<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
AMENDMENT NO. 2
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-27314
CITYSCAPE FINANCIAL CORP.
-------------------------
DELAWARE 11-2994671
- ------------------------ -----------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
565 TAXTER ROAD, ELMSFORD, NEW YORK 10523-5200
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(914) 592-6677
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
29,640,212 SHARES $.01 PAR VALUE, OF
COMMON STOCK, AS OF NOVEMBER 14, 1996
-------------------------------------
<PAGE> 2
CITYSCAPE FINANCIAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996
Pursuant to Rule 12b-15 under the Securities Act of 1934, as amended, the
Registrant is filing this amendment to its Quarterly Report on Form 10-Q, which
amendment contains restated financial information as of and for the six months
and the three months ended June 30, 1996. There have been no changes or
restatements of the financial information as of and for the six months and the
three months ended June 30, 1995.
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
----
<S> <C>
Consolidated Statements of Financial Condition at June 30, 1996 and
December 31, 1995 2
Consolidated Statements of Operations for the six months and the three months
ended June 30, 1996 and 1995 3
Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1995 4
Notes to Consolidated Financial Statements 5 - 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8 - 15
PART II - OTHER INFORMATION 16 - 23
</TABLE>
<PAGE> 3
CITYSCAPE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 6,860,183 $ 3,598,549
Cash held in escrow 10,885,667 5,920,118
Prepaid commitment fees 37,034,000 -
Available-for-sale securities 9,818,190 -
Mortgage servicing receivables 129,223,915 24,561,161
Trading securities 45,414,617 15,571,455
Mortgages held for sale, net 114,348,602 73,852,293
Mortgages held for investment, net 4,510,991 1,024,204
Equipment and leasehold improvements, net 5,956,176 2,380,571
Goodwill 48,788,336 19,258,011
Other assets 31,962,110 6,352,619
--------------- ---------------
Total assets $ 444,802,787 $ 152,518,981
=============== ===============
LIABILITIES
Warehouse financing facilities $ 72,796,772 $ 74,901,975
Accounts payable and other liabilities 35,648,248 16,410,833
Allowance for loan losses 11,949,262 2,130,954
Income taxes payable 38,829,387 1,204,803
Standby financing facility 7,966,292 771,361
Notes payable 38,000,000 -
Convertible subordinated debentures 143,750,000 -
--------------- ---------------
Total liabilities 348,939,961 95,419,926
--------------- ---------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, $.01 par value, 50,000,000 shares authorized;
29,626,452 and 28,900,732 issued and outstanding at June 30, 1996
and December 31, 1995, respectively 296,264 289,007
Additional paid-in capital 57,435,086 44,838,143
Foreign currency translation adjustment 84,168 (6,219)
Unrealized gain on available-for-sale securities, net of taxes 5,670,044 -
Retained earnings 32,377,264 11,978,124
--------------- ---------------
Total stockholders' equity 95,862,826 57,099,055
--------------- ---------------
COMMITMENTS AND CONTINGENCIES --------------- ---------------
Total liabilities and stockholders' equity $ 444,802,787 $ 152,518,981
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
CITYSCAPE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
REVENUES 1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gain on sale of loans $29,216,968 $ 8,591,851 $53,309,706 $12,471,351
Mortgage origination income 1,355,553 785,476 2,191,649 1,404,636
Interest 6,460,688 1,067,926 9,478,371 2,133,758
Servicing income 795,149 73,939 1,355,853 98,688
Earnings from partnership 110,000 196,639 260,000 431,000
Other 514,343 30,870 636,190 43,440
----------- ----------- ----------- -----------
Total revenues 38,452,701 10,746,701 67,231,769 16,582,873
----------- ----------- ----------- -----------
EXPENSES
Salaries and employee benefits 9,170,243 2,281,875 14,552,588 4,084,079
Interest expense 4,683,682 1,392,875 6,381,727 2,332,864
Selling expenses 3,011,939 607,473 4,374,906 917,903
Other operating expenses 1,980,177 1,655,884 6,024,575 2,690,706
Amortization of goodwill 708,486 - 1,202,280 -
----------- ----------- ----------- -----------
Total expenses 19,554,527 5,938,107 32,536,076 10,025,552
----------- ----------- ----------- -----------
Earnings before minority interest and income taxes 18,898,174 4,808,594 34,695,693 6,557,321
Minority interest - 845,608 - 845,608
----------- ----------- ----------- -----------
Earnings before income taxes 18,898,174 3,962,986 34,695,693 5,711,713
Provision for income taxes 7,772,178 1,585,194 14,296,553 2,284,685
----------- ----------- ----------- -----------
NET EARNINGS $11,125,996 $ 2,377,792 $20,399,140 $ 3,427,028
=========== =========== =========== ===========
PRIMARY EARNINGS PER SHARE
Net earnings per share of common stock $ 0.37 $ 0.11 $ 0.68 $ 0.16
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE
Net earnings per share of common stock $ 0.35 - $ 0.66 -
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AND COMMON STOCK EQUIVALENTS
Primary 30,452,048 22,081,628 30,152,067 22,081,628
=========== =========== =========== ===========
Fully Diluted 33,841,939 - 31,940,693 -
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
CITYSCAPE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 20,399,140 $ 3,427,028
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,692,300 113,711
Income taxes payable 37,624,584 1,457,372
Earnings from partnership interest (260,000) (431,000)
Increase in mortgage servicing receivables (56,275,808) (5,438,021)
Increase in trading securities (29,843,162) (4,277,266)
Net changes in operating assets and liabilities:
Increase in accrued interest receivable (1,621,521) (82,267)
(Increase) decrease in accounts receivable (10,472,041) 406,962
Proceeds from sales of mortgages 731,322,184 140,525,396
Mortgage origination funds disbursed (730,999,857) (148,539,391)
(Increase) decrease in other assets (11,918,090) 11,147
Increase in accounts payable & other liabilities 21,385,770 2,109,193
Other, net 752,169 827,058
------------ -----------
Net cash used in operating activities (27,214,332) (9,890,078)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of J&J and Heritable (102,154,974) -
Net purchases of equipment (3,389,575) (284,582)
Net (advances) distributions from partnership 908,315 141,168
Increase in mortgages held for investment (713,787) -
Increase in real estate owned (180,472) -
------------ -----------
Net cash used in investing activities (105,530,493) (143,414)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in warehouse financings and notes payable (2,104,760) 8,832,791
Increase (decrease) in standby financing facility (1,138,261) 2,049,302
Net proceeds from issuance of subordinated debentures 139,134,125 -
Net proceeds from issuance of common stock 115,355 500,000
------------ -----------
Net cash provided by financing activities 136,006,459 11,382,093
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,261,634 1,348,601
Cash and cash equivalents at beginning of period 3,598,549 919,291
------------ -----------
Cash and cash equivalents at end of period $ 6,860,183 $ 2,267,892
============ ===========
SUPPLEMENTAL DISCLOSURE OF FLOW INFORMATION
Income taxes paid during the period $ 2,925,028 $ 1,463,625
============ ===========
Interest paid during the period $ 2,357,385 $ 1,437,812
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
CITYSCAPE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. ORGANIZATION
Cityscape Financial Corp. ("Cityscape" or the "Company") is a consumer
finance company that, through its wholly-owned subsidiary, Cityscape Corp.
("CSC"), engages in the business of originating, purchasing, selling and
servicing mortgage loans secured primarily by one- to four-family residences.
The majority of the Company's loans are made to owners of single family
residences who use the loan proceeds for such purposes as debt consolidation,
financing of home improvements and educational expenditures, among others. In
the United States, the Company is licensed to do business in 37 states and the
District of Columbia. The Company commenced operations in the United Kingdom in
May 1995 with the formation of City Mortgage Corporation Limited ("CSC-UK"), an
English corporation that originates, sells and services loans in England,
Scotland and Wales in which the Company initially held a 50% interest and
subsequently purchased the remaining 50% on September 30, 1995 (See Note 3).
