<PAGE>
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, 1997)
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ________________to_______________
Commission File Number: 0-24286
EAGLE FINANCE CORP.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2464365
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1425 TRI-STATE PARKWAY, GURNEE, ILLINOIS 60031-4060
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(847) 855-7150
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock as of the latest practicable date:
10,000,000 shares of common stock, $0.01 par value per share, were authorized
and 4,189,100 shares were issued and outstanding as of March 31, 1997.
<PAGE>
EAGLE FINANCE CORP.
FORM 10-Q
________________________
TABLE OF CONTENTS
________________________
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Income . . . . . . . . . . . . . . . . . . . 4
Statements of Changes in Stockholders' Equity . . . . . . 5
Statements of Cash Flows . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 9
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 19
Item 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . 19
Item 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . 19
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . 19
Item 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 20
Item 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
2
<PAGE>
EAGLE FINANCE CORP.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND 1996 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ -------------
1997 1996 1996
----------- ------------ -----------
<S> <C> <C> <C>
Finance receivables, net . . . . . . . . . $43,458,745 $135,862,572 $54,663,926
Nonrefundable acquisition discount . . . . (2,740,780) (5,822,802) (1,443,164)
Allowance for credit losses . . . . . . . (4,389,950) (12,007,705) (6,045,514)
----------- ------------ -----------
36,328,015 118,032,065 47,175,248
Finance receivables held for sale, net . . 19,213,406 -- --
Excess servicing receivable . . . . . . . 847,909 -- 1,050,590
Cash . . . . . . . . . . . . . . . . . . . 2,621,761 1,693,422 1,271,594
Money market investments . . . . . . . . . 545,000 545,000 552,651
Prepaid expenses and debt issuance costs . 1,272,154 1,145,756 1,554,082
Repossessed or titled assets . . . . . . . 2,912,348 4,447,186 4,249,443
Income tax receivable . . . . . . . . . . 3,872,346 -- 4,732,346
Deferred income tax benefit . . . . . . . 1,004,912 4,136,270 1,004,912
Other assets . . . . . . . . . . . . . . . 2,544,289 1,385,471 2,176,696
----------- ------------ -----------
$71,162,140 $131,385,170 $63,767,562
----------- ------------ -----------
----------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt . . . . . . . . . . . . . . . $41,689,262 $ 92,662,901 $32,827,893
Subordinated debt . . . . . . . . . . . . 17,628,231 18,086,706 17,977,720
Accrued interest . . . . . . . . . . . . . 252,811 732,341 468,533
Accrued income tax payable . . . . . . . . 1,910 710,644 --
Accounts payable and accrued liabilities . 2,509,690 3,112,618 1,893,737
Unearned insurance commissions . . . . . . 3,836 42,220 5,158
Dealer reserves . . . . . . . . . . . . . 276,681 295,152 286,783
----------- ------------ -----------
Total liabilities . . . . . . . . . . . . 62,362,421 115,642,582 253,459,824
Stockholders' equity:
Preferred Stock, authorized 3,000,000 shares;
none issued . . . . . . . . . . . . . . -- -- --
Common Stock: $.01 par value, authorized
10,000,000 shares, issued and
outstanding 4,189,100 shares . . . . . . 41,891 41,891 41,891
Additional paid-in capital . . . . . . . . 13,514,422 13,514,422 13,514,422
Retained earnings . . . . . . . . . . . . (4,756,594) 2,186,275 (3,248,575)
----------- ------------ -----------
Total stockholders' equity . . . . . . . . 8,799,719 15,742,588 10,307,738
----------- ------------ -----------
$71,162,140 $131,385,170 $ 63,767,562
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------ ------------
Interest income:
Interest and fee income $ 3,427,589 $ 8,080,506
Interest expense (1,450,326) (2,388,923)
----------- -----------
Net interest income 1,977,263 5,691,583
Provision for credit losses (375,000) (2,696,000)
------------ ------------
Net interest income after provision for
credit losses 1,602,263 2,995,583
Other income:
Servicing income 780,455 677,377
Insurance commissions 2,410 21,235
------------ ------------
Total other income 782,865 698,612
Income before operating expenses 2,385,128 3,694,195
Operating expenses:
Salaries and related costs 2,035,145 1,743,945
Other operating expenses 1,858,002 1,811,799
------------ ------------
Total operating expenses 3,893,147 3,555,744
------------ ------------
Income (loss) before income taxes (1,508,019) 138,451
Applicable income taxes -- 52,200
------------ ------------
Net income (loss) $(1,508,019) $ 86,251
------------ ------------
------------ ------------
Per share data:
Net income (loss) per common share
(primary) $(0.36) $0.02
Net income (loss) per common share
(fully diluted) $(0.36) $0.02
Average number of common shares
outstanding (primary) 4,189,100 4,304,000
Average number of common shares
outstanding (fully diluted) 4,189,100 4,304,000
See accompanying notes to financial statements.
