<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
<S> <C>
For the Quarterly Period Ended Commission File
MARCH 31, 1997 No. 0-23854
</TABLE>
RELIANCE ACCEPTANCE GROUP, INC.
Exact Name of Registrants as Specified in Charter
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 36-3235321
- ------------------------------ -------------------------
State or Other Jurisdiction of I. R. S. Employer
Incorporation or Organization Identification Number
</TABLE>
400 NORTH LOOP 1604 EAST, SUITE 200
SAN ANTONIO, TEXAS 78232
Address of Principal Executive Offices
(210) 496-5910
Registrant's Telephone Number, Including Area Code
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____
---
The number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding at May 9, 1997
- -------------------------- --------------------------------
<S> <C>
Common Stock, $.01 Par Value 10,907,303
</TABLE>
Exhibit Index is located on page 24
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
-------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996................... 3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996............. 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996............. 5
Notes to Condensed Consolidated Financial Statements.... 6
Item 2. Management's Discussion and Analysis of the Results
of Operations and Financial Condition.................. 12
PART II. OTHER INFORMATION
- ----------------------------
Item 3. Defaults Upon Senior Securities......................... 22
Item 6. Exhibits and Reports on Form 8-K........................ 22
</TABLE>
2
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
PART I
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
---------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
ASSETS
Cash $ 6,307 $ 4,546
Short-term investments 2,207 2,110
Finance receivables, net 447,801 383,348
Nonrefundable dealer discounts (10,088) (10,718)
Allowance for credit losses (23,503) (4,913)
--------- ------------
414,210 367,717
Repossessions 8,086 5,927
Income tax refund receivable 12,590 9,180
Other assets 16,413 11,528
Net assets of discontinued operations --- 152,014
--------- ------------
Total assets $ 459,813 $ 553,022
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper $ 95 $ 147.326
Long-term debt 356,511 221,394
Accounts payable and other liabilities 3,049 8,651
--------- ------------
Total liabilities 359,655 377,371
--------- ------------
Stockholders' equity:
Preferred stock, $.01 par value; 20,000,000
shares authorized --- ---
Common stock, $.01 par value; 40,000,000 shares
authorized 10,878,925 and 15,036,720 shares
issued and outstanding at March 31, 1997, and
December 31, 1996 respectively 109 150
Class A common stock, $.01 par value 2,000,000
shares authorized --- ---
Surplus 87,734 82,793
Retained earnings 12,315 92,708
--------- ------------
Total stockholders' equity 100,158 175,651
--------- ------------
Total liabilities and stockholders' equity $ 459,813 $ 553,022
========= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1997 1996
-------- ---------
<S> <C> <C>
Interest income:
Interest and fee income $ 21,314 $ 15,397
Interest expense 6,908 4,189
-------- ---------
Net interest income 14,406 11,208
Provision for credit losses 22,200 ---
-------- ---------
Net interest income after provision for credit losses (7,794) 11,208
Other income 724 368
-------- ---------
Operating expense:
Salaries and employee benefits 4,823 3,196
Occupancy 354 215
Furniture, fixtures and equipment 152 97
Computer processing 108 118
Repossession & repair expense 1,551 1,435
Other operating expense 1,894 1,403
-------- ---------
Total operating expense 8,882 6,464
-------- ---------
Income from continuing operations before income taxes (15,952) 5,112
Income taxes (6,049) 1,959
-------- ---------
Net income from continuing operations (9,903) 3,153
-------- ---------
Discontinued operations:
Income from discontinued operations before income taxes 3,610 5,260
Income taxes 1,328 1,550
-------- ---------
Net income from discontinued operations 2,282 3,710
-------- ---------
Gain from split-off of discontinued operations 45,208 ---
-------- ---------
Net income $ 37,587 $ 6,863
======== =========
Earnings per share from continuing operations $ (0.76) $ 0.21
Earnings per share from discontinued operations 0.18 0.24
Earnings per share from gain 3.46 ---
-------- ---------
Earnings per share $ 2.88 $ 0.45
======== =========
Cash dividends declared per share $ 0.09 $ 0.09
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 37,587 $ 6,863
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain from split-off (45,208) --
Provision for credit losses 22,200 --
Dealer discount accretion -- (1,296)
Depreciation and amortization 462 94
Net changes in other assets and liabilities (22,845) (713)
-------- ---------
Net cash provided by operating activities (7,804) 4,948
-------- ---------
Cash flows from investing activities:
Loan repayments 41,604 28,371
Loan purchases (78,305) (72,092)
Net cash received from split-off 53,771 --
Net (increase) decrease
in assets of discontinued operations prior to split-off 3,471 (1,978)
Other, net (368) (280)
-------- ---------
Net cash used in investing activities 20,173 (45,979)
-------- ---------
Cash flows from financing activities:
Proceeds from commercial paper 301,622 201,367
Repayment of commercial paper (448,853) (179,971)
Proceeds from long-term debt 247,800 92,800
Repayments of long-term debt (112,683) (76,200)
Net proceeds from issuance of common stock 2,956 113
Dividends paid (1,353) (1,020)
-------- ---------
Net cash provided by financing activities (10,511) 37,089
-------- ---------
Net (decrease) increase in cash and cash equivalents 1,858 (3,942)
Cash and cash equivalents, beginning of period 6,656 4,829
-------- ---------
Cash and cash equivalents, end of period $ 8,514 $ 887
======== =========
Impact of Split-off:
Proceeds:
Net Cash $ 53,771
Bank qualified auto receivables 31,992
Redemption of Stock 117,000
--------
202,763
Net assets of discontinued operations at split-off (155,485)
Assets written off (2,070)
--------
Gain $ 45,208
========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The consolidated organization consists of Reliance Acceptance Group, Inc.