CSC-UK had no operations and no predecessor prior to May 1995.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments consisting of normal recurring accruals, considered necessary for a
fair presentation of the results for the interim period have been included.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. The accompanying consolidated financial statements and the information
included under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" should be read in conjunction with the
consolidated financial statements and related notes of the Company for the year
ended December 31, 1995.
The consolidated financial statements of the Company include the accounts
of CSC and its wholly-owned subsidiaries and beginning in May 1995, CSC-UK. All
significant intercompany balances and transactions have been eliminated in
consolidation. The CSC Acquisition, the UK Acquisition, the J&J Acquisition and
the Heritable Acquisition (as such terms are defined below) have been accounted
for under the purchase method of accounting and with respect to the CSC
Acquisition as a, "reverse acquisition" as described in Note 3 below.
Certain amounts in the statements have been reclassified to conform with
the 1996 classifications.
3. CHANGES IN REPORTED AMOUNTS
The Company has revised its previously issued financial statements as of and
for the six months and the three months ended June 30, 1996. The Company
reviewed its accounting treatment in connection with the restructuring charges
recorded and deferred taxes recognized as part of the J&J Acquisition and the
Heritable Acquisition. As a result of this review, (i) the Company has recorded
as goodwill the amount of restructuring charges recognized for these
acquisitions in accordance with Emerging Issues Task Force Issue No. 94-3, "
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring) and
(ii) the Company has recorded as goodwill the amount of deferred taxes resulting
from the sale of the mortgage loans acquired immediately following the J&J
Acquisition and the Heritable Acquisition in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes".
5
<PAGE> 7
4. ACQUISITIONS
In April 1994, the Company acquired all of the capital stock of CSC in an
acquisition in which the shareholders of CSC acquired beneficial ownership of
16,560,000 shares or 92% of the Company's common stock (the "CSC Acquisition").
In connection with the CSC Acquisition, the Company changed its name to
Cityscape Financial Corp. From the date of its formation through the date of the
CSC Acquisition, the Company's activities were limited to (i) the sale of
initial shares in connection with its organization, (ii) a registered public
offering of securities and (iii) the pursuit of a combination, by merger or
acquisition. The CSC Acquisition was effective as of January 1, 1994 for
financial reporting purposes.
The CSC Acquisition and the issuance of common stock to the former CSC
shareholders resulted in the former shareholders of CSC obtaining a majority
voting interest in the Company. Generally accepted accounting principles require
that the company whose shareholders retain the majority interest in a combined
business be treated as the acquirer for accounting purposes. As a consequence,
the CSC Acquisition has been accounted for as a "reverse acquisition" for
financial reporting purposes and CSC is deemed to have acquired 100% interest in
the Company, as of the date of the acquisition.
In January 1994, CSC acquired Astrum Funding Corp. ("Astrum") in exchange
for 6.25% of the outstanding shares of the Company. This transaction was
accounted for using the purchase method of accounting. The Astrum acquisition
resulted in the Company acquiring net assets of $1,185 and obtaining licenses to
act as a mortgage banker in 11 states in which it had not previously been
licensed. No additional fair market value was assigned to the net assets
received. Although the Company acquired the new licenses earlier than if it had
applied for licensing on its own, the Company assigned no value to such licenses
because they could have been obtained independently. Further, the Company
determined that due to the illiquidity of the Company's stock as well as the
relatively minimal interest granted to the Astrum shareholders, the Company's
stock had no fair value in excess of the net assets received in the acquisition.
In May 1995, the Company and three principals of a privately held United
Kingdom-based mortgage banker formed CSC-UK. CSC-UK operates in the United
Kingdom (excluding Northern Ireland, the "UK"), and lends to individuals who are
unable to obtain mortgage financing from conventional mortgage sources such as
banks and building societies because of impaired or unsubstantiated credit
histories and/or unverifiable income. On September 29, 1995, the Company entered
into an agreement with the three other shareholders of CSC-UK to acquire their
50% interest in CSC-UK not then owned by the Company through the issuance of
3,600,000 shares of the Company's Common Stock valued at $21.6 million (the "UK
Acquisition"). The UK Acquisition was completed in September 1995. The UK
Acquisition resulted in the recognition of $19.7 million of goodwill, which is
being amortized using the straight-line method over a life of ten years. In
addition to the goodwill, the Company acquired assets of $9.0 million,
consisting primarily of mortgage servicing receivables, and assumed liabilities
of $4.1 million. The UK Acquisition was accounted for as a purchase transaction.
No additional fair market value was assigned to the net assets received in the
UK Acquisition.
In April 1996, CSC-UK acquired all of the outstanding stock of J&J
Securities Limited ("J&J") a London-based mortgage banker for pound sterling
15.0 million ($22.7 million based on the Noon Buying Rate on the date of such
acquisition) and 548,000 shares of the Company's Common Stock valued at $9.8
million (the "J&J Acquisition"). Of the $22.7 million in cash, $17.9 million was
paid at closing, $3.1 million was payable subject to the resolution of certain
tax issues related to J&J and $1.7 million is payable based upon the performance
of certain mortgage loans held by J&J. J&J has become a wholly-owned subsidiary
of CSC-UK. The J&J Acquisition was accounted for as a purchase transaction. J&J
provides secured mortgage loans to UK borrowers who are similar to the Company's
UK borrowers. The Company acquired assets of $53.8 million, consisting primarily
of mortgage loans held for sale of $52.0 million, and assumed liabilities of
$38.8 million. Additional fair market value of $21.8 million, representing the
value of the mortgage servicing receivables, was assigned to the net assets
acquired in the J&J Acquisition. The J&J Acquisition resulted in the recognition
of $5.2 million of goodwill, which is being amortized using the straight-line
method over a life of ten years.
In June 1996, CSC-UK acquired all of the outstanding stock of Heritable Group
Limited ("Heritable") for approximately pound sterling 41.8 million ($64.7
million based on the Noon Buying Rate on the date of such acquisition) and
99,362 shares of the Company's Common Stock valued at $2.5 million (the
"Heritable
6
<PAGE> 8
Acquisition"). Heritable, a UK-based mortgage finance company, operates as a
wholly-owned subsidiary of CSC-UK. The Heritable Acquisition was accounted for
as a purchase transaction. Heritable originates a full range of mortgage loan
products secured primarily by single family residences directed towards
borrowers on the upper-end of the credit spectrum. The Company acquired assets
of $224.9 million, consisting primarily of mortgage loans held for sale of
$188.6 million, and assumed liabilities of $196.8 million. Additional fair
market value of $29.1 million, representing the value of the mortgage servicing
receivables, was assigned to the net assets acquired in the Heritable
Acquisition. The Heritable Acquisition resulted in the recognition of $25.4
million of goodwill, which is being amortized using the straight-line method
over a life of ten years.
5. NEW ACCOUNTING PRONOUNCEMENT
On January 1, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation". This SFAS encourages the adoption of a new fair value
based accounting method for employee stock-based compensation plans and applies
to all arrangements whereby an employee receives stock or other equity
instruments of an employer based on the price of an employer's stock. These
arrangements include restricted stock options and stock appreciation rights. The
SFAS also permits the retention of the Company's current method of accounting
for these plans under Accounting Principles Board Opinion No. 25. The Company
will continue its current method of accounting for stock based compensation and
therefore, pro forma disclosures in footnotes will be provided on an annual
basis. The adoption of this SFAS had no impact on the Company's results of
operations or its financial condition.
6. EARNINGS PER SHARE
Primary earnings per share are based on the net earnings applicable to
Common Stock divided by the weighted average number of Common Stock and Common
Stock equivalents outstanding during the period, after giving effect to a 100%
stock dividend effected in September 1995 and a 100% stock dividend effected
in July 1996. Fully diluted earnings per share are based on the net earnings
applicable to Common Stock adjusted for the after-tax interest expense on the
Convertible Debentures (as defined below), divided by the weighted average
number of Common Stock and Common Stock equivalents outstanding during the
period increased by the assumed conversion of the Convertible Debentures into
shares of Common Stock.
