<PAGE> 1
THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission File No. 1-11121
TFC ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1306895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5425 Robin Hood Road
Suite 101A
Norfolk, Virginia 23513
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (757) 858-1400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
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
--- ---
As of August 13, 1996, there were 11,290,308 outstanding shares of the
registrant's $.01 par value per share common stock.
<PAGE> 2
TFC ENTERPRISES, INC.
REPORT ON FORM 10-Q FOR THE THREE MONTHS
AND SIX MONTHS ENDED JUNE 30, 1996
Table of Contents and 10-Q Cross Reference Index
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
<S> <C>
Financial Highlights 3
Financial Statements (Item 1)
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Changes in Shareholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2) 13
PART II - OTHER INFORMATION
Submission of Matters to a Vote of Security Holders (Item 4) 21
Other Information (Item 5) 21
Exhibits and Reports on Form 8-K (Item 6) 22
Signatures 23
Index to Exhibits 23
</TABLE>
2
<PAGE> 3
TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three months Six months
(dollars in thousands, except ended June 30, ended June 30,
per share amounts) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (364) $ 1,951 $ 376 $ 3,775
Net income (loss) per common share (.03) .17 .03 .33
Average common and common equivalent
shares outstanding (in thousands) 11,289 11,320 11,287 11,312
- -------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Annualized return on average equity NM 17.23% 2.03% 17.00%
Annualized return on average assets NM 4.00 .38 4.08
Yield on interest earning assets 21.56% 23.46 21.91 23.05
Cost of interest bearing liabilities 9.60 8.53 9.52 8.40
Net interest margin 14.41 17.76 14.77 17.44
Operating expense as a percentage of
average interest earning assets 12.98 12.06 12.26 11.81
Total net charge-offs to average
gross contract receivables
net of unearned interest 25.81 11.77 24.11 12.14
60 day delinquencies to period end
gross contract receivables 7.74 6.52 7.74 6.52
Total allowance and nonrefundable reserve
to period end gross contract receivables
net of unearned interest 17.02 15.60 17.02 15.60
Equity to assets, period end 20.61 22.33 20.61 22.33
- -------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES:
Interest earning assets (a) $189,828 $204,942 $203,119 $193,921
Total assets 185,918 194,887 196,837 184,816
Interest bearing liabilities 141,410 137,076 152,258 129,524
Equity 37,250 45,288 37,081 44,401
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Throughout this report, ratios are based on unrounded numbers and
factors contributing to changes between periods are noted in descending
order of materiality.
NM - Not meaningful.
(a) Average interest bearing deposits and gross contract receivables net of
unearned interest revenue and unearned discount.
3
<PAGE> 4
TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, Dec 31, June 30,
(dollars in thousands) 1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 11,492 $ 12,507 $ 2,987
Net contract receivables 140,021 171,051 177,970
Recoverable income taxes 3,331 3,904 162
Property and equipment, net 3,398 2,256 1,926
Goodwill, net 11,250 11,656 12,063
Other intangible assets, net 2,457 2,596 2,735
Deferred income taxes 3,210 6,911 8,406
Other assets 3,314 4,265 2,559
-------- -------- --------
Total assets $178,473 $215,146 $208,808
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Revolving line of credit $ 57,378 $ 59,475 $106,421
Term notes 34,000 50,000 25,000
Automobile Receivables-Backed notes 29,139 47,252 --
Subordinated notes, net 13,764 13,732 14,935
Other debt -- -- 341
Accounts payable and accrued expenses 4,213 4,146 5,256
Income taxes payable -- -- 5,050
Refundable dealer reserve 2,082 3,250 4,525
Other liabilities 1,106 887 653
-------- -------- --------
Total liabilities 141,682 178,742 162,181
-------- -------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none outstanding -- -- --
Common stock, $.01 par value, 40,000,000 shares
authorized; 11,290,308; 11,283,954 and
11,282,719 shares outstanding, respectively 49 49 49
Additional paid-in capital 54,290 54,279 54,266
Retained deficit (17,548) (17,924) (7,688)
-------- -------- --------
Total shareholders' equity 36,791 36,404 46,627
-------- -------- --------
Total liabilities and shareholders' equity $178,473 $215,146 $208,808
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
June 30, June 30,
(in thousands, except per share amounts) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and other finance revenue $22,248 $22,350
Interest expense 7,251 5,439
- ------------------------------------------------------------------------------------------------------------
Net interest revenue 14,997 16,911
Provision for credit losses 2,500 250
- ------------------------------------------------------------------------------------------------------------
Net interest revenue after provision for credit losses 12,497 16,661
Other revenue:
Commissions on ancillary products 935 1,094
Other 73 51
- ------------------------------------------------------------------------------------------------------------
Total other revenue 1,008 1,145
- ------------------------------------------------------------------------------------------------------------
Operating expense:
Salaries 6,316 6,343
Employee benefits 1,008 1,034
Occupancy 482 305
Equipment 620 494
Amortization of intangible assets 546 546
Other 3,476 2,730
- ------------------------------------------------------------------------------------------------------------