(formerly known as Cole Taylor Financial Group, Inc.) (the "Company" or the
"Parent Company") and its subsidiary, Reliance Acceptance Corporation
(formerly known as Cole Taylor Finance Co.) (the "Finance Company"). The
Finance Company operates through wholly owned subsidiaries under the name
Reliance Acceptance Corporation.
On February 12, 1997 (the "Closing Date"), pursuant to an Amended and Restated
Exchange Agreement (the "Share Exchange Agreement") dated as of June 12, 1996,
the Company and the Taylor Family Group, completed the exchange of (a) 1 share
of Common Stock, $.01 par value per share, of Taylor Capital Group, Inc., a
subsidiary of the Company, holding, among other things, all of the capital
stock of Cole Taylor Bank (the "Bank"), CT Mortgage Company, Inc. and an
investment in Alpha Capital Fund II, L. P. ("Alpha Capital"), which went to the
Taylor Family Group, for (b) all of the 4.5 million shares of Common Stock, $.01
par value per share, of the Company owned by the Taylor Family Group, which went
to the Company (the "Share Exchange"). Prior to the Share Exchange, the Bank
transferred to Cole Taylor Auto Finance, Inc. ("Auto Sub"), a newly formed
subsidiary of the Bank, which was subsequently transferred to the Company prior
to the Share Exchange, the Bank's used automobile receivables business
consisting of, among other things, used automobile finance contracts with a fair
market value of $31 million, and $52.03 million in cash. At the same time as the
Share Exchange, the Finance Company a subsidiary of the Company, was merged
with and into Auto Sub (the "Merger"), and the surviving corporation was renamed
Reliance Acceptance Corporation. The terms of the transaction were the result of
arm's length negotiations between the Board of Directors of the Company,
assisted by independent financial and legal advisors, and the Taylor Family
Group, and the transaction was approved by the Board without the participation
of members of the Taylor Family and by the stockholders of the Company at its
Annual Meeting held on November 15, 1996.
The condensed consolidated financial statements report the operations of the
Finance Company and applicable assets, liabilities and expenses of the Parent
Company as continuing operations. The split-off entity, consisting of the Bank
and Mortgage Company, qualifies as discontinued operations as defined in
Accounting Principles Board Opinion 30 (APB 30). Accordingly, the Company's
consolidated balance sheet as of December 31, 1996 is presented to reflect the
split-off entity's net assets as discontinued operations. The Bank and Mortgage
Company operations and a portion of the Parent Company expenses, prior to the
Closing Date, are reported as discontinued operations. In addition, all expenses
directly attributable to the split-off transaction are reported in discontinued
operations. The split-off was accounted for as a non-reciprocal distribution to
stockholders and an accounting gain or $45 million was recorded by the Company.
The accounting and reporting policies conform to generally accepted accounting
principles and to the general reporting practices within the finance industry.
All significant intercompany balances and transactions have been eliminated in
consolidation. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. These estimates may differ from actual
results.
6
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The unaudited interim condensed consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain disclosures required by generally accepted accounting
principles are not included herein.
In the opinion of management of the Company, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
consolidated financial position and consolidated results of operations for the
periods presented. The results of operations for the three month periods ended
March 31, 1997 are not necessarily indicative of the results to be expected for
the full year.
2. Finance Receivables and Nonrefundable Dealer Discounts:
The following table summarizes the components of finance receivables on the
dates shown (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Gross finance receivables $578,996 $507,166
Unearned finance charges 130,479 123,092
Unearned insurance commissions 716 726
-------- --------
Finance receivables, net 447,801 383,348
Nonrefundable dealer discounts 10,088 10,718
Allowance for credit losses 23,503 4,913
-------- --------
$414,210 $367.717
======== ========
</TABLE>
7
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the activity in the nonrefundable dealer
discounts for the three month periods ending March 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Balance at January 1 $ 15,631 $ 12,655
Nonrefundable dealer discounts established 7,749 5,638
Discount accretion -- (1,296)
Provision 22,200 --
Net charges to dealer discount/allowance (11,989) (2,314)
--------- --------
Balance at September 30 $ 33,591 $ 14,683
========= ========
</TABLE>
In conjunction with the financing of installment contracts, agreements are
entered into with dealers whereby nonrefundable dealer discounts are established
to protect the Finance Company from potential losses associated with such
contracts.
Effective January 1, 1996, the Company's accounting treatment for nonrefundable
dealer discounts was revised to follow guidelines analogous to the treatment
prescribed in AICPA Practice Bulletin 6, Amortization of Discounts on Certain
Acquired Loans. The Company stratifies its installment contracts receivable by
month of purchase (referred to as "pools") to evaluate the adequacy of the
nonrefundable dealer discounts allocated to such pools. If the nonrefundable
dealer discounts associated with an individual pool of installment contracts
receivable are estimated to be deficient to cover known and currently estimable
losses for that pool, an allowance for credit losses is used to absorb such
deficiency. Any required increase in the allowance for credit losses is
recognized as an additional provision for credit losses. If the nonrefundable
dealer discounts associated with an individual pool of installment contracts
receivable are estimated to exceed known and currently estimable losses for that
pool, such excess may be accreted to interest income over the remaining life of
the respective pool, using a method that approximates the level yield method.
