SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-14065
BLC FINANCIAL SERVICES, INC.
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Delaware 75-1430406
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(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
645 Madison Avenue, 18th Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-751-5626
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2000
Common stock $.01 par value 20,292,875
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying financial statements and information are
submitted as required by Form 10-Q. The financial information
does not include all disclosures that are required by
generally accepted accounting principles.
In the opinion of management, all adjustments that are
necessary to present fairly, the financial position of BLC
Financial Services, Inc. (the "Company") for the periods
included, have been made.
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<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
March 31, June 30,
2000 1999
ASSETS _________ ____________
- ------
<S> <C> <C>
Loans receivable, net $ 21,282,000 $ 21,936,000
Loans held for sale 10,381,000 8,922,000
Cash 3,594,000 4,229,000
Cash - restricted 2,470,000 1,728,000
Accounts receivables - loans sold 14,672,000 8,982,000
Accounts and other receivables 1,751,000 2,681,000
Prepaid expenses and deposits 483,000 464,000
Leasehold improvements, furniture and equipment,
net of accumulated depreciation 1,302,000 1,207,000
Servicing assets 6,621,000 4,761,000
Residual interests 13,911,000 10,877,000
Deferred income taxes 799,000 1,000,000
Security deposits 144,000 131,000
Deferred financing costs, net of
accumulated amortization 1,279,000 669,000
Other assets 886,000 450,000
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TOTAL ASSETS $ 79,575,000 $ 68,037,000
============== ============
LIABILITIES and SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
- -----------
Advances under credit facilities $ 40,279,000 $ 39,488,000
Accounts payable & accrued expenses 1,263,000 643,000
Due to participants 3,296,000 1,640,000
Allowance for estimated future losses on loans sold 11,000 77,000
Debentures 6,246,000 4,725,000
Notes Payable (including related party notes
of $300,000) 335,000 120,000
Customer deposits 3,121,000 2,197,000
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TOTAL LIABILITIES 54,551,000 48,890,000
============= ============
SHAREHOLDERS' EQUITY
- --------------------
Preferred Stock, $.10 par value:
Authorized - 2,000,000 shares, issued and
outstanding - none
Common Stock, $0.01 par value:
Authorized - 35,000,000 shares, issued and
outstanding 20,292,875 and 20,288,875,
respectively 203,000 202,000
Additional paid in capital 14,566,000 12,659,000
Retained earnings 9,479,000 5,865,000
Accumulated other comprehensive income 776,000 421,000
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Total shareholders' equity 25,024,000 19,147,000
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 79,575,000 $ 68,037,000
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
For the three months ended For the nine months ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES:
Gain on sale of loans $ 4,110,000 $ 2,515,000 $ 12,022,000 $ 9,958,000
Interest income 1,068,000 632,000 3,492,000 2,750,000
Service fee income 823,000 965,000 2,217,000 2,115,000
Origination income 201,000 316,000 1,197,000 1,069,000
Miscellaneous 45,000 2,000 158,000 32,000
Total revenues ----------- ----------- ------------ ------------
6,247,000 4,430,000 19,086,000 15,924,000
----------- ----------- ------------- ------------
EXPENSES:
Operating costs 2,832,000 2,117,000 7,688,000 6,588,000
General and administrative 775,000 712,000 2,459,000 2,170,000
Interest 960,000 594,000 2,914,000 2,273,000
---------- ----------- ------------- ------------
Total expenses 4,567,000 3,423,000 13,061,000 11,031,000
---------- ----------- ------------- ------------
Income before provision for income taxes 1,680,000 1,007,000 6,025,000 4,893,000
Provision for income taxes 691,000 398,000 2,411,000 1,952,000
----------- ----------- ------------ ------------
NET INCOME $ 989,000 $ 609,000 $ 3,614,000 $ 2,941,000
=========== =========== ============ ============
NET INCOME PER COMMON SHARE
Earnings per share, basic $ 0.05 $ 0.03 $ 0.18 $ 0.15
=========== =========== ============ ============
Earnings per share, diluted $ 0.04 $ 0.03 $ 0.15 $ 0.13
=========== =========== ============ ============
Weighted average number of common shares 20,289,186 20,010,987 20,288,977 19,927,973
=========== =========== ============ ============
Weighted average number of common shares
and dilutive securities outstanding 25,444,368 24,052,345 25,239,290 24,064,527
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Unaudited)
<TABLE>
Accumulated
Common Stock Additional Other
Number of Paid in Retained Comprehensive Comprehensive
Shares Amount Capital Earnings Income Income Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 20,288,875 $202,000 $12,659,000 $ 5,865,000 $ 421,000 $19,147,000
For the nine months ended
March 31, 2000:
Net income -- -- 3,614,000 -- 3,614,000 3,614,000
Warrants exercised 4,000 1,000 3,000 4,000
Pre-confirmation net
operating loss
utilization -- 1,904,000 -- -- 1,904,000
Change in unrealized
gain on residual