Total operating expense 12,448 11,452
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 1,057 6,354
Provision for (benefit from) income taxes 681 2,579
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 376 $ 3,775
- ------------------------------------------------------------------------------------------------------------
Primary net income (loss) per common share $ .03 $ .33
Fully diluted net income (loss) per common share .03 .33
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
Three months ended
- -------------------------------------------------------------------------
JUNE 30, March 31, Dec 31, Sept 30, June 30,
1996 1996 1995 1995 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------
$10,233 $12,015 $ 13,588 $13,420 $12,021
3,393 3,858 3,753 3,341 2,921
- -------------------------------------------------------------------------
6,840 8,157 9,835 10,079 9,100
1,500 1,000 25,000 1,250 250
- -------------------------------------------------------------------------
5,340 7,157 (15,165) 8,829 8,850
425 510 428 602 594
29 44 86 31 14
- -------------------------------------------------------------------------
454 554 514 633 608
- -------------------------------------------------------------------------
2,998 3,318 2,460 3,270 3,260
461 547 488 485 514
262 220 208 199 151
358 262 275 348 271
273 273 272 273 273
1,810 1,666 1,504 1,408 1,711
- -------------------------------------------------------------------------
6,162 6,286 5,207 5,983 6,180
- -------------------------------------------------------------------------
(368) 1,425 (19,858) 3,479 3,278
(4) 685 (7,552) 1,409 1,327
- -------------------------------------------------------------------------
$ (364) $ 740 $(12,306) $ 2,070 $ 1,951
- -------------------------------------------------------------------------
$ (.03) $ .07 $ (1.09) $ .18 $ .17
(.03) .07 (1.09) .18 .17
- -------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
(in thousands) 1996 1995
---- ----
<S> <C> <C>
COMMON STOCK $ 49 $ 49
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $ 54,279 $ 54,259
Stock options exercised 11 7
-------- --------
Balance at end of period $ 54,290 $ 54,266
======== ========
RETAINED DEFICIT
Balance at beginning of period $(17,924) $(11,463)
Net income 376 3,775
-------- --------
Balance at end of period $(17,548) $ (7,688)
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------
(in thousands) 1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 376 $ 3,775
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of intangible assets 545 546
Depreciation and other amortization 853 569
Provision for (benefit from) deferred income taxes 3,701 (3,549)
Provision for credit losses 2,500 250
Gain on disposal of assets -- (6)
Changes in operating assets and liabilities:
Decrease (increase) in recoverable income taxes 573 (65)
Decrease (increase) in other assets 569 (791)
Increase in accounts payable and accrued expenses 67 1,809
Increase in income taxes payable -- 3,082
(Decrease) increase in refundable dealer reserve (1,168) 2,321
Increase in other liabilities 219 96
-------- --------
Net cash provided by operating activities 8,235 8,037
-------- --------
INVESTING ACTIVITIES
Repayments on (net cost of acquiring) contract receivables 28,530 (39,044)
Purchase of property and equipment (1,581) (425)
Proceeds on disposal of assets -- 6
-------- --------
Net cash provided by (used in) investing activities 26,949 (39,463)
-------- --------
FINANCING ACTIVITIES
Net (payments) borrowings on revolving line of credit (2,097) 21,629
Payments on Term notes (16,000) --
Payments on Automobile Receivables-Backed notes (18,113) --
Borrowings on Subordinated notes -- 10,000
Net payments on other debt -- (511)
Proceeds from stock options exercised 11 7
-------- --------
Net cash (used in) provided by financing activities (36,199) 31,125
-------- --------
Decrease in cash and cash equivalents (1,015) (301)
Cash and cash equivalents at beginning of period 12,507 3,288
-------- --------
Cash and cash equivalents at end of period $ 11,492 $ 2,987
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
8
<PAGE> 9
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business. TFC Enterprises, Inc. ("TFCE") is the holding
company for its two wholly-owned subsidiaries, The Finance Company ("TFC") and
First Community Finance, Inc. ("FCF"). TFCE has no significant operations of
its own. TFC specializes in purchasing and servicing installment sales
contracts originated by automobile and motorcycle dealers in the sale of used
automobiles, vans, light trucks, and new and used motorcycles (collectively
"vehicles") both on an individual basis ("point of sale" purchase) and on a
portfolio basis ("portfolio" purchase). Based in Norfolk, Virginia, TFC also
has offices in Dallas, Texas; Jacksonville, Florida; and San Diego, California.
FCF is involved in the direct origination and servicing of small consumer
loans. FCF operates ten offices throughout Virginia and North Carolina.
Basis of presentation. The unaudited consolidated financial statements of the
Company are prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. These financial statements should be
read in conjunction with the Company's 1995 Annual Report on Form 10-K. In the
opinion of management, all normal recurring adjustments which management of the
Company considers necessary for a fair presentation of the financial position
and results of operations for the periods are reflected in the financial
statements. Operating results for the three and six months ended June 30,
1996, are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1996.