4
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
----------- -----------
Common stock:
Balance at beginning of period $ 41,891 $ 41,800
Stock options exercised -- 91
----------- -----------
41,891 41,891
----------- -----------
Additional paid-in capital:
Balance at beginning and end of period 13,514,422 13,514,422
Retained earnings:
Balance at beginning of period (3,248,575) 2,100,024
Net income (1,508,019) 86,251
----------- -----------
(4,756,594) 2,186,275
----------- -----------
Total stockholders' equity $ 8,799,719 $15,742,588
----------- -----------
----------- -----------
See accompanying notes to financial statements.
5
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------ -------------
Cash flows from operating activities:
Net income $(1,508,019) $ 86,251
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Provision for credit losses 375,000 2,696,000
Net finance receivable (charge-offs)
recoveries against allowance (2,030,564) (1,496,130)
Decrease (increase) in:
Prepaid expenses 71,136 (44,705)
Excess servicing receivable 202,681 --
Repossessed or titled assets 1,337,095 (18,046)
Other assets (367,593) (132,425)
Income tax receivable 860,000 --
Increase (decrease) in:
Accrued interest (215,722) 229,507
Accrued income tax 1,910 27,500
Accounts payable and accrued liabilities 615,953 (67,710)
Unearned insurance commissions (1,322) (3,895)
Dealer reserves (10,102) 2,288
Nonrefundable acquisition discount 1,297,616 (3,605,350)
------------ -------------
Net cash provided by (used in)
operating activities 628,069 (2,326,715)
------------ -------------
Cash flows from investing activities:
Purchase of investments 7,651 --
Proceeds from bulk sale/securitization
of vehicle retail installment notes -- 12,811,872
Principal collected on finance receivables 6,163,794 14,839,243
Finance receivables originated or acquired
(net of write-offs) (14,172,019) (17,794,821)
------------ -------------
Net cash provided by (used in)
investing activities (8,000,574) 9,856,294
------------ -------------
Cash flows from financing activities:
Proceeds from draws on bank lines 9,637,282 16,580,583
Repayments of borrowings -- (24,530,583)
Debt to affiliate (775,913) (38,656)
Proceeds from issuance of other debt 43,054 41,408
Repayment of other debt (392,543) --
Debt issuance costs 210,792 41,874
------------ -------------
Net cash provided by (used in)
financing activities 8,722,672 (7,905,374)
------------ -------------
Cash, net change 1,350,167 (375,795)
Cash at beginning of period 1,271,594 2,069,217
------------ -------------
Cash at end of period $ 2,621,761 $ 1,693,422
------------ -------------
------------ -------------
Supplemental cash flow disclosures -
cash paid during the period for:
Interest $ 1,666,048 $ 2,102,984
Income taxes and Illinois replacement tax $ 1,910 $ 24,700
See accompanying notes to financial statements.
6
<PAGE>
EAGLE FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
1. The financial statements of Eagle Finance Corp., a Delaware corporation
(the "Company"), are unaudited, but in the opinion of management reflect all
necessary adjustments, consisting only of normal recurring accruals, for a
fair presentation of results as of the dates and for the periods covered by
the financial statements. The results for the interim periods are not
necessarily indicative of the results of operations that may be expected for
the fiscal year. Management suggests that the unaudited interim financial
statements contained herein be read in conjunction with the financial
statements and the accompanying notes to the financial statements included in
the Company's 1996 Annual Report on Form 10-K.
2. Net income per common share amounts are based on the weighted average
number of common shares and common stock equivalents outstanding as reflected
on Exhibit 11 to this Quarterly Report on Form 10-Q.
3. As of January 1, 1997, the Company adopted Financial Accounting
Standards Board Statement ("FASB") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
("FASB 125"). FASB 125 is effective for transfers and servicing of financial
assets and retirements of liabilities occurring after December 31, 1996, and
is to be applied prospectively. FASB 125 provides accounting and reporting
standards for transfers and servicing of financial assets and retirements of
liabilities based on consistent application of a financial components
approach that focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings. Adoption
of FASB 125 is not expected to have a material impact on the Company's
financial position, results of operations or liquidity.