7. CONVERTIBLE DEBENTURES
In May 1996, the Company issued $143.8 million of 6% Convertible
Subordinated Debentures due 2006 (the "Convertible Debentures"), convertible at
any time prior to redemption or maturity, at the holder's option, into shares of
the Company's Common Stock at a conversion price of $26.25, subject to
adjustment. The Convertible Debentures may be redeemed, at the option of the
Company, in whole or in part, at any time after May 15, 1999 at predetermined
redemption prices together with accrued and unpaid interest to the date fixed
for redemption. Interest at 6% per annum, is payable semi-annually on each May 1
and November 1. The terms of the indenture governing the Convertible Debentures
do not limit the incurrence of additional indebtedness by the Company, nor do
they limit the Company's ability to make payments such as dividends.
7
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Restatements
On September 26, 1996, the Company announced that it had determined that
certain adjustments were required to be made the Company's previously issued
financial statements for the quarter ended June 30, 1996, to reflect a change
in the accounting treatment with respect to the valuation of assets acquired as
a result of the recent acquisitions of J&J and Heritable. The effect of this
accounting change resulted in the Company eliminating $50.9 million in revenues
and approximately $6.3 million of expenses originally recorded in connection
with the acquisitions and a reduction in reported earnings of $26.5 million, or
$0.78 per fully diluted share. Additionally, as a result of this accounting
change the goodwill initially recorded in connection with such acquisitions was
reduced from $60.5 million to $10.6 million resulting in a reduction of
goodwill amortization of approximately $496,000 from the previously reported
figure for the second quarter.
On November 19, 1996, the Company announced that it had determined that
certain additional adjustments relating to the J&J and Heritable Acquisitions
were required to be made to the financial statements for the quarter ended June
30, 1996. These adjustments reflect a change in the accounting treatment with
respect to the $5.0 million of restructuring charges and the $17.3 million of
deferred taxes recorded as a result of such acquisitions. The effect of these
adjustments resulted in the Company increasing the goodwill as initially
restated in September from $10.6 million to $30.6 million reflecting the
reclassification, as costs of the acquisitions, of (i) the restructuring
charges, previously recorded as an expense, and (ii) the tax liability incurred
as a result of the subsequent sale of the loans acquired as a result of the
acquisition, previously recorded as a deferred tax asset. This increase in
goodwill resulted in an increase of amortization expense as previously reported
in the second quarter of 1996 of $170,692 and will result in a $502,150 per
quarter increase in amortization expense through the first quarter of 2006.
As a result of these adjustments, second quarter net earnings increased by
$2.8 million or $0.08 per fully diluted share, from $8.3 million or $0.27 per
fully diluted share, to $11.1 million or $0.35 per fully diluted share. For the
six months ended June 30, 1996, net earnings increased from the previously
reported $17.6 million or $0.58 per fully diluted share to $20.4 million or
$0.66 per fully diluted share.
Overview
The Company is a consumer finance company engaged in the business of
originating, purchasing, selling and servicing mortgage loans secured primarily
by one- to four-family residences. The Company generates income primarily from
gains recognized from premiums on loans sold through whole loan sales to
institutional purchasers, gain on sale of loans sold through securitizations,
interest earned on loans held for sale and mortgage servicing receivables,
origination fees received as part of the loan application process and fees
earned on loans serviced. Gain on sale of loans includes the fair value of the
interest-only and residual certificate that the Company receives upon the sale
of loans through securitizations in the US and the value of mortgage servicing
receivables that it receives on UK securitizations and on sales into the US
Greenwich Facility and the UK Greenwich Facility (as such terms are defined in
"--Liquidity and Capital Resources"). Gain recorded on loans sold with servicing
retained represents the excess of the interest rate payable by an obligor on a
loan over the interest rate passed through to the purchaser acquiring an
interest in such loan, less applicable recurring fees. Gain on sale of loans
constituted approximately 79.3% of total revenues for the six months ended June
30, 1996 and 75.2% of total revenues for the six months ended June 30, 1995. The
Company completed its first US securitization in March of 1995 and its first UK
securitization in March of 1996. The Company anticipates that it will continue
to sell a substantial portion of its loans through securitizations with the
balance sold in whole loan sales to institutional purchasers.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Total revenues increased $27.8 million or 259.8% to $38.5 million for the
three months ended June 30, 1996 from $10.7 million for the comparable period in
1995. This increase was due primarily to higher gains on sale of loans resulting
from the combined US and UK increased loan origination and purchase volume and
volume of loans sold compared to the prior period and increased interest income
resulting from higher average balances of loans held for sale, as well as
increased interest income recognized on higher average balances of mortgage
servicing receivables.
Gain on sale of loans increased $20.6 million or 239.5% to $29.2
million for the three months ended June 30, 1996 from $8.6 million for the
comparable period in 1995. This increase was due primarily to CSC-UK's gain on
sale of loans of $15.3 million representing a 37.0% gain on the $41.4 million of
loan sales during the period compared to gain on sale of loans of $2.7 million
representing a 36.0% gain on the
8
<PAGE> 10
$7.5 million on loan sales during the comparable period in 1995. Additionally,
the increase was due to the increased volume of US loan sales at lower average
gains during the three months ended June 30, 1996 ($270.9 million of loan sales
at a weighted average gain of 5.2% ($14.0 million) as compared to a weighted
average gains of 7.7% ($5.9 million) on $76.9 million loan sales during the
three months ended June 30, 1995). The lower average gain on sale of loans
recognized during the three months ended June 30, 1996 was due primarily to the
lower average margins from bulk purchases which began during the second quarter
of 1996, as well as lower margins from changes in interest rates during the
second quarter of 1996.
Mortgage origination income increased $570,077 or 72.6% to $1.4 million for
the three months ended June 30, 1996 from $785,476 for the comparable period in
1995. This increase was due primarily to (i) the increase in US loan origination
and purchase volume to $290.0 million for the three months ended June 30, 1996
from $87.7 million for the comparable period in 1995 and (ii) the increase in
mortgage origination income from CSC-UK. It is anticipated that the Company's
domestic origination fees as a percentage of loans originated will continue to
decrease in the future. Mortgage origination income as a percentage of total
revenues decreased to 3.5% for the 1996 period from 7.3% for the comparable
period in 1995.
Interest income increased $5.4 million or 490.9% to $6.5 million for the
three months ended June 30, 1996 from $1.1 million for the comparable period in
1995. This increase was due primarily to the increased balance of loans held for
sale during the 1996 period resulting from the increased loan origination and
purchase volume in excess of loans sold during the period, as well as income
recognized on mortgage servicing receivables.
Servicing income increased $721,210 or 975.4 % to $795,149 for the three
months ended June 30, 1996 from $73,939 for the comparable period in 1995. This
increased income was due primarily to an increase in the average balances of US
loans serviced to $587.9 million for the period ending June 30, 1996 from $96.6
million for the comparable period in 1995 and the increase in the average
balances of UK loans serviced to $198.4 million for the period ending June 30,
1996 from $5.5 million for the comparable period in 1995.
Earnings from partnership interest decreased $86,639 or 44.1% to $110,000
for the three months ended June 30, 1996 from $196,639 for the comparable period
in 1995. This decrease was due to lower earnings recognized from the equity
interest in Industry Mortgage Company, L.P. (including its successor, IMC
Mortgage Company, "IMC") for the three months ended June 30, 1996.
Total expenses increased $13.7 million or 232.2% to $19.6 million for
the three months ended June 30, 1996 from $5.9 million for the comparable
period in 1995. This increase was due primarily to increased salaries, selling
expenses and operating expenses related to increased loan origination and
purchase volume during the 1996 period. Total expenses as a percentage of total
revenues decreased to 51.0% for the three months ended June 30, 1996 from 55.1%
for the comparable period in 1995. During the three months ended June 30, 1996,
amortization of goodwill related to the UK Acquisition, J&J Acquisition and the
Heritable Acquisition totaled $708,486.
Salaries and employee benefits increased $6.9 million or 300.0% to $9.2
million for the three months ended June 30, 1996 from $2.3 million for the
comparable period in 1995. This increase was primarily due to increased staffing
levels to 367 US employees at June 30, 1996 compared to 167 US employees for the
comparable period in 1995 and the increased staffing levels associated with the
UK operations resulting from the growth in loan origination and purchase volume
and geographic expansion, as well as increased loans serviced.