2. CONTRACT RECEIVABLES
The following is a summary of contract receivables at June 30, 1996, December
31, 1995 and June 30, 1995:
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
(in thousands) 1996 1995 1995
-------- --------- --------
<S> <C> <C> <C>
Gross contract receivables $205,098 $271,039 $271,922
Less:
Unearned interest revenue 33,013 49,878 50,648
Unearned discount 663 1,320 2,278
Unearned commissions 1,444 2,193 1,831
Unearned service fees 131 (210) 249
Payments in process -- 2,906 3,562
Escrow for pending acquisitions 537 419 874
Allowance for credit losses 17,262 23,046 4,714
Nonrefundable reserve 12,027 20,436 29,796
-------- -------- --------
Net contract receivables $140,021 $171,051 $177,970
======== ======== ========
</TABLE>
9
<PAGE> 10
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CONTRACT RECEIVABLES (CONTINUED)
Changes in the allowance for credit losses and nonrefundable reserve for the
three and six months ended June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- --------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period $21,394 $ 5,411 $ 23,046 $ 5,492
Provision for credit losses 1,500 250 2,500 250
Charge-offs (7,924) (1,682) (12,464) (2,400)
Recoveries 2,292 735 4,180 1,372
------- ------- -------- --------
Balance at end of period $17,262 $ 4,714 $ 17,262 $ 4,714
------- ------- -------- --------
NONREFUNDABLE RESERVE
Balance at beginning of period $14,387 $25,702 $ 20,436 $ 24,348
Allocation for credit losses 3,717 9,249 6,740 16,313
Charge-offs (6,077) (5,155) (15,149) (10,865)
------- ------- -------- --------
Balance at end of period $12,027 $29,796 $ 12,027 $ 29,796
======= ======= ======== ========
</TABLE>
10
<PAGE> 11
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE
Primary and fully diluted net income (loss) per common share for the three and
six months ended June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
(in thousands, except per share amounts) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) $ (364) $ 1,951 $ 376 $ 3,775
Stock and stock equivalents (average shares):
Common shares outstanding 11,289 11,283 11,287 11,282
Stock options (a) -- 37 -- 30
------- ------- ------- -------
Total stock and stock equivalents 11,289 11,320 11,287 11,312
------- ------- ------- -------
Primary net income (loss) per
common share (b) $ (.03) $ .17 $ .03 $ .33
======= ======= ======= =======
FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) $ (364) $ 1,951 $ 376 $ 3,775
Stock and stock equivalents (average shares):
Common shares outstanding 11,289 11,283 11,287 11,282
Stock options (c) -- 101 -- 104
------- ------- ------- -------
Total stock and stock equivalents 11,289 11,384 11,287 11,386
------- ------- ------- -------
Fully diluted net income (loss) per
common share (b) $ (.03) $ .17 $ .03 $ .33
======= ======= ======= =======
</TABLE>
(a) Shares were assumed to be repurchased at the average closing common
stock price of $2.59 and $2.98 in the second quarter and first six
months of 1996, respectively. Shares were assumed to be repurchased at
the average closing common stock price of $10.95 and $9.12 in the
second quarter and first six months of 1995, respectively.
(b) Calculation based on unrounded numbers.
(c) Shares were assumed to be repurchased at the closing common stock price
of $2.38 and $12.13 per common share at June 30, 1996 and 1995,
respectively.
11
<PAGE> 12
TFC ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. OTHER MATTERS
Defaults under forbearance agreements. As a result of the net loss in the
second quarter of 1996, the Company, at June 30, 1996, was not in compliance
with certain aspects of forbearance agreements with lenders. The Company is
currently in discussions with its lenders to resolve the out-of-compliance
situations. Although the Company is not able to predict what the ultimate
resolution of the discussions will be, certain of the remedies available to the
lenders as a result of the defaults include repricing and/or foreclosure of the
loans, which could have a material adverse effect on the Company's business,
financial condition and results of operations, as well as its ability to
continue as a going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
Proposed restructuring of senior management. In June 1996, the Company's Board
of Directors approved a proposed restructuring of the Company's senior
management. The proposed restructuring, which would not include the Chairman of
the Board, would involve the termination of the employment agreements of
certain key executives. Termination of the employment agreements would be in
exchange for approximately $1.5 million to $1.8 million in combined cash
payments and cancellation of certain notes receivable from these executives.
The notes receivable are related to 1995 profit sharing amounts owed to the
Company. The purpose of the proposed restructuring is to reduce salary expense
in the future. The combined base salaries, exclusive of benefits and profit
sharing amounts, of the affected executives total approximately $3.8 million
over the remaining 3.5 years of the employment agreements through December 31,
1999.
The proposed restructuring of senior management is contingent on approval by
the Company's lenders, certain of which approvals have been obtained. No final
agreements have yet been reached with the affected executives. However, it is
anticipated that, assuming lender approval, agreements will be reached in the
third quarter of 1996.
Revisions to Robert S. Raley, Jr. employment agreement / termination of
deferred compensation agreement. In June 1996, the Company and Robert S. Raley,
Jr., the Company's Chairman of the Board, agreed to extend the term of his
employment agreement through December 31, 2002. In addition, the Board of
Directors has agreed to increase Mr. Raley's annual base salary from $50,000 to
an annualized rate of $300,000 and has approved a $300,000 personal line of
credit, subject to lender approval, for Mr. Raley's use. Although the salary
increase will not become a binding part of Mr. Raley's employment agreement,
the Board of Directors retained the right to amend Mr. Raley's base salary at
any time. In 1996, Mr. Raley will receive the entire $300,000 base salary.
In August 1996, the Company and Mr. Raley agreed to terminate all of Mr.
Raley's rights to the twenty year deferred compensation agreement contained in
his employment agreement. Since Mr. Raley is considered a "principal
shareholder" of the Company, the voluntary termination of his deferred
compensation agreement and the resultant elimination of the Company's
obligation with respect thereto, aggregating $1.0 million, will be considered
an equity contribution in the third quarter of 1996. Deferred compensation
expense for the first six months of 1996 totaled $.1 million.
12
<PAGE> 13
TFC ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains forward looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward looking statements as a result of certain factors,
including, but not limited to, those factors set forth elsewhere in this
report.
