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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
----------------------------
Date of Report (Date of earliest event reported): May 7, 1996
TFC ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
1-11121 54-1306895
(Commission File Number) (I.R.S. Employer Identification No.)
5425 Robin Hood Road, Suite 101A 23513
Norfolk, Virginia (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (804) 858-1400
Page 1 of 13 pages
Exhibit Index on Page 4
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A press release regarding the Company's financial results for the first
quarter of 1996-Exhibit 99.7
The exhibits on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Form 8-K and the Exhibit
Index is incorporated herein by reference.
Page 2 of 13 pages
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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 hereunto duly authorized.
TFC ENTERPRISES. INC.
By: /s/ CHARLES M. JOHNSTON
-------------------------
Charles M. Johnston
Chief Financial Officer
Date: May 10, 1996
Page 3 of 13 pages
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBITS SEQUENTIAL PAGE NO.
- ----------- ----------------------- -------------------
99.7 Press release dated April 10, 1996 5
Page 4 of 13 pages
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Exhibit 99.7
CONTACT: CHARLES M. JOHNSTON TFC ENTERPRISES, INC.
804-858-4054 NEWS RELEASE
*FOR IMMEDIATE RELEASE*
TFC ENTERPRISES REPORTS FINANCIAL RESULTS FOR FIRST QUARTER 1996
NORFOLK, VA, May 7, 1996 /PRNewswire/ -- TFC Enterprises, Inc. (NASDAQ:
TFCE) today reported first quarter 1996 net income of $.7 million, or $.07 per
common share. This compares to net income of $1.8 million, or $.16 per common
share, in the first quarter of 1995, and a net loss of $(12.3) million, or
$(1.09) per common share, in the fourth quarter of 1995.
Gross contract purchases totaled $25.9 million in the first quarter of
1996, or 65% below the $73.5 million purchased in the first quarter of 1995.
The decrease 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 were made to reduce the rate of future charge-offs and
delinquencies.
Net interest revenue for the first quarter of 1996 totaled $8.2 million,
an increase of 4% compared with $7.8 million in the first quarter of 1995. The
increase was attributable to higher interest earning assets offset, in part, by
a reduction in the net interest margin.
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Average interest earning assets for the first quarter of 1996 totaled
$216.2 million, an increase of 19% over the first quarter 1995 level of $182.5
million.
The net interest margin was 15.1% in the first quarter of 1996, compared
to 17.1% in the first quarter of 1995. The decrease was 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 22.2% in the first quarter of
1996, compared to 22.6% in the first quarter of 1995. The decrease was
primarily attributable to a $.6 million reduction in the amount of contract
purchase discount accreted to interest revenue as a yield enhancement. This
was offset, in part, by an increase in the weighted average annual percentage
rate of the contract receivables portfolio.
The cost of interest bearing liabilities was 9.5% in the first quarter of
1996, compared with 8.4% in the first quarter of 1995. The increase was
primarily attributable to higher interest rates charged to the Company under
forbearance agreements with its lenders, as more fully disclosed in the TFC
Enterprises, Inc. 1995 Annual Report on Form 10-K.
Operating expense was $6.3 million in the first quarter 1996, compared with
$5.3 million in the first quarter of 1995. The increase was primarily
attributable to higher repossession and
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salary expenses. Also contributing to the increase in operating expense was
the growth of First Community Finance, Inc., the Company's subsidiary engaged
in the business of originating and servicing small consumer loans. As a
percentage of average interest earning assets, operating expense was 11.6% in
the first quarter of both 1996 and 1995.
Provision for credit losses totaled $1.0 million in the first quarter of
1996. No provision for credit losses was recorded in the first quarter 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 maintain the combined allowance for credit losses and nonrefundable
dealer reserve at an amount considered adequate to absorb future credit
losses.
Net charge-offs to the allowance for credit losses and non-refundable
dealer reserve totaled approximately $11.7 million in the first quarter of
1996, or 22.7% of average gross contract receivables net of unearned interest.
This compared to $5.8 million, or 12.5%, in the first quarter of 1995. The
increase in net charge-offs in the first quarter of 1996, relative to the
comparable prior year period, was primarily attributable to higher charge-offs
relating to assets purchased prior to 1996 offset, in part, by an increase in
recoveries. Recoveries tripled to $1.9
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million in the first quarter of 1996, compared to $.6 million in the first
quarter of 1995, an increase of $1.3 million.
At March 31, 1996, the combination of the Company's allowance for credit
losses and nonrefundable dealer reserve totaled approximately $35.8 million, or
18.5% of gross contract receivables net of unearned interest. This compared to
$43.5 million, or 19.7%, at December 31, 1995 and $31.1 million, or 16.0%, at
March 31, 1995. In addition, the refundable dealer reserve, which is available
to absorb losses relating to contracts purchased from certain dealers, totaled
approximately $2.2 million at March 31, 1996, compared with $3.3 million at
December 31, 1995, and $2.9 million at March 31, 1995.
Gross contract receivables that were 60 days or more past due totaled
approximately $21.3 million, or 9.1% of gross contract receivables at March 31,
1996. This compared to $18.4 million, or 6.8%, at December 31, 1995 and $15.1
million, or 6.4%, at March 31, 1995.