Interest expense increased $3.3 million or 235.7% to $4.7 million for the
three months ended June 30, 1996 from $1.4 million for the comparable period in
1995. The increase was due primarily to the interest costs associated with the
$143.8 million of Convertible Debentures issued during the second quarter of
1996, as well as an increased balance of loans held pending sale during the
three months ended June 30, 1996 resulting from the increased loan origination
and purchase volume during the period.
Other expenses increased $2.7 million or 117.4% to $5.0 million for the
three months ended June 30, 1996 from $2.3 million for the comparable period in
1995. This was due primarily to increased selling costs of $2.4 million or
395.8% to $3.0 million for the three months ended June 30, 1996 from $607,473
9
<PAGE> 11
for the comparable period in 1995 and increased professional fees, travel and
entertainment and occupancy costs incurred to support the increased loan
origination and purchase volume.
Net earnings increased $8.7 million or 362.5% to $11.1 million for the
three months ended June 30, 1996 from $2.4 million for the comparable period in
1995. The growth in net earnings was due primarily to the increased revenues
resulting from an increase in US and UK loan origination and purchase volume and
volume of loans sold during the three months ended June 30, 1996.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Total revenues increased $50.6 million or 304.8% to $67.2 million for the
six months ended June 30, 1996 from $16.6 million for the comparable period in
1995. This increase was due primarily to higher gain on sale of loans resulting
from the combined US and UK increase in loan origination and purchase volume
and volume of loans sold compared to the prior period, the inclusion of the
operating results of CSC-UK, which was not in existence until May 1995 and was
50% owned in the second quarter of 1995, increased interest income resulting
from higher average balances of loans held for sale, as well as increased
interest income recognized on higher average balances of mortgage servicing
receivables, an increase in mortgage origination income due to an increased
loan origination volume and an increase in servicing income.
Gain on sale of loans increased $40.8 million or 326.4% to $53.3 million
for the six months ended June 30, 1996 from $12.5 million for the comparable
period in 1995. This increase was a result of the inclusion of CSC-UK's gain on
sale of loans of $27.5 million representing a 40.0% gain on the $68.8 million of
loan sales during the period as compared to gain on sale of loans of $2.7
million representing a 36.0% gain on the $7.5 million of loan sales during the
comparable period in 1995. Additionally, the increase was due to the increased
volume of US loan sales at lower average gains during the six months ended June
30, 1996 ($446.7 million of loan sales at a weighted average gain of 5.8%
($25.8 million) as compared to a weighted average gains of 7.3% ($9.8 million)
on $133.6 million of loan sales during the six months ended June 30, 1995). The
lower average gain on sale of loans recognized during the six months ended June
30, 1996 was a result of the lower average margins from bulk purchases which
began during the second quarter of 1996, as well as lower margins from changes
in interest rates during the second quarter of 1996.
Mortgage origination income increased $787,013 or 56.0% to $2.2 million for
the six months ended June 30, 1996 from $1.4 million for the comparable period
in 1995. This increase was due primarily to (i) the increase in US loan
origination and purchase volume to $456.7 million for the six months ended June
30, 1996 from $148.5 million for the comparable period in 1995, and (ii) the
increase in mortgage origination income from CSC-UK. It is anticipated that the
Company's origination fees as a percentage of loans originated will continue to
decrease in the future. Mortgage origination income as a percentage of total
revenues decreased to 3.3% for the 1996 period from 8.5% for the
comparable period in 1995.
Interest income increased $7.4 million or 352.4% to $9.5 million for the six
months ended June 30, 1996 from $2.1 million for the comparable period in 1995.
This increase was due primarily to the increased balance of loans held for sale
during the 1996 period resulting from the increased loan origination and
purchase volume in excess of loans sold during the period as well as income
recognized on mortgage servicing receivables.
Servicing income increased $1.3 million or 1,273.9% to $1.4 for the six
months ended June 30, 1996 from $98,688 for the comparable period in 1995. This
increase was due primarily to an increase in the average balances of US
loans serviced to $500.9 million for the period ending June 30, 1996 from $71.6
million for the comparable period in 1995 and the increase in the average
balance of UK loans serviced to $128.2 million for the period ending June 30,
1996 from $5.5 million for the comparable period in 1995.
Earnings from partnership interest decreased $171,000 or 39.7% to $260,000
for the six months ended June 30, 1996 from $431,000 for the comparable period
in 1995. This decrease was due to lower earnings recognized from the equity
interest in IMC during the six months ended June 30, 1996.
10
<PAGE> 12
Total expenses increased $22.5 million or 225.0% to $32.5 million for the
six months ended June 30, 1996 from $10.0 million for the comparable period in
1995. This increase was due to increased salaries, selling expenses and
operating expenses related to increased loan origination and purchase volume
during the 1996 period, as well as inclusion of the operating results of CSC-UK
for the entire 1996 period, as compared to the comparable period in 1995.
Total expenses as a percentage of total revenues decreased to 48.4% for the six
months ended June 30, 1996 from 60.2% for the comparable period in 1995. During
the six months ended June 30, 1996, amortization of goodwill related to the UK
Acquisition, J&J Acquisition and the Heritable Acquisition totaled $1.2 million.
Salaries and employee benefits increased $10.5 million or 256.1% to $14.6
million for the six months ended June 30, 1996 from $4.1 million for the
comparable period in 1995. This increase was due primarily to increased staffing
levels to 367 US employees at June 30, 1996 compared to 167 US employees for the
comparable period in 1995, the increased staffing levels associated with the UK
operations resulting from the growth in loan origination and purchase volume and
geographic expansion, as well as increased loans serviced.
Interest expense increased $4.1 million or 178.3%, to $6.4 million for the
six months ended June 30, 1996 from $2.3 million for the comparable period in
1995. The increase was due primarily to the interest costs associated with the
$143.8 million of Convertible Debentures issued during the second quarter of
1996 as well as an increased balance of loans held pending sale during the six
months ended June 30, 1996 resulting from the increased loan origination and
purchase volume during the period.
Other expenses increased $6.8 million or 189.0% to $10.4 million for the six
months ended June 30, 1996 from $3.6 million for the comparable period in 1995
This increase was due primarily to the increased selling costs of $3.5 million
or 376.6% to $4.4 million for the six months ended June 30, 1996 from $917,903
for the comparable period in 1995, as well as increased professional fees,
travel and entertainment and occupancy costs incurred to support the increased
loan origination and purchase volume and the inclusion of the operating results
of CSC-UK during the period.
Net earnings increased $17.0 million or 500.0% to $20.4 million for the six
months ended June 30, 1996 from $3.4 million for the comparable period in 1995.
This increase was due primarily to increased revenues resulting from an
increase in loan origination and purchase volume and volume of loans sold
during the six months ended June 30, 1996 as the Company expanded its
geographic base to 37 states and the District of Columbia and further
penetrated existing markets.
FINANCIAL CONDITION
June 30, 1996 Compared to December 31, 1995
Cash and cash equivalents increased $3.3 million or 91.7% to $6.9 million
at June 30, 1996 from $3.6 million at December 31, 1995.
Prepaid commitment fees were recorded as an asset at March 31, 1996 as a
result of the UK Greenwich Facility entered into by CSC-UK and Greenwich
International Ltd., a subsidiary of Greenwich Capital Markets, Inc. (referred to
herein, including any subsidiaries as "Greenwich") in March 1996, to be
amortized over the 20-year life of the UK Greenwich Facility. The unamortized
balance at June 30, 1996 was $37.0 million. There was no corresponding asset at
December 31, 1995.
Available-for-sale securities in the amount of $9.8 million were recorded as
an asset at June 30, 1996 as a result of the Company's equity interest in IMC.