interests, net of
income tax effect
-- -- -- -- 355,000 355,000 355,000
------------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 20,292,875 $ 203,000 $14,566,000 $ 9,479,000 $ 776,000 $ 3,969,000 $25,024,000
============= =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PART I - FINANCIAL STATEMENT
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
Nine months ended
March 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,614,000 $ 2,941,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & amortization 1,477,000 1,184,000
Utilization of pre-confirmation net operating losses 1,904,000 1,561,000
Provisions for credit losses 517,000 526,000
Loans held for sale (1,459,000) 1,243,000
Restricted cash (742,000) (124,000)
Accounts receivable - loans sold (5,690,000) 2,872,000
Accounts and other loans receivable 930,000 (5,247,000)
Servicing asset (2,740,000) (1,850,000)
Due to participants 1,656,000 1,219,000
Security deposits (13,000) --
Prepaid expenses (19,000) 51,000
Other assets (436,000) --
Accounts payable & accrued expenses 620,000 214,000
Customer deposits 924,000 387,000
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Net cash provided by operating activities 543,000 4,977,000
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Cash flows from investing activities:
Loans originated and purchased (30,105,000) (20,591,000)
Principal collections & sale of loans receivable 30,228,000 24,479,000
Origination of residual interests (3,662,000) (3,507,000)
Principal collections of residual interests 1,132,000 739,000
Acquisition of equipment (321,000) (403,000)
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Net cash provided by (used in) investing activities (2,728,000) 717,000
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Cash flows from financing activities:
Net Borrowings under credit lines 27,140,000 16,664,000
Proceeds from issuance of debentures 1,521,000 775,000
Principal payments on debt 215,000 516,000
Principal payments on notes payable (26,349,000) (22,334,000)
Increase in deferred financing cost (981,000) (218,000)
Proceeds from exercise of warrants 4,000 280,000
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Net cash provided by (used in) financing activities 1,550,000 (4,317,000)
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Net increase (decrease) in cash (635,000) 1,377,000
Cash - beginning of period 4,229,000 1,730,000
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Cash - end of period $ 3,594,000 $ 3,107,000
============= =============
Supplemental disclosures of cash flow information:
Cash paid during period for interest expense $ 2,772,000 $ 2,322,000
============= =============
Cash paid during period for income taxes $ 313,000 $ 869,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated condensed financial statements
have been prepared in conformity with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and the
applicable rules of the Securities and Exchange Commission. Accordingly, they do
not include all of 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 have been included. Operating results for the
nine-month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending June 30, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended June 30, 1999.
Principles of consolidation and preparation
The accompanying consolidated financial statements include the accounts
of BLC Financial Services, Inc. (the "Company") and its wholly owned
subsidiaries.
Business operations
The Company is primarily engaged in the business of originating,
selling and servicing loans to small businesses under the Section 7(a)
Guaranteed Loan Program ("7(a) Program") sponsored by the United States Small
Business Administration ("SBA"). Additionally, the Company originates, sells and
services loans to businesses under the United States Department of Agriculture
("USDA") Rural Business - Cooperative Business and Industry ("B&I") Guaranteed
Loan Program.
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<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 2000
(Unaudited)
1. BASIS OF PRESENTATION (continued)
-----------------------------------
Loan and revenue recognition
The Company's policy is to sell the SBA or USDA guaranteed portion of
all loans that it originates in the secondary market on a nonrecourse basis. The
guaranteed portion of the loans receivable that have been originated, but not
yet sold, are carried at the lower of aggregate cost or market value. Market
value is determined by outside commitments from investors or current yield on
similar loans. Loans receivable held for investment are stated at the principal
amount outstanding less deferred income.
Upon the sale of the loans, the Company allocates the cost, based upon
the relative fair values, to the guaranteed portion of the loan, the
unguaranteed portion of the loan, the servicing asset and residual interest, if
any.
Gain on sales of loans receivable principally represents the present
value of the differential between the interest rates charged by the Company and
the interest rates passed on to the purchaser of the receivables, after
considering the effects of estimated prepayments, repurchases and normal
servicing fees. Gains on the sale of loans receivable are recorded on the trade
date using the specific identification method.
