,487) 0
Residual receivables, net 50,299 0 17,380 0 67,679
Property and equipment, net 19,081 1,352 1,126 0 21,559
Real estate and personal property
acquired through foreclosure 4,140 0 0 0 4,140
Excess of cost over net assets of
acquired businesses, net 1,706 0 588 0 2,294
Debt origination costs, net 6,455 0 202 0 6,657
Deferred income tax asset 2,820 0 1,331 0 4,151
Servicing asset 1,289 0 0 0 1,289
Other assets 4,395 109 1,019 0 5,523
--------- --------- ---------- ------------- ---------
Total assets $ 421,474 $ 1,461 $ 96,435 $ (49,487) $ 469,883
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving warehouse lines of
credit $ 124,467 $ 0 $ 43,296 $ 0 $ 167,763
Mortgage note payable 3,446 0 0 0 3,446
Senior unsecured debt 125,000 0 0 0 125,000
Investor savings debentures 138,091 0 0 0 138,091
Other liabilities 10,493 366 4,747 0 15,606
--------- --------- ---------- ------------- ---------
Total liabilities 401,497 366 48,043 0 449,906
Minority interest 68 0 0 0 68
Intercompany debt 0 586 17,368 (17,954) 0
Shareholders' equity 19,909 509 31,024 (31,533) 19,909
--------- --------- ---------- ------------- ---------
Total liabilities and
shareholders' equity $ 421,474 $ 1,461 $ 96,435 $ (49,487) $469,883
============ =========== ========== ============= ========
</TABLE>
-END-