Prior to June 1996, the Company had recorded a 9.1% limited partnership interest
in IMC. At December 31, 1995, the Company's investment in partnerships was
$758,315 and was recorded as other assets. In June 1996, IMC converted into
corporate form and effected a public offering of common stock. As a result of
the offering, the Company's interest in IMC is no longer accounted for under the
equity method of accounting, whereby the Company recognized its relative portion
of the partnership earnings as revenues, but rather as available-for-sale
securities in accordance with SFAS No. 115. Available-for-sale securities are
reported on the statement of financial condition at fair market
11
<PAGE> 13
value with any corresponding change in value reported as an unrealized gain or
loss (if assessed to be temporary) as an element of stockholders' equity after
giving effect for taxes.
Mortgage servicing receivables increased $104.6 million or 425.2% to
$129.2 million at June 30, 1996 from $24.6 million at December 31, 1995 due
primarily to the $50.9 million of mortgage servicing receivables recorded as a
result of the J&J Acquisition and the Heritable Acquisition and the $44.3
million recognized as a result of the increase of loan sales with servicing
retained, partially offset by amortization expenses.
Trading securities increased $29.8 million or 191.0% to $45.4 million at
June 30, 1996 from $15.6 million at December 31, 1995 as a result of the $109.7
million and $252.0 million of US securitizations completed during the first six
months of 1996.
Mortgage loans held for sale, net increased $40.4 million or 54.7% to $114.3
million at June 30, 1996 from $73.9 million at December 31, 1995 due primarily
to the volume of US loans originated exceeding loan sale volume in the first six
months of 1996 and loans acquired as part of the J&J Acquisition and the
Heritable Acquisition which were not yet sold.
Mortgage loans held for investment, net increased $3.5 million or 350.0% to
$4.5 million at June 30, 1996 from $1.0 million at December 31, 1995. This
increase was due to the Company's increased loan origination and purchase
volume and the inclusion of $2.7 million of mortgages held for investment by
CSC-UK. As a percentage of total assets, mortgage loans held for investment
increased to 1.0% at June 30, 1996 from 0.7% at December 31, 1995.
Goodwill and other intangibles net of amortization increased $29.5 million
or 152.8% to $48.8 million at June 30, 1996 from $19.3 million at December 31,
1995 primarily as a result of the goodwill recorded in connection with the J&J
Acquisition and Heritable Acquisition of $5.2 million and $25.4 million,
respectively, offset by $1.2 million of amortization during the period.
Other assets increased $25.6 million or 400.0% to $32.0 million at June 30,
1996 from $6.4 million at December 31, 1995. This was due primarily to the
inclusion at June 30, 1996 of subwarehouse loan receivables of $5.6 million,
deferred costs of $4.5 million related to the issuance of the Convertible
Debentures, CSC-UK receivables related to loan sales to Greenwich of
approximately $9.3 million and other assets of CSC-UK of $6.2 million.
Warehouse financing facilities outstanding decreased $2.1 million or 2.8% to
$72.8 million at June 30, 1996 from $74.9 million at December 31, 1995 primarily
as a result of an increased volume of loans directly funded by the Company with
proceeds from the Convertible Debenture offering.
Accounts payable and other liabilities increased $19.3 million or 117.7% to
$35.7 million at June 30, 1996 from $16.4 million at December 31, 1995. This
increse was due primarily to the inclusion of CSC-UK and increased escrow
balances associated with the increased loan servicing portfolio.
Allowance for loan losses increased $9.8 million or 466.7% to $11.9 million
at June 30, 1996 from $2.1 million at December 31, 1995 was due primarily as a
result of increased loans sold in the UK with servicing rights retained.
Notes payable totaled $38.0 million at June 30, 1996 representing the $38.0
million note payable recorded in connection with the UK Greenwich Facility.
Stockholders' equity increased $38.8 million or 68.0% to $95.9 million at
June 30, 1996 from $57.1 million at December 31, 1995 primarily as a result of
net earnings of $20.4 million for the six months ended June 30, 1996, stock
issued in connection with the J&J Acquisition and Heritable Acquisition totaling
$12.3 million, in addition to a $5.7 million unrealized gain on
available-for-sale securities, net of taxes and a foreign currency translation
adjustment of $84,168.
12
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company uses its cash flow from whole loan sales, loans sold through
securitizations, pre-funding mechanisms through its securitizations, loan
origination fees, processing fees, net interest income and borrowings under its
warehouse facility, US purchase facilities, standby facility and UK purchase
facility to meet its working capital needs. The Company's cash requirements
include the funding of loan originations and purchases, payment of interest
expenses, funding the over-collateralization requirements for securitizations,
operating expenses, income taxes and capital expenditures.
Adequate credit facilities and other sources of funding, including the
ability of the Company to sell loans, are essential to the continuation of the
Company's ability to originate and purchase loans. As a result of increased loan
originations and purchase volume and its growing securitization program, the
Company has operated, and expects to continue to operate, on a negative cash
flow basis. During the six month periods ended June 30, 1996 and 1995, the
Company used operating cash of $27.2 million and $9.9 million, respectively.
Additionally, during the same periods, the Company used $105.5 million and
$143,414 in investing activities, primarily to fund the Company's acquisitions
of J&J and Heritable in the 1996 period. The Company's sale of loans through
securitizations results in a gain on sale recognized by the Company. The
recognition of this gain on sale has a negative impact on the cash flow of the
Company because significant costs are incurred upon closing of the transactions
giving rise to such gain and the Company is required to pay income taxes on the
gain on sale of loans through securitizations in the period recognized,
although the Company does not receive the cash representing the gain until
later periods as the related loans are repaid or otherwise collected. During
the same periods, the Company received cash from financing activities of $136.0
million and $11.4 million, respectively. The Company borrows funds on a
short-term basis to support the accumulation of loans prior to sale. These
short-term borrowings are made under a warehouse line of credit with a group of
banks for which CoreStates Bank, N.A. ("CoreStates") serves as agent (the
"Warehouse Facility"). Pursuant to the Warehouse Facility, the Company has
available a secured revolving credit line of $72.0 million to finance the
Company's origination or purchase of loans, pending sale to investors or for
holding certain loans in its own portfolio (the "Revolving Credit Line"). The
Revolving Credit Line is settled on a revolving basis in conjunction with
ongoing loan sales and bears interest at a variable rate (8.35% at June 30,
1996) based on (i) 25 basis points over the higher of either the prime rate or
the federal funds rate plus 50 basis points or (ii) LIBOR (A) divided by the
result of one minus the stated maximum rate at which reserves are required to
be maintained by Federal Reserve System member banks, (B) plus 175 basis
points, as periodically elected by the Company. The outstanding balance of this
portion of the Warehouse Facility was $55.9 million at June 30, 1996. The
Revolving Credit Line extends through June 1997. In addition, the Warehouse
Facility provides for a secured revolving working capital credit line of up to
$3.0 million to be used by the Company for general corporate purposes (the
"Working Capital Credit Line"). The Working Capital Credit Line operates as a
revolving facility until January 1, 1997 at which time any outstanding balance
under the Working Capital Credit Line converts to a term loan. The Working
Capital Credit Line bears interest at a variable rate (9.3% at June 30, 1996)
based on 100 basis points over the higher of either the prime rate or the
federal funds rate plus 50 basis points. There was no outstanding balance under
the Working Capital Credit Line at June 30, 1996. The Working Capital Credit
Line terminates on December 31, 1998.
The Warehouse Facility also permits the Company to use up to 20.0% of the
Revolving Credit Line to provide subwarehouse lines of credit to certain loan
correspondents from whom the Company purchases loans. In July 1995, the Company
began lending funds on a short-term basis to assist in the funding of loans
originated by certain of the Company's loan correspondents. Each borrowing
under these subwarehouse credit lines has a term of not more than 30 days. The
Company requires personal guarantees of the credit line from the principals of
the related loan correspondents. At June 30, 1996, the aggregate balance of
loans outstanding under this program was $4.8 million, with applications
pending for an additional $12.6 million of loans.