The Company generally ceases to accrue interest income on loan
receivables which become 90 days delinquent. The Company then categorizes these
loans as being in liquidation, and takes appropriate steps to attempt to collect
the loan in full. Any interest received on delinquent loans is either applied
against principal or reported as interest income, according to management's
judgement as to the collectibility of principal.
Per share information
Basic EPS is determined using net income divided by the weighted
average shares outstanding during the period. Diluted EPS is computed by
dividing net income, plus the after tax effect of the interest expense on the
convertible debentures, by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued using the treasury stock method
calculated based upon average market price for the period.
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<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 2000
(Unaudited)
2. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
----------------------------------------------
<TABLE>
The allowance for loan losses for the nine months ended March 31, 2000
and 1999 are as follows:
<S> <C> <C> <C>
Balance at June 30, 1999 $914,000 Balance at June 30, 1998 $641,000
Provision for loan losses 527,000 Provision for loan losses 506,000
Write-off (96,000) Write-off (258,000)
Recoveries Recoveries 20,000
------------ ------------
Balance at March 31, 2000 $1,345,000 Balance at March 31, 1999 $909,000
============ ============
</TABLE>
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
Results of Operations:
Quarter Ended March 31, 2000 vs. Quarter Ended March 31, 1999
The Company recorded net income of approximately $989,000 (or $.05 per
basic share) for the three months ended March 31, 2000 as compared to net income
of approximately $609,000 (or $.03 per basic share) for the three months ended
March 31, 1999. Net income before provision for income taxes was $1,680,000 for
the quarter ended March 31, 2000 as compared to $1,007,000 for the quarter ended
March 31, 1999.
Revenues for the three months ended March 31, 2000 increased from
approximately $4,430,000 for the three months ended March 31, 1999 to
approximately $6,247,000, or approximately 41%. At March 31, 2000 the Company
maintained a total serviced loan portfolio of 581 loans which approximated
$337,613,000 as compared to 422 loans approximating $226,974,000 at March 31,
1999.
Gain on sale of loans increased from $2,515,000 for the three months
ended March 31, 1999 to $4,110,000 for the three months ended March 31, 2000, an
increase of 63%. This is attributable to increases in loan originations and
sales of both the guaranteed and unguaranteed portions of loans originated. The
guaranteed loans sold during the quarter ended March 31, 2000 increased to
$31,285,000 from $18,963,000 during the same period last year. The unguaranteed
portion of loans securitized during the quarter ending March 31, 2000 increased
to $7,694,000 from $4,844,000 for the quarter ending March 31, 1999. These
increases in both the guaranteed and unguaranteed loan sales during the quarter
were partially offset by an overall reduction in the average premium as well as
the servicing fee received on the sale of the guaranteed portion of the loans in
the secondary marketplace.
Interest income increased from approximately $632,000 for the three
months ended March 31, 1999 to approximately $1,068,000 for the three months
ended March 31, 2000, or by 69%. This was due to an increase in the average
outstanding and performing retained loan portfolio held by the Company during
the three months ended March 31, 2000. In addition, the prime rate, which is the
base rate for all of the Company's loan originations increased to 9% as of March
31, 2000, compared to a prime rate of 7.75% at March 31, 1999.
Service fee income was $965,000 as of March 31, 1999 as compared to
$823,000 at March 31, 2000. This decrease can be attributed to an overall
decrease in the service fee rates earned on the sale of guaranteed portion of
loans as well as an increase in the quarterly amortization or principal payments
on the residual interests. At March 31, 2000, the overall average service fee
and residual interest earned on the guaranteed portion of all loans sold
approximated 1.25% as compared to 1.80% at March 31, 1999. However, this
decrease in rates was partially offset by the increase in the serviced and sold
loan portfolio which approximated $279,800,000 at March 31, 2000 compared to
$187,574,000 at March 31, 1999. In addition, the Company continues to earn
residual interest income, net of amortization, on unguaranteed loans securitized
and guaranteed loans sold. Service fees and residual interest rates earned on
those guaranteed loans sold in the secondary market ranged between .50% and
approximately 4.4%.
Origination income decreased from $316,000 at March 31, 1999 to
$201,000 at March 31, 2000. This decrease is attributable to a decrease in the
number of loans originated through the Company's non-government guaranteed loan
program.