SIGNIFICANT EVENTS
Defaults under forbearance agreements. As a result of the net loss in the
second quarter of 1996, the Company, at June 30, 1996, was not in compliance
with certain aspects of forbearance agreements with lenders. The Company is
currently in discussions with its lenders to resolve the out-of-compliance
situations. Although the Company is not able to predict what the ultimate
resolution of the discussions will be, certain of the remedies available to the
lenders as a result of the defaults include repricing and/or foreclosure of the
loans, which could have a material adverse effect on the Company's business,
financial condition and results of operations, as well as its ability to
continue as a going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
Proposed restructuring of senior management. In June 1996, the Company's Board
of Directors approved a proposed restructuring of the Company's senior
management. The proposed restructuring, which would not include the Chairman of
the Board, would involve the termination of the employment agreements of
certain key executives. Termination of the employment agreements would be in
exchange for approximately $1.5 million to $1.8 million in combined cash
payments and cancellation of certain notes receivable from these executives.
The notes receivable are related to 1995 profit sharing amounts owed to the
Company. The purpose of the proposed restructuring is to reduce salary expense
in the future. The combined base salaries, exclusive of benefits and profit
sharing amounts, of the affected executives total approximately $3.8 million
over the remaining 3.5 years of the employment agreements through December 31,
1999.
The proposed restructuring of senior management is contingent on approval by
the Company's lenders, certain of which approvals have been obtained. No final
agreements have yet been reached with the affected executives. However, it is
anticipated that, assuming lender approval, agreements will be reached in the
third quarter of 1996.
Revisions to Robert S. Raley, Jr. employment agreement / termination of
deferred compensation agreement. In June 1996, the Company and Robert S. Raley,
Jr., the Company's Chairman of the Board, agreed to extend the term of his
employment agreement through December 31, 2002. In addition, the Board of
Directors has agreed to increase Mr. Raley's annual base salary from $50,000 to
an annualized rate of $300,000 and has approved a $300,000 personal line of
credit, subject to lender approval, for Mr. Raley's use. Although the salary
increase will not become a binding part of Mr. Raley's employment agreement,
the Board of Directors retained the right to amend Mr. Raley's base salary at
any time. In 1996, Mr. Raley will receive the entire $300,000 base salary.
In August 1996, the Company and Mr. Raley agreed to terminate all of Mr.
Raley's rights to the twenty year deferred compensation agreement contained in
his employment agreement. Since Mr. Raley is considered a "principal
shareholder" of the Company, the voluntary termination of his deferred
compensation agreement and the resultant elimination of the Company's
obligation with respect thereto, aggregating $1.0 million, will be considered
an equity contribution in the third quarter of 1996. Deferred compensation
expense for the first six months of 1996 totaled $.1 million.
13
<PAGE> 14
TFC ENTERPRISES, INC.
RESULTS OF OPERATIONS
Volume. Gross contracts purchased or originated totaled $29.4 million in the
second quarter of 1996, or 67% below the $89.6 million purchased in the second
quarter of 1995. For the first six months of 1996, gross contracts purchased or
originated totaled $55.3 million, or 66% below the $163.1 million purchased
during the first half of 1995. The decrease in gross contract purchases in the
second quarter and first six months of 1996, relative to the comparable periods
in 1995, was primarily attributable to a significant reduction in point of sale
purchases resulting from adjustments to the Company's credit and pricing
guidelines in late 1995, and to increased competition from other lenders. These
adjustments to the Company's credit and pricing guidelines were directed toward
reducing the rate of future charge-offs and delinquencies. Management expects
that contract purchase volume for the remainder of 1996 will continue to be
well below the corresponding levels in 1995, and, accordingly, this could have
a material adverse effect on the Company's future profitability.
As discussed in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K,
management's focus in 1996 has been to redirect the Company toward its
traditional military point of sale and civilian portfolio purchase business
lines, as well as toward an expanded "D" paper program referred to as the
"Credit Builder" program. In the first six months of 1996, gross contract
purchase volume for the Credit Builder program totaled $2.0 million. Purchase
volume for the Credit Builder program in the first half of 1996 has not met
management's expectations. Furthermore, gross contract purchase volume from
this product is not expected to materially improve for the remainder of 1996.
Management continues to focus the Company on its traditional military point of
sale and civilian portfolio purchase business lines.
Gross contracts purchased or originated were as follows for the three and six
months ended June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
GROSS CONTRACT VOLUME Three months ended Six months ended
June 30, June 30,
------------------ ------------------
(dollars in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contracts purchased or originated:
Point of sale $17,040 $72,913 $33,065 $129,472
Portfolio 12,406 16,656 22,283 33,598
------- ------- ------- --------
Total $29,446 $89,569 $55,348 $163,070
======= ======= ======= ========
Number of contracts purchased or originated:
Point of sale 3,076 8,056 5,609 13,771
Portfolio 2,349 3,518 4,199 7,743
------- ------- ------- --------
Total 5,425 11,574 9,808 21,514
======= ======= ======= ========
</TABLE>
The decrease in gross contracts purchased or originated in the first six months
of 1996 reflected reductions in each of the Company's three Regional Service
Centers located in Norfolk, Virginia (Mid-Atlantic), Dallas, Texas (Southwest),
and Jacksonville, Florida (Southern) offset, in part, by an increase in First
Community Finance, Inc. originations.
14
<PAGE> 15
TFC ENTERPRISES, INC.