The Company has a $50.0 million loan purchase agreement (the "US Purchase
Facility") with ContiTrade Services Corporation ("ContiTrade") whereby the
Company originates and then sells loans and retains the rights to repurchase
loans at a future date for whole loan sales to institutional investors or for
sales through securitizations. This agreement extends through June 1999. The
aggregate principal balance of loans sold to and retained by ContiTrade at June
30, 1996 under the US Purchase Facility was $11.7 million. The Company also has
a standby financing arrangement with ContiTrade (the "Standby Facility")
13
<PAGE> 15
whereby ContiTrade provides the Company up to $10.0 million line of credit which
is secured by the interest-only and residual certificates the Company receives
upon loan sales through securitizations. As of June 30, 1996, the Company had
$2.0 million available under the Standby Facility. The Standby Facility bears
interest at a variable rate based on LIBOR plus 200 basis points (7.4% at June
30, 1996) and the agreement extends through June 1999.
In June 1996, the Company entered into a purchase and sale agreement with
Greenwich, effective as of February 2, 1996 (the "US Greenwich Facility"), with
respect to mortgage loans originated or purchased by the Company in the US.
Pursuant to the US Greenwich Facility, the Company sells loans to Greenwich for
subsequent inclusion in securitizations. In addition, the Company is advanced
amounts based on a percentage of the principal balance of the loans sold to
Greenwich. Advanced amounts outstanding under this facility bear interest at a
rate of LIBOR plus 175 basis points (7.25% at June 30, 1996). The US Greenwich
Facility expires on the earlier to occur of $1.0 billion in loans sold into the
facility or February 2, 1998. The Company had approximately $604.0 million
available under the facility at June 30, 1996. The Company retains servicing on
all loans sold into the US Greenwich Facility.
In March 1996, CSC-UK and Greenwich entered into a mortgage loan
purchase agreement effective as of January 1, 1996 that includes a working
capital facility with respect to the funding of variable rate, residential
mortgage loans originated or purchased by CSC-UK in the UK (the "UK Greenwich
Facility") and terminated a previous facility with Greenwich. Pursuant to the UK
Greenwich Facility and with certain exceptions, CSC-UK sells all of the loans it
originates to Greenwich which must buy such loans. CSC-UK and/or Greenwich will
subsequently resell these loans through whole loan sales or securitizations. The
UK Greenwich Facility includes a working capital facility pursuant to which
CSC-UK is advanced amounts based on a percentage of the principal balance of
loans originated or purchased by CSC-UK and sold to Greenwich, which advance may
not exceed (pound)10.0 million in the aggregate outstanding at any time.
Outstanding amounts under this working capital facility bear interest at a rate
of LIBOR plus 255 basis points (7.39% at June 30, 1996). The outstanding balance
under this working capital facility was pound sterling 10.0 million ($15.5
million) at June 30, 1996. This agreement expires on December 31, 2000 with
respect to the working capital facility and on December 31, 2015 with respect
to the loan purchase agreement. Both CSC-UK and Greenwich are prohibited from
entering into substantially similar transactions with other parties. CSC-UK
agreed to pay a fee to Greenwich in connection with the UK Greenwich Facility
in the aggregate amount of $38.0 million, evidenced by a note bearing interest
at a rate of 6.2% payable in installments of $13.0 million on December 15, 1996
and $25.0 million on December 15, 1997. Such fee is amortized over the life of
the UK Greenwich Facility.
In May 1996, the Company issued Convertible Debentures in the aggregate
principal amount of $143.8 million. Proceeds from the Convertible Debentures
were used to repay the indebtedness incurred in connection with the J&J
Acquisition, to finance the Heritable Acquisition and for general corporate
purposes.
As of June 30, 1996, the Company had available a $30.0 million term loan
with the First National Bank of Boston to fund loan originations and purchases
and working capital needs, secured by first and second liens on the
interest-only and residual certificates the Company receives upon loan sales
through securitizations. There was no outstanding balance under the term loan at
June 30, 1996. The term loan bears interest at a rate of 11.0% per annum and
the agreement extends through December 31, 1996.
The Company also has a loan and security agreement with CoreStates whereby
CoreStates agrees to lend the Company up to $10.0 million to fund loan
originations and purchases. Borrowings under the agreement bear interest at the
prime rate plus 25 basis points and are due upon demand. The agreement
terminates on June 30, 1997.
The Company is required to comply with various operating and financial
covenants as defined in the agreements described above. The continued
availability of funds provided to the Company under these agreements is subject
to the Company's continued compliance with these covenants.
The Company's business requires continual access to short- and long-term
sources of debt and equity capital. While management believes that it has
sufficient funds to finance its operations and will be able to refinance or
otherwise repay its debt in the normal course of business, there can be no
assurance that
14
<PAGE> 16
existing lines can be extended or refinanced or that funds generated from
operations will be sufficient to satisfy such obligations. Future financing may
involve the issuance of additional debt or equity securities.
The Company's cash requirements may be significantly influenced by possible
acquisitions or strategic alliances, although there are no present agreements
with respect to any significant acquisitions or strategic alliances.
The Company anticipates that it will need to arrange for additional cash
resources prior to the end of 1996 through additional debt or equity financing
or additional bank borrowings. The Company has no commitments for additional
bank borrowings or additional debt or equity financing, and there can be no
assurance that the Company will be successful in consummating any such financing
transaction in the future on terms the Company would consider to be favorable.
All references herein to "$" are to United States dollars; all references to
"pound sterling" are to British Pounds Sterling. Unless otherwise specified,
translation of amounts from British Pounds Sterling to United States dollars for
the convenience of the reader has been made herein at pound sterling 1.00 =
$1.55.
15
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings arising out of
the ordinary course of its business. Management believes that none of these
actions, individually or in the aggregate, will have a material adverse effect
on the results of operations or financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Stockholders was held on June 12, 1996.
(b) Elected eight directors into one of three classes, to hold office until the
1997, 1998 or 1999 Annual Meeting, as the case may be, and until their
successors have been elected and qualified.
<TABLE>
<CAPTION>
DIRECTORS FOR AGAINST UNVOTED
--------- --- ------- -------
<S> <C> <C> <C>
Class III Directors
(Hold office until the 1999 Annual Meeting):
Robert Grosser 13,196,727 800 1,559,501
Robert C. Patent 13,196,727 800 1,559,501
Asher Fensterheim 13,196,707 820 1,559,501
Class II Directors
(Hold office until the 1998 Annual Meeting):
Jonah L. Goldstein 13,196,727 800 1,559,501
Arthur P. Gould 13,196,707 820 1,559,501
Hollis W. Rademacher 13,196,727 800 1,559,501
Class I Directors
(Hold office until the 1997 Annual Meeting):
Robert M. Stata 13,196,727 800 1,559,501
David A. Steene 13,196,727 800 1,559,501
</TABLE>
(c) Stockholders ratified the selection by the Company's Board of Directors
of KPMG Peat Marwick LLP as independent accountants of the Company for
the fiscal year ending December 31, 1996 as follows:
Number of votes for 13,177,977
Number of votes against 250
Number of abstentions 19,300
Number of shares not voted 1,559,501
ITEM 5. OTHER INFORMATION
None
16
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
3.2 Bylaws of the Company, as amended, incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
4.1 Purchase and Sale Agreement, dated as of June 24, 1994, between
CSC and ContiTrade incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
4.2 Indenture, dated as of May 7, 1996, between the Company and The
Chase Manhattan Bank, N.A., incorporated by reference to Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q filed with the
Commission on May 15, 1996.
4.3 Registration Rights Agreement, dated as of April 26, 1996, among
the Company, NatWest Securities Limited, Bear, Stearns & Co. Inc.,
CIBC Wood Gundy Securities Corp. and Wasserstein Perella
Securities, Inc., incorporated by reference to Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q filed with the Commission
on May 15, 1996.
10.1 Lease Agreement, dated as of September 30, 1993, between CSC and
Taxter Park Associates, as amended by the First Amendment to
Lease, dated as of April 19, 1994, and the Second Amendment to
Lease, dated as of May 12, 1995, incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.2 Sublease Agreement between KLM Royal Dutch Airlines and CSC, dated
as of December 5, 1994, incorporated by reference to Exhibit 10.2
to the Company's Registration Statement on Form S-1 as declared
effective by the Commission on December 20, 1995.