Management's evaluation as to the adequacy of the nonrefundable dealer discount
to absorb losses is based on historical experience of the portfolio, estimates
of the collectibility of the accounts, the value of the underlying collateral,
and current economic conditions.
8
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Other Debt:
The following table reflects certain aspects of other debt of the Parent and
Finance Companies:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
(in thousands)
<S> <C> <C>
PARENT COMPANY:
Subordinated notes bearing interest
at 9% payable monthly, maturing
June 15, 2001 $ 25,000 $ 25,000
$30 million unsecured revolving
loan, bearing interest at prime
rate or LIBOR plus 1.5%, maturing
June 30, 1997; a commitment fee
of .25% per annum on the unused
portion of the credit line is
payable annually; paid in full
and canceled February 12, 1997 --- 22,700
FINANCE COMPANY:
Revolving credit agreement bearing
interest at reference rate plus .50%
or adjusted LIBOR plus 2.25%, maturing
July 12, 1997 227,150 55,550
Reliance Auto Receivable Corporation
$126,060,667 Asset Backed Notes, Series
1996-A, bearing interest at a rate of
6.10% 104,361 118,144
----------- -------------
Total $356,511 $221,394
=========== =============
</TABLE>
The revolving credit agreement borrowings are secured by the Finance Company's
receivables. The agreement includes financial covenants relating to the ratio of
debt to adjusted tangible net worth (as defined), the ratios of the allowance
for loan losses and nonrefundable dealer discounts to finance receivables, the
ratio of unsubordinated debt to borrowing base (as defined), the ratio of
adjusted net income (as defined) to interest expense and to fixed charges (as
defined), and the charge-off policy. It also contains restrictions, amongst
others, as to dividend payments, merger or disposal of assets and creation of
liens on assets owned or acquired. As of December 31, 1996, the Finance Company
was in default of covenants relating to the ratio of debt to adjusted tangible
net worth (as defined), the ratio of adjusted net income (as defined) to
interest expense, the ratio of unsubordinated debt to borrowing base (as
defined), and minimum adjusted tangible net worth (as defined). The Finance
Company received waivers from the lender regarding noncompliance with these
covenants as of December 31, 1996 and January 31, 1997. As of March 31, 1997,
the Finance Company was in default of a covenant relating to the ratio of
adjusted net income to interest expense and a covenant relating to submission of
certain financial information concerning the Finance Company and may have been
in default of covenants relating to minimum adjusted tangible net worth and a
prohibition on payment of dividends. The Finance Company has requested waivers
from the lender regarding noncompliance with all of these covenants.
9
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the fourth quarter of 1996, the Finance Company borrowed $126,060,667 at
a fixed rate of 6.10% in a securitized debt financing transaction which is
secured by $109,411,932 of the Company's finance receivables at March 31, 1997.
Under the agreement, all principal portions of payments received on the
underlying collateral plus interest at 6.10% are paid monthly to the
noteholders. The remaining collections from the collateral, less a 3% servicing
fee paid monthly to the Finance Company, are retained by the Trustee as
additional collateral subject to a maximum credit support amount (as defined).
The agreement includes financial covenants relating to the ratio of
delinquencies (as defined), the ratio of defaulted receivables (as defined), and
minimum requirements for tangible net worth (as defined). Violation of these
provisions could result in an increase in the credit support amount (as defined)
or a more rapid pay down of the notes or both. As of May 12, 1997, the Finance
Company was in default of the covenant relating to the ratio of defaulted
receivables described above. The note insurer has waived this default, subject
to the reservation of all future rights relating to remedies for such default.
10
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Net Assets of Discontinued Operations:
The assets and liabilities of the discontinued operations have been separately
classified on the balance sheet as net assets of discontinued operations. A
summary of these assets and liabilities follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1996
------------
ASSETS:
<S> <C>
Cash and due from banks $ 67,032
Federal funds sold 5,675
Interest-bearing deposits in other banks 14,564
Investment securities 403,789
Loans, net 1,205,055
Premises, leasehold improvements and equipment, net 15,314
Other assets 113,202
------------
Total assets - discontinued operations 1,824,631
------------
LIABILITIES:
Deposits 1,406,775
Borrowing 248,268
Accrued interest, taxes and other 17,574
liabilities
------------
Total liabilities - discontinued operations 1,672,617
============
Net assets of discontinued operations $ 152,014
============
</TABLE>
A summary of the net income of the discontinued operations for the period of
January 1, 1997 to February 11, 1997 and the three months ended March 31, 1996
is as follows (in thousands):
<TABLE>
<CAPTION>
For the period of Jan. 1, 1997 For the three months ended
to Feb. 11, 1997 March 31, 1996
------------------------------ --------------------------
<S> <C> <C>
Net interest income $ 8,566 $ 17,648
Provision for loan
losses (420) (999)
Noninterest income 1,930 3,701
Noninterest expense (6,466) (15,090)
Income taxes (1,328) (1,550)
------- --------
Net Income $ 2,282 $ 3,710
======= ========
</TABLE>
11
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Item 2
The following presents management's discussion and analysis of the results of
operations of the Company for the three months ended March 31, 1997 compared
to the same period in 1996 and the financial condition of the Company as of
March 31, 1997 compared to December 31, 1996. This discussion should be read in
conjunction with the consolidated financial statements and accompanying notes
presented elsewhere in this Form 10-Q.