4. In February 1997, FASB Statement No. 128, "Earnings Per Share"
("FASB 128"), was issued. FASB 128 supersedes APB Opinion No. 15, Earnings
Per Share and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held
common stock or potential common stock. FASB 128 was issued to simplify the
computation of EPS and to make the U.S. standard more compatible with the EPS
standards of other countries and that of the International Accounting
Standards Committee. It replaces the presentation of primary EPS with a
presentation of basic EPS and fully diluted EPS with diluted EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS under APB 15.
FASB 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted (although pro forma EPS disclosure in the footnotes for periods
prior to required adoption is permitted). After adoption, all prior-period
EPS data presented shall be restated to conform with FASB 128. Although no
assurances can be provided, the
7
<PAGE>
Company does not expect adoption of FASB 128 to have a significant impact on
the Company's financial statements.
THIS REPORT MAY CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY INTENDS SUCH
FORWARD-LOOKING STATEMENTS TO BE COVERED BY THE SAFE HARBOR PROVISIONS FOR
FORWARD-LOOKING STATEMENTS CONTAINED IN THE PRIVATE SECURITIES REFORM ACT OF
1995, AND IS INCLUDING THIS STATEMENT FOR PURPOSES OF INDICATING SUCH INTENT.
FORWARD-LOOKING STATEMENTS THAT ARE BASED ON CERTAIN ASSUMPTIONS, AND
DESCRIBE FUTURE PLANS, STRATEGIES AND EXPECTATIONS OF THE COMPANY, ARE
GENERALLY IDENTIFIABLE BY USE OF THE WORDS "BELIEVE," "EXPECT," "INTEND,"
"ANTICIPATE," "ESTIMATE," "PROJECT" OR SIMILAR EXPRESSIONS. THE COMPANY'S
ABILITY TO PREDICT RESULTS OR THE ACTUAL EFFECT OF FUTURE PLANS OR STRATEGIES
IS INHERENTLY UNCERTAIN. FACTORS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON THE OPERATIONS AND FUTURE PROSPECTS OF THE COMPANY INCLUDE, BUT ARE NOT
LIMITED TO, CHANGES IN INTEREST RATES, GENERAL ECONOMIC CONDITIONS,
LEGISLATIVE/REGULATORY CHANGES, MONETARY AND FISCAL POLICIES OF THE U.S.
GOVERNMENT, INCLUDING POLICIES OF THE U.S. TREASURY AND THE FEDERAL RESERVE
BOARD, THE QUALITY OR COMPOSITION OF THE COMPANY'S PORTFOLIO OF FINANCE
RECEIVABLES, THE ABILITY OF THE COMPANY TO OBTAIN DEBT OR OTHER FINANCING,
COMPETITION, DEMAND FOR FINANCIAL SERVICES IN THE COMPANY'S MARKET AREA AND
ACCOUNTING PRINCIPLES, POLICIES AND GUIDELINES. THESE RISKS AND UNCERTAINTIES
SHOULD BE CONSIDERED IN EVALUATING FORWARD-LOOKING STATEMENTS AND UNDUE
RELIANCE SHOULD NOT BE PLACED ON SUCH STATEMENTS. FURTHER INFORMATION
CONCERNING THE COMPANY AND ITS BUSINESS, INCLUDING ADDITIONAL FACTORS THAT
COULD MATERIALLY AFFECT THE COMPANY'S FINANCIAL RESULTS, IS INCLUDED IN OTHER
COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a specialized financial services company engaged
primarily in acquiring and servicing automobile retail installment sales
contracts ("Installment Contracts") for purchases of late model used
automobiles by "non-prime" consumers, who typically have limited access to
traditional sources of consumer credit. To a lesser extent, the Company also
makes direct consumer loans and finance leases and purchases other retail
installment sale contracts (collectively "Other Loans") and offers, as agent,
insurance and other products related to consumer finance transactions
(collectively "Insurance Products"). The Company maintains its corporate
headquarters and a regional office near Chicago in Gurnee, Illinois, and
operates two other regional offices in Tampa and Orlando, Florida.
As of March 31, 1997, the Company had active relationships (I.E., the
Company purchased Installment Contracts from such dealers during the
preceding 90 days) with approximately 390 dealers located primarily in
Illinois, Florida, Georgia and South Carolina, and, to a lesser extent, in
Arizona, Colorado, Indiana, Kentucky, New Mexico, Ohio, Tennessee, Texas,
Utah, Wisconsin and Wyoming.