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TFC Enterprises, Inc., through its wholly-owned subsidiary, The Finance
Company, specializes in purchasing and servicing installment sales contracts
originated by automobile and motorcycle dealers. Through First Community
Finance, Inc., another wholly-owned subsidiary, TFC Enterprises, Inc. is
involved in the direct origination and servicing of small consumer loans.
Based in Norfolk, VA, TFC Enterprises, Inc. also has offices in Dallas, TX,
Jacksonville, FL, San Diego, CA, and throughout Virginia.
NOTE: Detailed supplemental information follows.
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TFC ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
3/31/96 12/31/95 3/31/95
(dollars in thousands)
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 14,181 $ 12,507 $ 571
Net contract receivables 154,187 171,051 154,473
Recoverable income taxes 3,818 3,904 96
Property and equipment, net 2,925 2,256 1,739
Goodwill, net 11,453 11,656 12,266
Other intangible assets, net 2,527 2,596 2,805
Deferred income taxes 2,720 6,911 5,410
Other assets 4,190 4,265 1,559
-------- -------- --------
Total assets $196,001 $215,146 $178,919
======== ======== ========
Liabilities and shareholders'
equity
Liabilities:
Revolving line of credit $ 54,855 $ 59,475 $ 93,488
Term notes 43,000 50,000 25,000
Automobile Receivables-
Backed notes 39,035 47,252 --
Subordinated notes, net 13,748 13,732 4,911
Other debt -- -- 925
Accounts payable and
accrued expenses 4,897 4,146 2,970
Income taxes payable -- -- 3,442
Refundable dealer reserve 2,246 3,250 2,902
Other liabilities 1,070 887 606
-------- -------- --------
Total liabilities 158,851 178,742 134,244
-------- -------- --------
Shareholders' equity:
Common stock, $.01 par value,
40,000,000 shares authorized;
11,287,308, 11,283,954, and
11,282,604 shares outstanding
at 3/31/96, 12/31/95 and
3/31/95, respectively 49 49 49
Additional paid-in capital 54,285 54,279 54,265
Retained deficit (17,184) (17,924) (9,639)
-------- -------- --------
Total shareholders' equity 37,150 36,404 44,675
-------- -------- --------
Total liabilities and
shareholders' equity $196,001 $215,146 $178,919
======== ======== ========
</TABLE>
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TFC ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
3/31/96 3/31/95
(in thousands, except per share amounts)
<S> <C> <C>
Interest and other
finance revenue $12,015 $10,329
Interest expense 3,858 2,518
------- -------
Net interest revenue 8,157 7,811
Provision for
credit losses 1,000 --
Other revenue 554 537
Operating expense:
Salaries 3,318 3,083
Employee benefits 547 520
Occupancy 220 154
Equipment 262 223
Amortization of
intangible assets 273 273
Other 1,666 1,019
------- -------
Total operating
expense 6,286 5,272
------- -------
Income before
income taxes 1,425 3,076
Provision for income
taxes 685 1,252
------- -------
Net income $ 740 $ 1,824
======= =======
Net income per
common share $ .07 $ .16
======= =======
</TABLE>
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TFC ENTERPRISES, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
3/31/96 3/31/95
(dollars in thousands)
<S> <C> <C>
CONTRACT PURCHASES
Point of sale $ 16,025 $ 56,559
Portfolio 9,877 16,942
-------- --------
Total 25,902 73,501
======== ========
AVERAGE BALANCES
Interest earning
assets 216,214 182,454
Total assets 207,547 173,271
Interest bearing
liabilities 162,700 120,672
Equity 36,930 43,805
PERFORMANCE RATIOS
Return on average
assets 1.43% 4.21%
Return on average
equity 8.02 16.66
Yield on interest
earning assets 22.23 22.64
Cost of interest
bearing liabilities 9.48 8.35
Net interest margin 15.09 17.12
Operating expense as a
percentage of interest
earning assets 11.63 11.56
Total net chargeoffs
to average gross
contract receivables, net
of unearned interest 22.66 12.54
60 day delinquencies
to gross contract
receivables, period
end 9.14 6.42
Total allowance and
nonrefundable reserve
to gross contract
receivables net of
unearned interest, period end 18.53 15.99
Equity to assets,
period end 18.95 24.97
</TABLE>
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TFC ENTERPRISES, INC.
CONTRACT RECEIVABLES SUMMARY
(Unaudited)
<TABLE>
<CAPTION>
3/31/96 12/31/95 3/31/95
(dollars in thousands)
<S> <C> <C> <C>
Gross contract receivables $233,164 $271,039 $235,693
Less:
Unearned interest revenue 40,106 49,878 41,126
Unearned discount 974 1,320 2,428
Unearned commissions 1,778 2,193 1,578
Unearned service fees (84) (210) 167
Payments in process 5 2,906 3,484
Escrow for pending
acquisitions 417 419 1,324
Allowance for credit losses 21,394 23,046 5,411
Nonrefundable reserve 14,387 20,436 25,702
-------- -------- --------
Net contract receivables $154,187 $171,051 $154,473
======== ======== ========
</TABLE>