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<PAGE>
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
Results of Operations:
Quarter Ended March 31, 2000 vs. Quarter Ended March 31, 1999 (continued)
Loans in the aggregate principal amount of approximately $37,781,000
were originated and funded during the three months ended March 31, 2000, as
compared to loans in the aggregate principal amount of approximately $28,106,000
for the three months ended March 31, 1999. The guaranteed principal amount of
the loans funded during the three months ended March 31, 2000 aggregated
approximately $28,592,000 as compared to the aggregate guaranteed principal of
approximately $20,860,000 for the prior year's period.
The increase in the Company's loan volume during the quarter ended
March 31, 2000 resulted from increased loan origination activities through the
consolidated efforts of its loan production offices located in Virginia,
Florida, Kansas, Texas, Washington, Arizona, Nebraska, Oklahoma, New Jersey, and
Massachusetts.
At March 31, 2000, 41 proposed loans in the aggregate principal amount
of approximately $23,146,000 had received both Business Loan Center and SBA
approval and were awaiting closing. An additional 66 proposed loans in the
aggregate principal amount of approximately $36,498,000 had been approved by
Business Loan Center and were either awaiting submission to the SBA or had been
submitted to the SBA and were awaiting approval.
At March 31, 2000, six proposed loans in the approximate aggregate
principal amount of $16,945,000 had received both BLC Commercial Capital Corp.
and USDA approval and were awaiting closing. In addition, six proposed loans in
the approximate aggregate principal amount of $17,635,000 were approved by BLC
Commercial Capital Corp. and awaiting submission to the USDA or awaiting USDA
approval. BLC Commercial Capital Corp.'s existing capital resources should
enable it to fund these loans and additional loans in process.
The Company's operating expenses increased from approximately
$2,117,000 for the three months ended March 31, 1999 to approximately $2,832,000
for the quarter ended March 31, 2000, an increase of 34%. This increase resulted
from increases in payroll, commissions and travel associated with continued
growth.
General and administrative expenses of approximately $775,000 for the
three months ended March 31, 2000 increased from approximately $712,000 for the
prior period, an increase of 9%.
Interest expense increased by approximately 62% during the three months
ended March 31, 2000 as compared to the prior year's period. The increase was
due to increased borrowing to meet the continued growth in loan production
activities as well as increase in the borrowing base rate during this quarter.
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<PAGE>
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
Results of Operations:
Nine Months Ended March 31, 2000 vs. Nine Months Ended March 31, 1999
The Company recorded net income of $3,614,000 (or $.18 per basic share)
for the nine months ended March 31, 2000, as compared to net income of
approximately $2,941,000 (or $.15 per basic share) for the nine months ended
March 31, 1999. Net income before provision for income taxes was $6,025,000 for
the nine months ended March 31, 2000 as compared to $4,893,000 for the nine
months ended March 31, 1999.
Revenues for the nine months ended March 31, 2000 increased to
approximately $19,086,000 from $15,924,000 for the nine months ended March 31,
1999, an increase of 20%, as a result of greater loan originations, an increased
serviced loan portfolio and increased gains on the sale of both the guaranteed
and unguaranteed portion of loans.
The majority of guaranteed portions of loans originated during the nine
months ended March 31, 2000 were sold in the secondary market immediately
subsequent to the closing of each loan. Gains on the sale of both the guaranteed
and unguaranteed portion of loans sold for the nine months ended December 31,
1999 approximated $12,022,000, as compared to approximately $9,958,000 for the
nine months ended March 31, 1999.
Generating these revenues were loans originated during the nine months
ended March 31, 2000, which approximated $116,457,000 as compared to loans in
the approximate aggregate principal amount of $81,773,000 for the nine months
ended March 31, 1999, an increase of 42%. The guaranteed principal amount of the
loans originated during the nine months ended March 31, 2000 aggregated
approximately $86,217,000, as compared to the aggregate guaranteed principal of
approximately $59,495,000 for the prior year's period.
Interest income increased from approximately $2,750,000 for the nine
months ended March 31, 1999 to approximately $3,492,000 for the nine months
ended March 31, 2000. This increase was due to an increase in the average
outstanding and performing retained loan portfolio held by the Company during
the nine months ended March 31, 2000 as well as an increase in the prime rate,
which is the base rate for all of the Company's loan originations.
Service fee income increased slightly from approximately $2,115,000 for
the nine months ended March 31, 1999 to approximately $2,217,000 for the nine
months ended March 31, 2000. While the serviced and sold portfolio continued to
grow during the nine months ended March 31, 2000, the service fee rates earned
on the sale of the guaranteed portion of loans sold in the secondary market
declined from those levels experienced during the same nine months of 1999.