The consolidated organization consists of Reliance Acceptance Group, Inc.
(formerly known as Cole Taylor Financial Group, Inc.) (the "Company" or the
"Parent Company") and its subsidiary, Reliance Acceptance Corporation
(formerly known as Cole Taylor Finance Co.) (the "Finance Company"). The
Finance Company operates through wholly owned subsidiaries under the name
Reliance Acceptance Corporation.
On February 12, 1997 (the "Closing Date"), pursuant to an Amended and Restated
Exchange Agreement (the "Share Exchange Agreement") dated as of June 12, 1996,
the Company and the Taylor Family Group, completed the exchange of (a) 1 share
of Common Stock, $.01 par value per share, of Taylor Capital Group, Inc., a
subsidiary of the Company, holding, among other things, all of the capital
stock of Cole Taylor Bank (the "Bank"), CT Mortgage Company, Inc. and an
investment in Alpha Capital Fund II, L. P. ("Alpha Capital"), which went to the
Taylor Family Group, for (b) all of the 4.5 million shares of Common Stock, $.01
par value per share, of the Company owned by the Taylor Family Group, which went
to the Company (the "Share Exchange"). Prior to the Share Exchange, the Bank
transferred to Cole Taylor Auto Finance, Inc. ("Auto Sub"), a newly formed
subsidiary of the Bank, which was subsequently transferred to the Company prior
to the Share Exchange, the Bank's used automobile receivables business
consisting of, among other things, used automobile finance contracts with a fair
market value of $31 million, and $52.03 million in cash. At the same time as the
Share Exchange, the Finance Company, was merged with and into Auto Sub (the
"Merger"), and the surviving corporation was renamed Reliance Acceptance
Corporation. The terms of the transaction were the result of arm's length
negotiations between the Board of Directors of the Company, assisted by
independent financial and legal advisors, and the Taylor Family Group, and the
transaction was approved by the Board without the participation of members of
the Taylor Family and by the stockholders of the Company at its Annual Meeting
held on November 15, 1996.
The condensed consolidated financial statements report the operations of the
Finance Company and applicable assets, liabilities and expenses of the Parent
Company as continuing operations. The split-off entity, consisting of the Bank
and Mortgage Company, qualifies as discontinued operations as defined in
Accounting Principles Board Opinion 30 (APB 30). Accordingly, the Company's
consolidated balance sheet as of December 31, 1996 is presented to reflect the
split-off entity's net assets as discontinued operations. The Bank and Mortgage
Company operations and a portion of the Parent Company expenses, prior to the
Closing Date, are reported as discontinued
12
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
operations. The split-off was accounted for as a non-reciprocal distribution to
stockholders and an accounting gain of $45 million was recorded by the Company.
The accounting and reporting policies conform to generally accepted accounting
principles and to the general reporting practices within the finance industry.
All significant intercompany balances and transactions have been eliminated in
consolidation. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. These estimates may differ from actual
results.
Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
Certain statements contained in this Management's Discussion and Analysis of
Results of Operations and Financial Condition are forward-looking statements
that are based on the beliefs of the Company's management, as well as
assumptions made by and information currently available to the Company's
management, and that are subject to certain risks or uncertainties. Such
forward-looking statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. When used herein, the words
"anticipate," "believe," "estimate," "expect" and similar expressions, as they
relate to the Company or its management, are intended to identify such forward-
looking statements. The Company cautions readers of this Quarterly Report on
Form 10-Q that a number of important factors could cause the Company's actual
results, performance or achievements in 1997 and beyond to differ materially
from the results, performance or achievements expressed in, or implied by, such
forward-looking statements. These factors include, without limitation, risks
associated with dependence on a single business segment and other risks and
uncertainties relating to the separation of the traditional commercial and
consumer banking business from the Company in the split-off: dependence on sales
of automobiles and related demand by consumers for financing; general economic
and business conditions affecting the Company's customers; the continued ability
of the Company to (a) find expansion opportunities and to successfully implement
the Company's expansion strategy, (b) to obtain new sources of funds through
securitizations of automobile loans, public or private offerings of debt
securities or otherwise, or maintain existing sources of funds, (c) to establish
and maintain relationships with automobile dealers and (d) to purchase an
increased number of loans meeting the Company's underwriting standards; changes
in interest rates; the adequacy of the Finance Company's dealer reserves and
allowance for credit losses; competition from other finance companies and
financial institutions; the impact of any other strategic transactions
undertaken by the Company; federal and state legislation, regulation and
supervision; the risk that a portion of the sales finance contracts purchased by
the Finance Company will become defaulted contracts or be subject to certain
claims of defenses which automobile buyers may assert against automobile dealers
or the Finance Company as the holder of the contracts; contractual restrictions
on the payment of dividends. These and other factors are more fully described in
the Company's other filings with the Securities and Exchange Commission,
including, without limitation, the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders and the Company's Prospectus dated May 25, 1994.