The following is management's discussion and analysis of the financial
condition of the Company at March 31, 1997 (unaudited) as compared to
March 31, 1996 (unaudited) and December 31, 1996, and the results of
operations for the three months ended March 31, 1997 and 1996 (unaudited).
This discussion should be read in conjunction with the Company's financial
statements and notes thereto appearing elsewhere in this quarterly report.
Data for the three months ended March 31, 1997 are not necessarily indicative
of results expected for the full fiscal year. The ratios and percentages
provided below are calculated using the detailed financial information
contained in the Company's financial statements and the financial data
included elsewhere in this Form 10-Q. References to "net" finance
receivables or Installment Contracts shall mean finance receivables or
Installment Contracts, as appropriate, net of unearned finance charges.
RECENT DEVELOPMENTS
In January 1997, the Company formally began using a proprietary credit
scoring model. Although no assurances can be given, the use of credit
scoring is expected to improve the Company's underwriting process.
On April 14, 1997, the Company sold approximately $19.2 million (net) of
Installment Contracts to General Electric Capital Corporation ("GECC") under
an Asset Purchase Agreement dated as of June 25, 1996, between the Company
and GECC (the "GECC Agreement"). As of March 31, 1997, the Company serviced
approximately $55.0 million (net) of Installment Contracts sold pursuant to
the GECC Agreement. SEE "--Liquidity and Capital Resources." At March 31,
1997, the Installment Contracts to be sold to GECC are shown on the balance
sheet as finance receivables held for sale.
GENERAL
Installment Contracts represented over 99% of the Company's net finance
receivables at March 31, 1997. Installment Contracts are purchased on a
non-recourse basis from automobile dealers and are typically secured by
medium-priced used automobiles. The automobiles are purchased by non-prime
consumers at retail prices typically ranging from approximately $5,000 to
$15,000. Installment Contracts financing such purchases typically have annual
percentage rates of interest ("APRs") ranging from 21% to 33% and repayment
terms ranging from 12 to 60 months. The average original principal
9
<PAGE>
amount financed under Installment Contracts outstanding at March 31, 1997 was
approximately $8,000, at an average APR of approximately 26%, with an average
original term of approximately 40 months. The Company's experience has
shown, however, that the average life of the Company's Installment Contracts
is substantially less than 40 months due to payoffs and repossessions that
occur prior to contract maturity.
The Company's outstanding balance of owned or serviced (i.e., managed)
Installment Contracts declined to $143.0 million at March 31, 1997 from
$151.6 million at December 31, 1996 and from $179.3 million at March 31,
1996. This decline reflects the Company's emphasis on addressing credit
losses (rather than portfolio growth) during 1996 and 1997.
Interest and servicing income on managed Installment Contracts accounts
for most of the Company's revenue. The net amount of Installment Contracts
purchased declined to $18.5 million during the three months ended March 31,
1997 from $28.9 million during the three months ended March 31, 1996. As
reflected in the following table, the finance receivables (purchased or
originated) by the Company during the periods presented below consist
primarily of Installment Contracts.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1997 1996
-------------- --------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net Installment Contracts purchased (1)... $18,466 99.6% $28,748 99.3%
Net Other Loans originated (1)............ 80 0.4% 200 0.7%
------- ----- ------- -----
Total..................................... $18,546 100.0% $28,948 100.0%
------- ----- ------- -----
------- ----- ------- -----
</TABLE>
_______________________
(1) Net of unearned finance charges
As part of its funding strategy, the Company sells Installment Contracts
to GECC. Generally, no gains or losses were recorded at the time the
Installment Contracts are sold. The Company retained servicing rights on the
Installment Contracts sold to GECC and recognizes servicing income over the
life of the related receivables. The Company is also eligible to receive
bonus servicing fees based on portfolio performance. Bonus servicing fees
are recognized as income when earned. The Company presently intends to
record gains or losses, as appropriate, on future sales and securitizations
in a manner consistent with industry practice. SEE "--Profitability" and
"--Liquidity and Capital Resources."
During the fourth quarter of 1996, the Company completed the
securitization of Installment Contracts through a transaction agented by
Greenwich Capital Markets, Inc. The Company recognized a gain on the
transaction. The Company capitalized the retained servicing rights on the
Installment Contracts securitized. The net amount of Installment Contracts
serviced by the Company for third parties was $80.4 million and $43.5 million
at March 31, 1997 and 1996, respectively. SEE "--Profitability" and
"--Liquidity and Capital Resources."