Volume. (continued)
Gross contract purchase and origination volume for each of the Company's
Regional Service Centers, as well as First Community Finance, Inc., was as
follows for the three and six months ended June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
GROSS CONTRACT VOLUME BY LOCATION Three months ended Six months ended
June 30, June 30,
------------------ -------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service Center:
Mid-Atlantic $10,783 $27,274 $19,570 $ 44,635
Southern -- 35,501 502 69,772
Southwest 15,732 25,897 30,647 47,483
------- ------- ------- --------
Subtotal 26,515 88,672 50,719 161,890
------- ------- ------- --------
First Community Finance, Inc. 2,931 897 4,629 1,180
------- ------- ------- --------
Total $29,446 $89,569 $55,348 $163,070
======= ======= ======= ========
</TABLE>
As discussed in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K, the
Company, in the first quarter of 1996, temporarily transferred the underwriting
functions of the Southern Regional Service Center to the Mid-Atlantic Regional
Service Center. This action was taken to improve control over the underwriting
process by reducing the number of locations at which contracts are purchased.
As a result, the Southern Regional Service Center's contract purchase volume
decreased significantly in the first half of 1996. The Company expects to
resume contract purchases by the Southern Regional Service Center, on a limited
basis, in the third quarter of 1996.
Net interest revenue. Net interest revenue for the second quarter of 1996
totaled $6.8 million, a decrease of 25% compared with $9.1 million in the prior
year period. The decrease was attributable to a reduction in interest earning
assets and a decrease in the net interest margin. For the first half of 1996,
net interest revenue was $15.0 million, down 11% from $16.9 million in the
first six months of 1995. The decrease was attributable to a decrease in the
net interest margin offset, in part, by an increase in interest earning assets.
The net interest margin was 14.41% in the second quarter of 1996, compared to
17.76% in the second quarter of 1995. For the first half of 1996, the net
interest margin was 14.77%, compared to 17.44% in the first half of 1995. The
decreases were attributable to a reduction in the yield on interest earning
assets and an increase in the cost of interest bearing liabilities.
The yield on interest earning assets was 21.56% for the second quarter of 1996,
compared with 23.46% in the prior year period. For the first six months of
1996, the yield on interest earning assets was 21.91%, compared with 23.05% in
the first six months of 1995. The decreases were primarily attributable to
reductions in the amount of contract purchase discount accreted to interest
revenue as a yield enhancement. Contract purchase discount accreted to interest
revenue totaled $.3 million and $.7 million in the second quarter and first six
months of 1996, respectively. This compares to $.9 million and $1.9 million
during the comparable periods in 1995.
The cost of interest bearing liabilities was 9.60% in the second quarter of
1996 and 9.52% in the first six months of 1996. This compared to 8.53% and
8.40%, respectively, in the comparable periods in 1995. The increases were
primarily attributable to higher interest rates charged to the Company by its
lenders under forbearance agreements.
15
<PAGE> 16
TFC ENTERPRISES, INC.
Net interest revenue. (continued)
As a result of the net loss in the second quarter of 1996, the Company, at June
30, 1996, was not in compliance with certain aspects of forbearance agreements
with lenders. The Company is currently in discussions with its lenders to
resolve the out-of-compliance situations. Although the Company is not able to
predict what the ultimate resolution of the discussions will be, certain of the
remedies available to the lenders as a result of the defaults include repricing
and/or foreclosure of the loans, which could have a material adverse effect on
the Company's business, financial condition and results of operations, as well
as its ability to continue as a going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
The following table summarizes net interest revenue and the net interest margin
for the three and six months ended June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
NET INTEREST REVENUE Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
(dollars in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average interest earning assets (a) $189,828 $204,942 $203,119 $193,921
Average interest bearing liabilities 141,410 137,076 152,258 129,524
-------- -------- -------- --------
Net interest earning assets $ 48,418 $ 67,866 $ 50,861 $ 64,397
======== ======== ======== ========
Interest and other finance revenue $ 10,233 $ 12,021 $ 22,248 $ 22,350
Interest expense 3,393 2,921 7,251 5,439
-------- -------- -------- --------
Net interest revenue $ 6,840 $ 9,100 $ 14,997 $ 16,911
======== ======== ======== ========
Yield on interest earning assets 21.56% 23.46% 21.91% 23.05%
Cost of interest bearing liabilities 9.60 8.53 9.52 8.40
----- ----- ----- -----
Net interest spread 11.96% 14.93% 12.39% 14.65%
===== ===== ===== =====
Net interest margin (b) 14.41% 17.76% 14.77% 17.44%
===== ===== ===== =====
</TABLE>
(a) Average interest bearing deposits and gross contract receivables net of
unearned interest revenue and unearned discount.
(b) Net interest margin is annualized net interest revenue divided by average
interest earning assets.
Operating expense. Operating expense was $6.2 million in the second quarter of
1996 and the second quarter of 1995. Compared to the second quarter of 1995,
the second quarter of 1996 primarily reflected higher repossession, occupancy
and equipment expense offset by lower salary and benefits expense. For the
first six months of 1996, operating expense totaled $12.4 million, an increase
of 9% compared to $11.5 million in the first half of 1995. The increase in the
first six months of 1996 was primarily attributable to higher repossession,
occupancy and equipment expense offset, in part, by lower salary and benefits
expense.
As a percentage of average interest earning assets, operating expense was
12.98% in the second quarter of 1996, compared to 12.06% in the second quarter
of 1995. The increase reflected a decrease in average
16
<PAGE> 17
TFC ENTERPRISES, INC.