13
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Overview
The Company has operated in the financial services industry, engaged primarily
in the banking and consumer loan acceptance business. As a result of the split-
off, the Finance Company, along with the used automobile receivables business of
the Bank, constitutes the sole business operations of the Company. This
Management's Discussion and Analysis of Results of Operations and Financial
Condition focuses on the continuing operations of the Company and the Finance
Company.
The Finance Company commenced operations in January 1993, and at March 31, 1997,
operated 54 Reliance Acceptance Corporation offices in sixteen states. The
Finance Company's headquarters are located in San Antonio, Texas. To date, the
Finance Company's operations have focused on purchasing closed-end retail sales
finance contracts, primarily in connection with sales of used automobiles.
The Finance Company purchases each sales finance contract in accordance with its
underwriting standards and procedures. The majority of automobiles financed by
the Finance Company range in age from used current year models to those that are
five years old with less than 100,000 miles. Most of the Finance Company's
customers have some derogatory credit history, but have performed satisfactorily
in recent automobile financing transactions. Typically, loans have terms ranging
from 24 to 60 months at annual interest rates between 18% and 25%. Accounts are
repayable in monthly installments and are assessed late payment fees if
scheduled payments are not made within ten days of their due date.
FINANCIAL CONDITION
Finance Receivables
Net finance receivables increased 16.8% to $448 million at March 31, 1997; from
$383 million at December 31, 1996. The increase in finance receivables was
primarily attributable to the receipt of $31 million of used automobile finance
contracts, from the Bank pursuant to the Share Exchange Agreement and increased
production volume in existing offices.
The Company's offices in Texas accounted for approximately 39% of gross finance
receivables as of March 31, 1997; offices in Georgia accounted for approximately
13%; and each of the remaining states where offices are located accounted for
less than 10%. The total number of offices at March 31, 1997 was 54 compared to
36 at March 31, 1996 and 53 at December 31, 1996.
14
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Delinquencies and Repossessions
The Company generally suspends the accrual of interest when an account becomes
90 or more days contractually delinquent.
If an account becomes 60 or more days contractually delinquent it is classified
as delinquent. The following table sets forth certain information with respect
to the Company's 60 day and greater contractually delinquent receivables and
repossessed assets (in thousands):
<TABLE>
<CAPTION>
As of As of As of
3/31/97 12/31/96 3/31/96
-------- --------- --------
<S> <C> <C> <C>
Delinquent gross receivables (60 days or more past due) $ 12,093 $ 8,839 $ 2,810
Repossessed assets 8,086 5,927 6,483
-------- --------- --------
Total delinquent receivables and repossessed assets $ 20,179 $ 14,766 $ 9,293
======== ========= ========
Delinquent receivables to gross finance receivables 2.09% 1.74% 0.75%
Delinquent receivables and repossessed assets to gross
finance receivables plus repossessed assets 3.44% 2.88% 2.42%
</TABLE>
The Company's ratios reported above reflect significantly increasing trends with
respect to the level of nonperforming loans and repossessions.
15
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Allowance for Credit Losses and Nonrefundable Dealer Discounts
The following table summarizes, for the periods indicated, period end and
average net finance receivables, activity in the nonrefundable dealer discounts,
allowance for credit losses, charges to dealer discounts and related ratios:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
Mar. 31, 1997 Mar. 31, 1996
------------------ ------------------
<S> <C> <C>
Finance receivables, net, end of period $447,801 $278,998
Average finance receivables, net 414,929 254,413
Allowance for credit loss/Nonrefundable
dealer discount at December 31, 1996 $ 15,631 $ 12,655
Nonrefundable dealer discount established 7,749 5,638
Discount accretion (1,296)
Provision 22,200
Net charges to dealer discount (11,989) (2,314)
-------- --------
Allowance for credit loss/Nonrefundable
dealer discount at March 31, 1997 $ 33,591 $ 14,683
======== ========
Net charges to average finance 11.56% 3.64%
receivables, net (annualized)
Allowance for credit loss/Dealer discount
to finance receivables, net at end of period 7.5% 5.26%
</TABLE>
Net charges were $12.0 million and $2.3 million for the three month periods
ending March 31, 1997 and 1996, respectively. The increase in loss experience is
due to the significantly increasing trends with respect to the level of
nonperforming loans and repossessions.