10.3 Employment Agreement, dated as of January 1, 1995, between CSC and
Robert Grosser, incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.4 Employment Agreement, dated as of January 1, 1995, between CSC and
Robert C. Patent, incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.5 Employment Agreement, dated as of November 1, 1992, between CSC
and Robert M. Stata, as amended by the Amendment Agreement, dated
as of January 1, 1994, incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-1 as declared
effective by the Commission on December 20, 1995.
10.6 Employment Agreement, dated as of July 1, 1995, between CSC and
Cheryl P. Carl, incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.7 Employment Agreement, dated as of July 1, 1995, between CSC and
Eric S. Goldstein, incorporated by reference to Exhibit 10.7 to
the Company's Registration Statement on Form S-1 as declared
effective by the Commission on December 20, 1995.
</TABLE>
17
<PAGE> 19
<TABLE>
<S> <C>
10.8 Employment Agreement, dated as of July 1, 1995, between CSC and
Steven Weiss, incorporated by reference to Exhibit 10.8 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.9 Letter agreement, dated as of August 18, 1994, between CSC and Tim
S. Ledwick, incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.10 Employment Agreement, dated as of July 1, 1995, between CSC and
Jonah L. Goldstein, incorporated by reference to Exhibit 10.10 to
the Company's Registration Statement on Form S-1 as declared
effective by the Commission on December 20, 1995.
10.11 Agreement of Limited Partnership of Industry Mortgage Company,
L.P., dated as of July 1, 1993, between Industry Mortgage
Corporation and the Limited Partners of Industry Mortgage Company,
L.P., including CSC, as amended by the First Amended and Restated
Agreement of Limited Partnership of Industry Mortgage Company,
L.P., dated as of January 1, 1994, by the First Amendment to First
Amended and Restated Agreement of Limited Partnership of Industry
Mortgage Company, L.P., dated as of March, 1994, and the Second
Amendment to First Amended and Restated Agreement of Limited
Partnership of Industry Mortgage Company, L.P., dated as of July
1994, incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.12 Master Agreement for Sale and Purchase of Mortgages, dated as of
July 1, 1993, between CSC and Industry Mortgage Company L.P.,
incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.13 Master Agreement for Sale and Purchase of Mortgage Loans, dated as
of March 11, 1994, between CSC and The First National Bank of
Boston, incorporated by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.14 ContiMortgage Wholesale Second Mortgage Program Master Agreement
for Sale and Purchase of Mortgages, dated as of August 23, 1991,
between CSC and ContiMortgage Corporation, as amended by the First
Amendment to Master Agreement for Purchase and Sale, dated as of
November 22, 1993, by the Second Amendment to Master Agreement for
Purchase and Sale, dated as of January 28, 1994 and by the Third
Amendment, dated as of November 9, 1994, incorporated by reference
to Exhibit 10.14 to the Company's Registration Statement on Form
S-1 as declared effective by the Commission on December 20, 1995.
10.15 Standby Financing and Investment Banking Services Agreement, dated
as of June 24, 1994, between CSC and ContiTrade, incorporated by
reference to Exhibit 10.15 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
10.16 Ongoing Agreement of Purchase and Sale of Mortgage Loans, dated as
of November 12, 1993, between CSC and NationsCredit Financial
Services Corporation of America, incorporated by reference to
Exhibit 10.16 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.17 Letter agreement, dated as of December 15, 1994, from
NationsCredit Corporation and CSC, incorporated by reference to
Exhibit 10.17 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.18 Promissory Note, dated as of December 9, 1993, between CSC and
Center Capital Corporation, incorporated by reference to Exhibit
10.18 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C>
10.19 Revolving Credit, Security, and Term Loan Agreement, dated as of
June 30, 1995 among CSC, the Company, CoreStates Bank, N.A.,
Harris Trust and Savings Bank, NBD Bank and NatWest Bank N.A., as
amended by Amendment No. 1 to the Revolving Credit Agreement,
dated as of August 30, 1995, incorporated by reference to Exhibit
10.19 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.20 The Company's 1995 Stock Option Plan, incorporated by reference to
Exhibit 10.20 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.21 The Company's 1995 Non-Employee Directors Stock Option Plan,
incorporated by reference to Exhibit 10.21 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.22 Pooling and Servicing Agreement, dated as of March 10, 1995, among
CSC, ContiTrade and Chemical Bank, incorporated by reference to
Exhibit 10.22 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.23 Indemnification Agreement, dated as of March 30, 1995, among CSC,
ContiTrade and Municipal Bond Investors Assurance Corporation,
incorporated by reference to Exhibit 10.23 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.24 Insurance Agreement, dated as of March 10, 1995, among CSC,
Chemical Bank and Municipal Bond Investors Assurance Corporation,
incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.25 Purchase Price Letter, dated as of March 30, 1995, between CSC and
ContiTrade, incorporated by reference to Exhibit 10.25 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.26 Pooling and Servicing Agreement, dated as of July 31, 1995,
between CSC and Harris Trust and Savings Bank, incorporated by
reference to Exhibit 10.26 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
10.27 Indemnification Agreement, dated as of August 24, 1995, between
CSC, ContiFinancial Services Corporation and Financial Security
Assurance Inc., incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.28 Insurance and Indemnity Agreement, dated as of July 31, 1995,
between CSC and Financial Security Assurance Inc., incorporated by
reference to Exhibit 10.28 to the Company's Registration Statement
on Form S-1, as amended as declared effective by the Commission on
December 20, 1995.
10.29+ Mortgage Loan Purchase Agreement, dated as of May 26, 1995,
between CSC-UK and Greenwich, incorporated by reference to Exhibit
10.29 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.30+ Letter, dated as of May 26, 1995, from Greenwich to CSC-UK
regarding purchase commitment with respect to first and second
mortgage loans located in the United Kingdom, incorporated by
reference to Exhibit 10.30 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C>
10.31+ Servicing Agreement, dated as of May 26, 1995, among CSC-UK, City
Mortgage Servicing Limited and Greenwich, incorporated by
reference to Exhibit 10.31 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
10.32 Stock Purchase Agreement, dated as of September 29, 1995, among
the Company, David Steene, Martin Brand and Gerald Epstein,
incorporated by reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.33 Service Agreement, dated as of April 5, 1995, between CSC-UK and
David Steene, incorporated by reference to Exhibit 10.33 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.34 Service Agreement, dated as of April 5, 1995, between CSC-UK and
Martin Brand, incorporated by reference to Exhibit 10.34 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.35 Service Agreement, dated as of April 5, 1995, between CSC-UK and
Gerald Epstein, incorporated by reference to Exhibit 10.35 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.36 Agreement, dated as of May 1, 1995, between CSC-UK and J.L.B.
Equities, Inc., incorporated by reference to Exhibit 10.36 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.37 Lease, dated as of August 2, 1995, among The Standard Life
Assurance Company, City Mortgage Servicing Limited and CSC-UK,
incorporated by reference to Exhibit 10.37 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.38 Agreement and Plan of Reorganization, dated as of April 12, 1994,
among Essex, CSC and Shareholders of CSC, incorporated by
reference to Exhibit 10.38 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
10.39 Stock Purchase Agreement, dated November 15, 1993, between CSC and
Spectrum Financial Consultants, Inc., incorporated by reference to
Exhibit 10.39 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.40 Pooling and Servicing Agreement, dated as of November 27, 1995,
among CSC, ContiTrade Services L.L.C. and Harris Trust and Savings
Bank, incorporated by reference to Exhibit 10.40 to the Company's
Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.41 Insurance and Indemnity Agreement, dated as of November 27, 1995,
between CSC and Financial Security Assurance Inc., incorporated by
reference to Exhibit 10.41 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December
20, 1995.