Origination income increased from $1,069,000 at March 31, 1999 to
$1,197,000 at March 31, 2000. This increase can be attributed to increased fees
earned on the origination and sales of non-SBA loans, as well as fees earned in
connection with packaging these and other SBA and B&I loans.
Operating expenses of the Company increased by 17% over the prior
year's period primarily as a result of an increased payroll expenses, commission
expenditures and travel associated with continued growth of the operations.
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<PAGE>
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
Results of Operations:
Nine Months Ended March 31, 2000 vs. Nine Months Ended March 31, 1999
(continued)
General and administrative expenses of approximately $2,459,000 for the
nine months ended March 31, 2000 increased from approximately $2,170,000 for the
prior year's period as a result of general overhead growth.
Interest expense increased during the nine months ended March 31, 2000
by approximately 28% from the prior year's period due to increased borrowing to
meet the continued growth in loan production activity during this period as well
as an increase in the base borrowing rate.
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<PAGE>
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
LIQUIDITY AND CAPITAL RESOURCES
The Company actively engages in commercial lending through Business
Loan Center, Inc., BLC Commercial Capital Corp., and BLC Capital Corp., and
therefore, the Company has a constant need for debt financing. Cash used by the
Company and its subsidiaries to fund loans, repay existing debt and to fund
operating expenses is currently provided only partially through collections on
loans and proceeds from loan sales. The remainder of the Company's cash
requirements is derived from existing capital and short and long-term borrowing.
The Company currently maintains a $50,000,000 credit facility to fund
both the guaranteed and unguaranteed portion of SBA 7(a) Program loan
originations, as well as a $15,000,000 credit facility to fund both the
guaranteed and unguaranteed portion of B&I loans. Borrowings under both of the
guaranteed lines are repaid immediately upon the sale of the guaranteed portion
on the secondary market.
During the nine months ended March 31, 2000, the Company, through its
subsidiary Business Loan Center, Inc. successfully completed the closing of a
revolving securitization facility totaling $75 million. This type of
securitization structure provides for periodic sales of the unguaranteed portion
of SBA loans into a conduit facility on a revolving basis. The initial sales,
which took place in December 1999, consisted of two pools of unguaranteed SBA
loans approximating $23.2 million. During the quarter ended March 31, 2000,
Business Loan Center, sold an additional pool totaling approximately $7.7
million.
The Company believes that its current capital resources and future cash
flows will be sufficient to meet its future financial obligations and projected
capital requirements, based on the resources provided by the credit facilities
described above, the anticipated proceeds from sales of both the guaranteed and
unguaranteed portion of loans in the secondary market, the cash generated from
the existing portfolio in the form of interest and servicing income, and the
regular principal repayments on loans receivable. Management believes that the
Company should be able to originate and fund at least $140 million in new loans
during the fiscal year ending June 30, 2000. However, there can be no assurances
that the Company will be able to achieve this level.
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<PAGE>
BLC FINANCIAL SERVICES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 2000
Year 2000 Update
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
Year 2000, these date code fields will need to accept four digit entries to
distinguish the twenty-first century dates. The Company uses software and
related technologies that may be affected by the Year 2000 problem, and has been
pursuing a strategy to ensure that all of its critical computer systems would be
operational beginning on January 1, 2000.
The Company has not had any Year 2000 problems subsequent to December
31, 1999 and does not anticipate any in the future. However, the Company plans
to continue to conduct analyses of the Company's information technology systems
and Year 2000 testing procedures. To date, the Company's costs associated with
Year 2000 issues have not been material, and management does not anticipate that
the costs which may be incurred subsequent to January 1, 2000 to exceed $50,000.
The Company's loan servicing system has continued to be fully
operational subsequent to January 1, 2000 after having received assurances from
the vendor of its servicing system, that their system is Year 2000 compliant.
However, in the event that the servicing system does not operate properly, the
Company could service each loan manually, which would entail additional labor
costs. These costs have been estimated to be no greater than $70,000.
There can be no assurance that other companies' computer systems and
applications on which the Company's operations rely will continue to remain
unaffected by the Year 2000 functions, or that any such operational failure by
another company would not have a material adverse effect on the Company's
systems and operations.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None
b. None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BLC Financial Services, Inc.
Date: May 9, 2000 By: /s/ Robert F. Tannenhauser
--------------------------------
Robert F. Tannenhauser
President
By: /s/ Jennifer M. Goldstein
--------------------------------
Jennifer M. Goldstein
Chief Financial Officer
-17-
<PAGE>
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