16
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
The following table summarizes management's estimate of anticipated losses, by
pool, and its evaluation as to the adequacy of the nonrefundable dealer discount
and allowance for credit losses (in thousands):
<TABLE>
<CAPTION>
Volume Current Remaining
Originated Balance Percent ITD Losses Expected Losses Losses
Pool $ $ Avg Liquidated $ Vol(%) $ Vol(%) $ Vol(%) O/S(%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 1,347 - - 100.0 55 4.1 55 4.1 0 0.0 -
2Q93 3,259 14 2,000 99.6 150 4.6 150 4.6 0 0.0 1.0
3Q93 7,546 120 2,222 98.4 366 4.8 367 4.9 1 0.0 1.1
4Q93 9,217 219 2,607 97.6 343 3.7 345 3.7 2 0.0 0.8
---------------------------------------------------------------------------------------------------------
21,369 353 2,434 98.3 914 4.3 917 4.3 3 0.0 0.9
1Q94 16,053 858 2,870 94.7 802 5.0 811 5.1 10 0.1 1.1
2Q94 22,085 2,313 3,666 89.5 1,474 6.7 1,513 6.8 39 0.2 1.7
3Q94 29,010 4,999 4,849 82.8 2,274 7.8 2,371 8.2 97 0.3 1.9
4Q94 30,652 7,349 5,428 76.0 3,026 9.9 3,219 10.5 193 0.6 2.6
---------------------------------------------------------------------------------------------------------
97,800 15,519 4,681 84.1 7,576 7.7 7,914 8.1 339 0.3 2.2
1Q95 33,030 9,816 6,345 70.3 3,189 9.7 3,456 10.5 267 0.8 2.7
2Q95 49,082 18,466 6,974 62.4 4,786 9.8 5,329 10.9 543 1.1 2.9
3Q95 58,166 25,707 7,895 55.8 6,502 11.2 7,447 12.8 945 1.6 3.7
4Q95 68,326 33,410 8,403 51.1 8,950 13.1 10,479 15.3 1,529 2.2 4.6
---------------------------------------------------------------------------------------------------------
208,604 87,399 7,648 58.1 23,427 11.2 26,711 12.8 3,284 1.6 3.8
1Q96 78,236 47,116 8,766 39.8 8,628 11.0 10,892 13.9 2,264 2.9 4.8
2Q96 77,792 54,050 9,147 30.5 6,316 8.1 9,906 12.7 3,589 4.6 6.6
3Q96 70,098 57,042 9,313 18.6 3,137 4.5 8,412 12.0 5,275 7.5 9.2
4Q96 77,135 73,319 9,700 4.9 836 1.1 9,256 12.0 8,420 10.9 11.5
---------------------------------------------------------------------------------------------------------
303,261 231,527 9,273 23.7 18,917 6.2 38,466 12.7 19,548 6.4 8.4
1Q97 81,932 81,440 9,505 0.6 0 0.0 9,832 12.0 9,832 12.0 12.1
2Q97 - - - 0.0 - 0.0 - 0.0 - - -
3Q97 - - - 0.0 - 0.0 - 0.0 - - -
4Q97 - - - 0.0 - 0.0 - 0.0 - - -
---------------------------------------------------------------------------------------------------------
81,932 81,440 9,505 0.6 0 0.0 9,832 12.0 9,832 12.0 12.1
712,966 416,238 8,596 41.6 50,834 7.1 83,840 11.8 33,006 4.6 7.9
Other 31,563 585 1.9
------- ------ ----
Total 447,801 33,591 7.5
======= ====== ====
</TABLE>
17
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Debt
The Finance Company's primary debt is the $250 million secured senior debt
revolving credit agreement with a group of several lenders, led by Bank America
Business Credit, Inc. The arrangement is secured by the finance receivables of
the Finance Company, other than those that are part of the securitization
described below. The revolving credit agreement expires on July 12, 1997.
Although the Company is currently in negotiations to extend the revolving credit
agreement there can be no assurance that these negotiations will be successful.
Outstanding borrowings bear interest at floating rates, at the Company's option,
either equal to a reference rate plus 0.5% or adjusted LIBOR plus 2.25%. The
revolving credit agreement includes financial covenants relating to the ratio of
debt to adjusted tangible net worth (as defined), the ratio of the allowance for
loan losses and nonrefundable dealer discounts to finance receivables, the ratio
of unsubordinated debt to borrowing base (as defined), the ratio of adjusted net
income (as defined) to interest expense and to fixed charges (as defined), the
charge-off policy and the required level of reserves in relation to a rolling
12-month percentage of charge-offs (as defined). It also contains restrictions,
among others, as to dividend payments, merger or disposal of assets, and
creation of liens on assets owned or acquired. As of March 31, 1997, the Finance
Company was in default of a covenant relating to the ratio of adjusted net
income to interest expense and a covenant relating to submission of certain
financial information concerning the Finance Company and may have been in
default of covenants relating to minimum adjusted tangible net worth and a
prohibition on payment of dividends. The Finance Company has requested waivers
from the lender regarding noncompliance with all of these covenants. Failure to
receive continued funding under the revolving credit agreement, either as a
consequence of unwaived defaults or by reason of failure to receive an extension
of the agreement upon expiration, would have a material adverse effect on the
Company's liquidity, unless alternative financing could be arranged.
The Finance Company completed a securitization of finance receivables on
November 20, 1996 for approximately $126 million. The securitization was
structured as an "on balance sheet," financing transaction rather than using
"gain on sale" accounting treatment. As such, the transaction is analogous to a
fixed-rate, secured financing at an interest rate of approximately 7%. As of May
12, 1997, the Finance Company was in default of the covenant relating to the
ratio of defaulted receivables, which results in an increase in the credit
support amount (as defined) and in accelerated paydown of the asset backed notes
issued in the securitization. The note insurer has waived this default for the
current month, subject to the reservation of all future rights relating to
remedies for such default and to further negotiations between the Finance
Company and the note insurer. If such default had not been waived, or if the
note insurer determines not to waive such default in the future, the Company's
liquidity could be materially adversely affected, unless alternative financing
could be arranged. The proceeds of the securitization were used primarily to pay
down debt, particularly amounts drawn under the revolving credit agreement. If
market conditions warrant, the Company may consider further securitizations, or
issuances of fixed or floating rate debt securities, either publicly or
privately placed, as alternatives to additional bank financing.