Operating expense. (continued)
interest earning assets in the second quarter of 1996. For the first six months
of 1996, operating expense was 12.26% of average interest earning assets,
compared to 11.81% in the first half of 1995. The increase was attributable to
higher operating expense offset, in part, by the effect of higher interest
earning assets.
In June 1996, the Company's Board of Directors approved a proposed
restructuring of the Company's senior management. The proposed restructuring,
which would not include the Chairman of the Board, would involve the
termination of the employment agreements of certain key executives. Termination
of the employment agreements would be in exchange for approximately $1.5
million to $1.8 million in combined cash payments and cancellation of certain
notes receivable from these executives. The notes receivable are related to
1995 profit sharing amounts owed to the Company. The purpose of the proposed
restructuring is to reduce salary expense in the future. The combined base
salaries, exclusive of benefits and profit sharing amounts, of the affected
executives total approximately $3.8 million over the remaining 3.5 years of the
employment agreements through December 31, 1999.
The proposed restructuring of senior management is contingent on approval by
the Company's lenders, certain of which approvals have been obtained. No final
agreements have yet been reached with the affected executives. However, it is
anticipated that, assuming lender approvals, agreements will be reached in the
third quarter of 1996.
In June 1996, the Company and Robert S. Raley, Jr., the Company's Chairman of
the Board, agreed to extend the term of his employment agreement through
December 31, 2002. In addition, the Board of Directors has agreed to increase
Mr. Raley's annual base salary from $50,000 to an annualized rate of $300,000
and has approved a $300,000 personal line of credit, subject to lender
approval, for Mr. Raley's use. Although the salary increase will not become a
binding part of Mr. Raley's employment agreement, the Board of Directors
retained the right to amend Mr. Raley's base salary at any time. In 1996, Mr.
Raley will receive the entire $300,000 base salary.
In August 1996, the Company and Mr. Raley agreed to terminate all of Mr.
Raley's rights to the twenty year deferred compensation agreement contained in
his employment agreement. Since Mr. Raley is considered a "principal
shareholder" of the Company, the voluntary termination of his deferred
compensation agreement and the resultant elimination of the Company's
obligation with respect thereto, aggregating $1.0 million, will be considered
an equity contribution in the third quarter of 1996. Deferred compensation
expense for the first six months of 1996 totaled $.1 million.
Provision for income taxes. The benefit from income taxes for the second
quarter of 1996 totaled four thousand dollars. This compares with a provision
for income taxes in the second quarter of 1995 of $1.3 million. The Company's
second quarter 1996 tax benefit reflects the impact of a $.4 million pretax
loss offset by $.3 million of nondeductible goodwill amortization and other
nondeductible expenses. The provision for income taxes totaled $.7 million in
the first six months of 1996. This compares to $2.6 million in the first six
months of 1995.
FINANCIAL CONDITION
Assets. Total assets decreased to $178.5 million at June 30, 1996, from $215.1
million at December 31, 1995, and $208.8 million at June 30, 1995. The decrease
was primarily attributable to a reduction in net contract receivables which
resulted from the Company's sharply lower contract purchase volume in the first
six months of 1996.
Net contract receivables. Net contract receivables were $140.0 million, or 78%
of total assets at June 30, 1996; $171.1 million, or 80% of total assets at
year-end 1995; and $178.0 million, or 85% of total assets at June 30, 1996. The
decrease in net contract receivables at June 30, 1996, compared with December
31, 1995 and June 30, 1995, reflected decreases in each of the Company's three
Regional Service Centers offset, in part, by an increase in net contract
receivables at First Community Finance, Inc.
17
<PAGE> 18
TFC ENTERPRISES, INC.
Net contract receivables. (continued)
The following table summarizes net contract receivables at June 30, 1996,
December 31, 1995 and June 30, 1995:
<TABLE>
<CAPTION>
NET CONTRACT RECEIVABLES June 30, Dec. 31, June 30,
(in thousands) 1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Service Center:
Mid-Atlantic $ 46,927 $ 58,406 $ 51,724
Southern 37,729 56,860 69,831
Southwest 49,208 51,393 55,463
-------- -------- --------
Subtotal 133,864 166,659 177,018
First Community Finance, Inc. 6,157 4,392 952
-------- -------- --------
Total $140,021 $171,051 $177,970
======== ======== ========
</TABLE>
Liabilities. Total liabilities were $141.7 million at June 30, 1996, a decrease
of $37.1 million, or 21%, from December 31, 1995, and a decrease of $20.5
million, or 13%, compared with June 30, 1995. The decrease in liabilities,
compared with year-end 1995 and June 30, 1995, primarily reflected decreased
borrowings under the Company's credit facilities which, in turn, resulted from
a contraction in net contract receivables. As a percentage of total liabilities
and equity, liabilities represented 79%, 83% and 78% respectively, at June 30,
1996, December 31, 1995 and June 30, 1995.
Equity. Equity totaled $36.8 million at June 30, 1996, compared to $36.4
million at December 31, 1995, and $46.6 million at June 30, 1995. The increase
in equity at June 30, 1996, compared with year-end 1995, was primarily
attributable to earnings retention. The decrease in equity at June 30, 1996,
compared with June 30, 1995, was primarily attributable to the Company's net
loss in the fourth quarter of 1995.