10.42 Indemnification Agreement, dated as of December 6, 1995, among
CSC, Financial Security Assurance Inc. and ContiFinancial Services
Corporation, incorporated by reference to Exhibit 10.42 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.43 Purchase Price Letter, dated as of December 6, 1995, between CSC
and ContiTrade Services L.L.C., incorporated by reference to
Exhibit 10.43 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
10.44 Stock Option Agreement, dated as of March 6, 1996, by and among
the Company, CSC-UK and Messrs. Jaye and Johnson, incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form
8-K filed with the Commission on March 14, 1996.
10.45 Asset Purchase Agreement, dated March 6, 1996, by and among
CSC-UK, J&J, UK Credit Corporation Limited ("UK Credit") and
certain shareholders of UK Credit, incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K filed with
the Commission on March 14, 1996.
10.46+ Letter Agreement, dated as of March 28, 1996, from Greenwich
International, Ltd. to CSC-UK regarding purchase commitment with
respect to first and second mortgage loans located in the United
Kingdom, incorporated by reference to Exhibit 10.46 to the
Company's Annual Report on Form 10-K/A filed with the Commission
on November 4, 1996.
10.47 Letter Agreement, dated March 28, 1996, between Greenwich and
CSC-UK regarding termination of prior agreement, incorporated by
reference to Exhibit 10.46 to the Company's Annual Report on Form
10-K filed with the Commission on April 1, 1996.
10.48 Subscription Agreement, dated April 26, 1996, among the Company,
NatWest Securities Limited, Bear, Stearns & Co. Inc., CIBC Wood
Gundy Securities Corp. and Wasserstein Perella Securities, Inc.,
incorporated by reference to Exhibit 10.48 to the Company's
Quarterly Report on Form 10-Q filed with the Commission on May 15,
1996.
10.49 Agreement for the Sale and Purchase of the Entire Issued Share
Capital of Heritable Group Limited, dated June 14, 1996,
incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed with the Commission on June 28, 1996.
10.50 Service Deed, dated as of April 23, 1996, between J&J and Michael
Robin Jaye, incorporated by reference to Exhibit 10.50 to the
Company's Quarterly Report on Form 10-Q filed with the Commission
on August 14, 1996.
10.51 Service Deed, dated as of April 23, 1996, between J&J and Alec
David Johnson, incorporated by reference to Exhibit 10.51 to the
Company's Quarterly Report on Form 10-Q filed with the Commission
on August 14, 1996.
10.52 Covenant Letter and related Pledge Agreement, Stock Pledge
Agreement and Collateral Assignment, each dated April 11, 1996,
among the First National Bank of Boston, the Company and CSC, as
amended by the Letter Agreement and related Commercial Promissory
Note and the Confirmation of Guaranty, each dated June 13, 1996.
10.53 Third Amendment to Lease, dated as of April 17, 1996, between CSC
and Taxter Park Associates, incoporated by reference to Exhibit
10.53 to the Company's Quarterly Report on Form 10-Q filed with
the Commission on August 14, 1996.
10.54 Lease, dated as of April 18, 1996, among The Standard Life
Assurance Company, City Mortgage Servicing Limited and CSC-UK,
incorporated by reference to Exhibit 10.54 to the Company's
Quarterly Report on Form 10-Q filed with the Commission on August
14, 1996.
10.55 Purchase and Sale Agreement, dated June 20, 1996 and effective as
of February 2, 1996, between CSC and Greenwich Capital Financial
Products, Inc., incorporated by reference to Exhibit 10.55 to the
Company's Quarterly Report on Form 10-Q filed with the Commission
on August 14, 1996.
10.56 Lease Agreement, dated as of July 7, 1996, between CSC and Robert
Martin Company, incorporated by reference to Exhibit 10.56 to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on August 14, 1996.
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C>
10.57 Loan Agreement, dated as of August 6, 1996, between CSC and
CoreStates, incorporated by reference to Exhibit 10.57 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on September 4, 1996.
10.58 Employment Agreement, dated as of January 1, 1996, between CSC and
Tim S. Ledwick, incorporated by reference to Exhibit 10.58 to the
Company's Registration Statement on Form S-1 as declared effective
by the Commission on September 4, 1996.
10.59 Employment Agreement, dated as of February 1, 1996, between CSC
and Robert J. Blackwell, incorporated by reference to Exhibit
10.59 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on September 4, 1996.
11.1* Computation of Earnings Per Share
27.1* Financial Data Schedule
</TABLE>
---------------
* Filed herewith
+ Confidential treatment granted with respect to certain provisions
(b) Reports on Form 8-K:
1. Form 8-K dated April 8, 1996 revising the Company's results for the year
ended December 31, 1995.
2. Form 8-K dated May 2, 1996 reporting the Company's first quarter 1996
results.
3. Form 8-K dated May 2, 1996 reporting the Company's acquisition of J&J,
as amended by Form 8-K/A dated September 27, 1996.
4. Form 8-K dated May 2, 1996 reporting the Company's offering of its 6%
Convertible Subordinated Debentures due 2006.
5. Form 8-K dated June 28, 1996 reporting the Company's acquisition of
Heritable, as amended by Form 8-K/A dated August 28, 1996, Form 8-K/A
dated September 11, 1996 and Form 8-K/A dated September 27, 1996.
6. Form 8-K dated September 27, 1996 revising the Company's results for the
six months and three months ended June 30, 1996.
22
<PAGE> 24
SIGNATURE
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.
CITYSCAPE FINANCIAL CORP.
-------------------------
Date: November 19, 1996 By /s/Tim S. Ledwick
----------------- ------------------
Tim S. Ledwick
Title: Chief Financial Officer
(as chief accounting officer and
on behalf of the registrant)
23
<PAGE> 1
EXHIBIT 11.1 CITYSCAPE FINANCIAL CORP.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY
NET EARNINGS APPLICABLE TO COMMON STOCK $11,125,996 $ 2,377,792 $20,399,140 $ 3,427,028
=========== =========== =========== ===========
Weighted average common shares 29,399,898 20,216,504 29,170,432 20,216,504
Adjustment to common shares:
Assume exercise of stock options or warrants 1,052,150 1,865,124 981,635 1,865,124
----------- ----------- ----------- -----------
WEIGHTED AVERAGE PRIMARY SHARES 30,452,048 22,081,628 30,152,067 22,081,628
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE $ 0.37 $ 0.11 $ 0.68 $ 0.16
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
----------- -----------
<S> <C> <C>
FULLY DILUTED (1)
Net earnings applicable to common stock $11,125,996 $20,399,140
Adjustment to net earnings:
Add: After-tax interest expense from Convertible
Debentures 800,353 800,353
----------- -----------
ADJUSTED NET EARNINGS APPLICABLE TO COMMON STOCK $11,926,349 $21,199,493
=========== ===========
Weighted average common shares 29,399,898 29,170,432
Adjustment to common shares:
Assume conversion of Convertible Debentures 3,309,786 1,654,892
Assume exercise of stock options 1,132,255 1,115,369
----------- -----------
WEIGHTED AVERAGE PRIMARY SHARES 33,841,939 31,940,693
=========== ===========
EARNINGS PER COMMON SHARE $ 0.35 $ 0.66
=========== ===========
</TABLE>
(1) Fully diluted earnings per share were not presented for the 1995 periods
because the Convertible Debentures were not issued until 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,860,183
<SECURITIES> 55,232,807
<RECEIVABLES> 129,223,915
<ALLOWANCES> 0
<INVENTORY> 114,348,602
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,956,176
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 444,802,787
<CURRENT-LIABILITIES> 0
<BONDS> 181,750,000
0
0
<COMMON> 296,264
<OTHER-SE> 95,566,562
<TOTAL-LIABILITY-AND-EQUITY> 444,802,787
<SALES> 0
<TOTAL-REVENUES> 67,231,769
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 26,154,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,381,727
<INCOME-PRETAX> 34,695,693
<INCOME-TAX> 14,296,553
<INCOME-CONTINUING> 20,399,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,399,140
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.66
<FN>
<F1>The Company makes use of an unclassified balance sheet style due to the
nature of its business. Current Assets and Current Liabilities are therefore
reflected as zero in accordance with the instructions of Appendix E to the
EDGAR Filer Manual.
</FN>
</TABLE>