18
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Prior to February, 1997, the Company also used a $200 million commercial paper
facility, guaranteed by the Company and supported by the revolving credit
agreement discussed above. The primary advantage offered by commercial paper to
the Company is its attractive interest rate, generally 200 or more basis points
lower than bank financing. Its primary disadvantage is its short-term nature,
with a term not exceeding 270 days. The Finance Company's commercial paper was
previously rated D-2 by Duff & Phelps Credit Rating Service and F-2 by Fitch
Investor Services. This rating meant the Finance Company's commercial paper was
"investment grade" and therefore marketable to purchasers of commercial paper
generally. But on March 11, 1997, Duff & Phelps downgraded the Finance Company's
commercial paper rating from D-2 to D-4 and its subordinated debt to BB from BB+
and on March 13, 1997, Fitch downgraded the Finance Company's commercial paper
rating to F-S. At the current ratings the Finance Company's commercial paper is
below investment grade and therefore not marketable. The Finance Company's
access to the commercial paper market since late January, 1997 already had been
severely curtailed owing to perceived conditions in the sub-prime auto finance
sector generally, particularly its declining credit quality in the fourth
quarter of 1996. Unless and until the credit ratings are upgraded, the Finance
Company will not access the commercial paper market and will continue to rely
primarily on its bank lines and securitizations for funding.
The Finance Company previously relied, to some extent, on loans from the Holding
Company, based on separate Holding Company borrowings from bank lines or
dividends from other subsidiaries. This source of funds is no longer present as
a result of the split-off transaction. The Company has $25 million of
subordinated debt outstanding at March 31, 1997. On May 12, 1997, Duff & Phelps
downgraded the Company's subordinated debt rating from CC to B- citing various
adverse credit factors. The Company's management is actively addressing these
concerns.
19
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS
Net Income
For the three months ended March 31, 1997, the Company's net income of $37.6
million represented a 445% increase as compared to the $6.9 million for the
three month period ended March 31, 1996. The $37.6 million of income for the
three months ended march 31, 1997 included a $45.2 million gain from the
disposition of discontinued operations. For the three months ended March 31,
1997, the Company's net loss of $9.9 million from continuing operations
represented a decrease of $13.1 million or 409.4% as compared to the $3.2
million of income for the same period of last year. The decrease in income from
continuing operations is primarily attributable to the Company's $22.2 million
provision for credit losses established during the quarter. The additional
provision was necessitated by significant increases in the Company's credit
losses in the first quarter of 1997, and the Company's analysis of these losses
employing a static pool reserve analysis, which is contained in this report (see
page 17). The Company does not currently know if further reserves for credit
losses will be necessary. The additional provision taken at the end of the first
quarter significantly increased the Company's coverage ratio for credit losses
(ratio of total reserves to outstanding receivables) from 4.1% to 7.5%. There
can be no assurance that future special provisions may not be necessary and if
so, earnings would be adversely affected by such additional provisions.
Management is actively addressing the issue of the Company's increased credit
losses with a view toward significantly lowering such losses in the near term,
particularly with respect to new originations. The Company is seeking to lower
credit losses through changes to personnel, policies and actual practices.
Net Interest Income
The Company's primary component of income is net interest income, which is the
difference between interest earned on finance receivables and interest paid on
borrowings. For the three months ended March 31, 1997, the Company's net
interest income increased 28.5% to $14.4 million as compared with $11.2 million
in the same period of 1996. The increase is attributable to an increase in
average net receivables, offset by an increase in delinquencies and the
discontinuation of dealer discount accretion. The net interest margin
(annualized), which is the ratio of net interest income divided by average
finance receivables was 13.9% in the three months ended March 31, 1997 versus
17.6% for the same period in 1996. During the first quarter of 1997, the
decrease in net interest margin was a result of higher interest expense due to
increased use of the revolving credit agreement, the discontinuation of income
accretion from the dealer reserve, a higher delinquency rate and the acquisition
of the Bank-qualified used automobile receivables that have a lower yield.
Operating Expenses
In addition to interest expense, the Company incurs operating expenses in the
conduct of its business. The following table summarizes the components of
operating expenses for the three months ended March 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
% of % of
1997 ANR 1996 ANR
------ ---- ------ -----
<S> <C> <C> <C> <C>
Salaries and employee benefits $4,823 4.65 $3,196 5.02
Occupancy 354 0.34 215 0.34
Furniture, fixtures and equipment 152 0.15 97 0.15
Computer processing 108 0.10 118 0.19
Repossession & repair expense 1,551 1.50 1,435 2.26
Other operating expenses 1,894 1.83 1,403 2.21
------ ---- ------ -----
Total operating expense $8,882 8.56 $6,464 10.16
====== ==== ====== =====
ANR = Average net finance receivables
</TABLE>
20
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
For the three months ended March 31, 1997, operating expenses increased 37.4% as
compared to the comparable 1996 period. Overall, operating expenses decreased as
a percentage of average net finance receivables from 10.16% to 8.56% for the
three months period ending March 31, 1996 and 1997, respectively. Salaries and
employee benefits, occupancy, furniture, fixtures and equipment, and other
operating expenses increased as a result of the opening of 18 new branches and
an accompanying increase in headcount to 560 at March 31, 1997, from 363 at
March 31, 1996.