CREDIT QUALITY AND RESERVES
Net charge-offs. Net charge-offs to the allowance for credit losses and
nonrefundable dealer reserve were $11.7 million in the second quarter of 1996,
representing an annualized rate of 25.81% of average contract receivables net
of unearned interest. This compares to $6.1 million, or 11.77%, in the second
quarter of 1995. For the first six months of 1996, net charge-offs were $23.4
million, or 24.11% of average contract receivables net of unearned interest.
This compares to $11.9 million, or 12.14%, in the first six months of 1995. The
increase in net charge-offs in the second quarter and first six months of 1996,
relative to the comparable prior year periods, was primarily attributable to
higher charge-offs relating to assets purchased prior to 1996. This was offset,
in part, by an increase in recoveries. Recoveries increased to $2.3 million in
the second quarter of 1996 and $4.2 million in the first half of 1996. This
compares to $.7 million in the second quarter of 1995, and $1.4 million in the
first six months of 1995.
An additional factor which contributed to the increase in net charge-offs in
the second quarter and first six months of 1996, compared with the comparable
periods in 1995, was a modest tightening of the Company's charge-off
guidelines. Prior to the third quarter of 1995, credits on which no payments
had been received for 120 days were generally charged-off when they became 180
days contractually past due. In the third quarter of 1995, the payment recency
guideline was reduced from 120 days to 90 days.
18
<PAGE> 19
TFC ENTERPRISES, INC.
Net charge-offs. (continued)
Net charge-offs by Regional Service Center and First Community Finance, Inc.,
for the three and six months ended June 30, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
NET CHARGE-OFFS BY LOCATION Three months ended Six months ended
June 30, June 30,
------------------ ------------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service Center:
Mid-Atlantic $ 3,291 $1,737 $ 7,458 $ 4,248
Southern 5,866 2,452 9,789 4,571
Southwest 2,517 1,913 6,136 3,074
------- ------ ------- -------
Subtotal 11,674 6,102 23,383 11,893
First Community Finance, Inc. 35 -- 50 --
------- ------ ------- -------
Total $11,709 $6,102 $23,433 $11,893
======= ====== ======= =======
</TABLE>
In late 1995, the Company made certain adjustments to its credit and pricing
guidelines which were directed toward reducing the level of charge-offs and
delinquencies in the future. In part because of the adjustments to the credit
and pricing guidelines, the Company's contract purchase volume decreased
significantly in the first half of 1996, compared to the first half of 1995.
Management expects that contract purchase volume for the remainder of 1996 will
continue to be well below the corresponding levels in 1995 and, accordingly,
this could have a material adverse effect on the Company's future
profitability.
Reserves. At June 30, 1996, the combination of the Company's allowance for
credit losses and nonrefundable dealer reserve totaled $29.3 million, or 17.02%
of gross contract receivables net of unearned interest. This compared to $43.5
million, or 19.66%, at December 31, 1995 and $34.5 million, or 15.60%, at June
30, 1995.
The Company's refundable dealer reserve totaled $2.1 million at June 30, 1996,
compared with $3.3 million and $4.5 million at December 31, 1995 and June 30,
1995, respectively. Under certain of the Company's programs, contracts from
dealers are purchased under a refundable, rather than a nonrefundable, reserve
relationship. The Company's refundable reserve is available to absorb losses
relating only to those contracts purchased from specific dealers.
Delinquencies. Gross contract receivables that were 60 days or more delinquent
at June 30, 1996, December 31, 1995 and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
DELINQUENCY June 30, Dec. 31, June 30,
(dollars in thousands) 1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Gross contract receivables 60 days and over delinquent $ 15,872 $ 18,441 $ 17,727
Gross contract receivables 205,098 271,039 271,922
Percent 7.74% 6.80% 6.52%
</TABLE>
19
<PAGE> 20
TFC ENTERPRISES, INC.
Provision for credit losses. The provision for credit losses totaled $1.5
million and $2.5 million in the second quarter and first six months of 1996,
respectively. Provision for credit losses totaled $.3 million in the second
quarter and first half of 1995. The Company's primary business involves
purchasing installment sales contracts at a discount to the remaining principal
balance. A portion of the discount is generally held in a nonrefundable dealer
reserve against which credit losses are first applied. Additional provisions
for credit losses, if necessary, are charged to income in amounts considered by
management to be adequate to absorb future credit losses.
Provision for credit losses is dependent on a number of factors, including, but
not limited to, the level and trend of delinquencies and net charge-offs, the
amount of nonrefundable and refundable dealer reserves and the overall economic
conditions in the markets in which the Company operates. Due to the inherent
uncertainty involved in predicting the future performance of these factors,
there can be no assurance regarding the future level of provision for credit
losses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management. As shown on the Consolidated Statements of Cash Flows,
cash and cash equivalents decreased by $1.0 million in the first six months of
1996, to $11.5 million at June 30, 1996. The decrease reflected $36.2 million
of net cash used in financing activities partially offset by $26.9 million of
net cash provided by investing activities and $8.2 million of net cash provided
by operating activities. Net cash used in financing activities primarily
reflected $36.2 million of net payments on the Company's revolving line of
credit, term notes and Automobile Receivables-Backed notes. Net cash provided
by investing activities principally reflected $28.5 million in net repayments
on contract receivables. In the first half of 1996, the combination of cash on
hand and net cash provided by investing activities was sufficient to fund
business volume. In the first half of 1995, the combination of cash on hand and
net cash provided by financing activities was sufficient to fund the growth in
business volume.