LIQUIDITY
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the
Company's ability to repay borrowings as they mature and to make new loans and
investments as opportunities arise.
The Company's purchase of sales finance contracts are primarily financed with
funds drawn pursuant to the senior secured revolving credit agreement, proceeds
of asset securitization and cash flow from maturing sales finance contracts.
Prior to February 1997, the Company also used commercial paper extensively to
fund its operations.
The Company's primary source of funds is the $250 million secured senior debt
revolving credit agreement with a group of several lenders, led by Bank America
Business Credit, Inc. The arrangement is secured by the finance receivables of
the Finance Company, other than those that are part of the securitization
described below. The revolving credit agreement expires on July 12, 1997, and
the Company is currently in negotiations to extend the revolving credit
agreement. Failure to receive continued funding under the revolving credit
agreement could have a material adverse effect on the Company's liquidity,
unless alternative financing could be arranged.
The Company completed a securitization of finance receivables on November 20,
1996 for approximately $126 million. The securitization was structured as an "on
balance sheet", financing transaction rather than using "gain on sale"
accounting treatment. As such, the transaction is analogous to a fixed-rate,
secured financing. The proceeds of the securitization were used primarily to pay
down debt, particularly amounts drawn under the revolving credit agreement. If
market conditions warrant, the Company may consider further securitizations, or
issuances of fixed or floating rate debt securities, either publicly or
privately placed, as alternatives to additional bank financing.
ADDITIONAL ACCOUNTING PRONOUNCEMENTS
In February 1997, FASB Statement No. 128, "Earnings Per Share" (Statement 128),
was issued. Statement 128 supersedes APB Opinion No. 15, Earnings Per Share and
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. Statement 128 was issued to simplify the computation of
EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
fully diluted EPS with diluted EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS under APB 15.
Statement 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Earlier application is not permitted
(although pro forma EPS disclosure in the footnotes for periods prior to
required adoption is permitted). After adoption, all prior-period EPS data
presented shall be restated to conform with Statement 128. The Company does not
expect adoption of Statement 128 to have a significant impact on the Company's
financial statements.
21
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See first and second paragraphs on page 18.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index on page 24.
(b) Reports on Form 8-K -
(1) the Company filed a Current Report on Form 8-K dated February
12, 1997, to provide (i) the Closing Date and terms of the
split-off pursuant to the Share Exchange Agreement, (ii)
information regarding the appointment of principal executive
officers and Board members of Reliance Acceptance Group, Inc.
and (iii) unaudited proforma consolidated financial
statements as of September 30, 1996 and December 31, 1995.
(2) The Company filed a Current Report on Form 8-K dated May 15,
1997 to provide information regarding certain significant
management changes.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Reliance Acceptance Group, Inc.
---------------------------------
(Registrant)
Date: May 15, 1997 /s/ James D. Dolph
------------ ---------------------------------
James D. Dolph
Chief Financial Officer
23
<PAGE>
RELIANCE ACCEPTANCE GROUP, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Documents Number
- --------- ---------------------------- ------
<S> <C> <C>
11 Statement regarding computation of primary earnings per share......... 25
27 Financial Data Schedule............................................... 26
</TABLE>
<PAGE>
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------------
1997 1996
----------- ----------
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
<S> <C> <C>
1 Average common shares outstanding $ 12,940,029 14,576,280
2 Net additional shares assuming
stock options exercised and proceeds
used to purchase treasury stock 111,578 789,422
3 Average number of common and common
equivalent shares outstanding 13,051,607 15,365,702
============ ===========
EARNINGS
4 Net income (loss) from continuing
operations (9,903,000) $ 3,153,000
5 Net income from discontinued
operations 2,282,000 3,710,000
6 Gain from split-off of discontinued
operations 45,208,000 ---
------------ -----------
7 Net income $ 37,587,000 $ 6,863,000
============ ===========
PER SHARE AMOUNTS
8 Net income per share from
continuing operations
(line 4/ line 3) $ (0.76) $ 0.21
9 Net income per share from
discontinued operations
(line 5/ line 3) 0.18 0.24
10 Gain per share (line 6/ line 3) 3.46 ---
------------ -----------
11 Net income per share
(line 6/ line 3) $ 2.88 $ 0.45
============ ===========
</TABLE>
Note: In all periods, earnings per share were calculated using the treasury
stock method. Fully diluted earnings per share are not presented as they
are less than 3% dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,307
<SECURITIES> 2,207
<RECEIVABLES> 437,713
<ALLOWANCES> 23,503
<INVENTORY> 0
<CURRENT-ASSETS> 37,089
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 459,813
<CURRENT-LIABILITIES> 3,144
<BONDS> 356,511
0
0
<COMMON> 109
<OTHER-SE> 100,049
<TOTAL-LIABILITY-AND-EQUITY> 459,813
<SALES> 0
<TOTAL-REVENUES> 22,038
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,882
<LOSS-PROVISION> 22,200
<INTEREST-EXPENSE> 6,908
<INCOME-PRETAX> (15,952)
<INCOME-TAX> 6,049
<INCOME-CONTINUING> (9,903)
<DISCONTINUED> 2,282
<EXTRAORDINARY> 45,208
<CHANGES> 0
<NET-INCOME> 37,587
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 2.88
</TABLE>