Credit and forbearance agreements with lenders. The Company reported a net loss
of $(6.5) million for the full year 1995 which reflected a substantial increase
in the provision for credit losses resulting from a significant increase in
delinquencies and credit losses in the Company's portfolio of contract
receivables. As a result of the reported loss and the increase in delinquencies
and credit losses, the Company was not in compliance at December 31, 1995, and
does not expect to be in compliance in 1996, with certain aspects of the credit
agreements relating to its revolving line of credit, term notes and
subordinated notes. In March 1996, the Company's lenders agreed to forbear in
the exercise of their rights and remedies under the credit agreements, provided
the Company continues to meet certain terms and conditions.
As a result of the net loss in the second quarter of 1996, the Company, at June
30, 1996, was not in compliance with certain aspects of forbearance agreements
with lenders. The Company is currently in discussions with its lenders to
resolve the out-of-compliance situations. Although the Company is not able to
predict what the ultimate resolution of the discussions will be, certain of the
remedies available to the lenders as a result of the defaults include repricing
and/or foreclosure of the loans, which could have a material adverse effect on
the Company's business, financial condition and results of operations, as well
as its ability to continue as a going concern.
The Company's credit and forbearance agreements with lenders are discussed in
more detail in the TFC Enterprises, Inc., 1995 Annual Report on Form 10-K.
20
<PAGE> 21
TFC ENTERPRISES, INC.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of Shareholders of TFC Enterprises, Inc. was held on
May 14, 1996 to consider two matters of business. The matters brought before
the shareholders and the voting results are as follows:
1. Election of Directors
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES*
--- ------- ------- ----------
<S> <C> <C> <C> <C>
Walter S. Boone, Jr. 8,432,669 -- 53,400 --
Robert S. Raley, Jr. 8,432,869 -- 53,200 --
Philip R. Smiley 8,432,669 -- 53,400 --
</TABLE>
The following directors' terms of office as a director continued after the
meeting: Meyer H. Abraham, Douglas E. Bywater, George R. Kouri and Linwood
R. Watson.
2. Ratification of Ernst & Young LLP as auditors
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES*
--- ------- ------- ----------
<S> <C> <C> <C>
8,452,254 20,650 13,165 --
</TABLE>
* "Broker non-votes" occur where a broker holding stock in street name does not
vote those shares.
ITEM 5. Other Information
Revisions to Robert S. Raley, Jr. employment agreement /
termination of deferred compensation agreement. In June 1996, the
Company and Robert S. Raley, Jr., the Company's Chairman of the
Board, agreed to extend the term of his employment agreement
through December 31, 2002. In addition, the Board of Directors
has agreed to increase Mr. Raley's annual base salary from
$50,000 to an annualized rate of $300,000 and has approved a
$300,000 personal line of credit, subject to lender approval, for
Mr. Raley's use. Although the salary increase will not become a
binding part of Mr. Raley's employment agreement, the Board of
Directors retained the right to amend Mr. Raley's base salary at
any time. In 1996, Mr. Raley will receive the entire $300,000
base salary.
In August 1996, the Company and Mr. Raley agreed to terminate all
of Mr. Raley's rights to the twenty year deferred compensation
agreement contained in his employment agreement. Since Mr. Raley
is considered a "principal shareholder" of the Company, the
voluntary termination of his deferred compensation agreement and
the resultant elimination of the Company's obligation with
respect thereto, aggregating $1.0 million, will be considered an
equity contribution in the third quarter of 1996. Deferred
compensation expense for the first six months of 1996 totaled $.1
million.
21
<PAGE> 22
TFC ENTERPRISES, INC.
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the accompanying Index to Exhibits are
filed or incorporated by reference as part of this Form 10-Q
and such Index to Exhibits is incorporated herein by
reference.
(b) Reports on Form 8-K
On April 12, 1996, the Company filed a report on Form 8-K,
under Item 7, regarding the Company's financial results for
1995, forbearance agreements with its lenders and business
focus in 1996.
On May 13, 1996, the Company filed a report on Form 8-K,
under Item 7, regarding the Company's first quarter 1996
results.
22
<PAGE> 23
TFC ENTERPRISES, INC.
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.
TFC ENTERPRISES, INC.
(Registrant)
Date: August 13, 1996 By: /S/ GEORGE R. KOURI
----------------------------------
George R. Kouri
President, Chief Executive Officer
and Director
Date: August 13, 1996 By: /S/ CHARLES M. JOHNSTON
----------------------------------
Charles M. Johnston
Vice President,
Treasurer and Chief
Financial Officer
(Principal Financial Officer
of the Registrant)
23
<PAGE> 24
TFC ENTERPRISES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------
<S> <C>
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TFC
ENTERPRISES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER AND SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000913958
<NAME> TFC ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,492
<SECURITIES> 0
<RECEIVABLES> 169,310
<ALLOWANCES> 29,289
<INVENTORY> 0
<CURRENT-ASSETS> 154,844
<PP&E> 6,285
<DEPRECIATION> 2,887
<TOTAL-ASSETS> 178,473
<CURRENT-LIABILITIES> 141,682
<BONDS> 134,281
0
0
<COMMON> 49
<OTHER-SE> 36,742
<TOTAL-LIABILITY-AND-EQUITY> 178,473
<SALES> 22,248
<TOTAL-REVENUES> 23,256
<CGS> 0
<TOTAL-COSTS> 12,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,500
<INTEREST-EXPENSE> 7,251
<INCOME-PRETAX> 1,057
<INCOME-TAX> 681
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 376
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