10
<PAGE>
PROFITABILITY
The following table sets forth certain data relating to the Company's
net income for the three months ended March 31, 1997 and 1996 and for the
year ended December 31, 1996:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------- FOR THE YEAR ENDED
1997 1996 DECEMBER 31, 1996
--------- -------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average net finance receivables:
Owned ..................................... $ 58,574 $139,577 $116,797
Serviced .................................. 88,698 41,390 56,041
--------- -------- --------
Managed ................................ 147,272 180,967 172,838
Average interest bearing liabilities ......... 55,324 114,308 98,202
Total interest and fee income (owned)......... 3,428 8,081 26,653
Total interest expense (owned)................ 1,450 2,389 9,059
--------- --------- --------
Net interest income before provision for credit
losses (owned)............................. $ 2,278 $ 5,692 $ 17,594
--------- --------- --------
--------- --------- --------
Average interest rate earned on net owned finance
receivables (owned)........................ 23.41% 23.16% 22.82%
Average interest rate on interest bearing
liabilities (owned)........................ 10.49% 8.36% 9.23%
--------- --------- --------
Net interest spread (owned)................... 12.92% 14.80% 13.59%
--------- --------- --------
Net interest margin (owned)(1)................ 13.50% 16.31% 15.06%
--------- --------- --------
</TABLE>
_____________________________
(1) Net interest margin represents net interest income on an annualized
basis divided by average net finance receivables.
A principal component of the Company's net income is its net interest
spread. Net interest spread represents the difference between interest
earned on finance receivables and interest paid for borrowed funds. The laws
of certain states establish the maximum interest rates, and prescribe the
types and maximum amounts of fees, insurance premiums and other amounts that
consumers may be charged. As is common in its market segment, the Company's
Installment Contracts generally bear the maximum allowable interest rates,
fees, premiums and other charges permitted under state law. As a result, the
Company has limited ability to offset increases in its cost of funds.
An increasingly larger component of the Company's profitability is the
servicing income earned on Installment Contracts sold or securitized, with
servicing retained, by the Company. Servicing income is derived from base
servicing fees for loan administration and collection services and bonus or
excess servicing fees paid based on the performance of the Installment
Contracts sold or securitized. The increase in servicing income was due to
higher levels of loans serviced by the Company. The following table sets
forth certain data relating to servicing fees for the periods shown:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------- FOR THE YEAR ENDED
1997 1996 DECEMBER 31, 1996
--------- -------- ------------------
<S> <C> <C> <C>
Base servicing fees .................. $686,039 $308,253 $1,712,437
Bonus/excess servicing fees .......... 297,096 369,124 3,705,841
Amortization of excess servicing ..... (202,680) -- (310,693)
-------- -------- ----------
Net servicing fees .................. $780,455 $677,377 $5,107,585
-------- -------- ----------
-------- -------- ----------
</TABLE>
11
<PAGE>
The Company maintains credit loss reserves to absorb potential losses in
its finance receivables portfolio. Credit loss reserves for the Company's
Installment Contracts portfolio are comprised of nonrefundable acquisition
discount and allowance for credit losses. SEE "--Credit Loss Experience."
The Company's liabilities are generally more interest-rate sensitive than
its finance receivables. As a result, significant increases in the Company's
cost of funds borrowed under its Revolving Credit Agreement could have a
material adverse effect on its profitability. The Company has attempted to
mitigate the adverse effect of increases in interest rates by entering into
interest rate protection agreements. The Company has purchased an interest
rate cap and interest rate collars that provide limited interest rate
protection. SEE "--Liquidity and Capital Resources." Additionally, the
Company may utilize alternative financing structures, such as a fixed rate
senior or subordinated debt, securitizations or whole loan sales to attempt
to mitigate the adverse effect of interest rate increases.
Another component of the Company's profitability is the level of its
operating expenses. The increase in operating expenses was attributable to
higher salaries and benefits costs, and related operating expenses due to the
increase in the number of employees and infrastructure improvements. The
increase in the number of employees was caused primarily by an increase in
the number of collections personnel in order to handle credit losses.
FINANCIAL CONDITION
Total assets increased $7.4 million (11.6%) to $71.2 million at March
31, 1997 from $63.8 million at December 31, 1996 primarily due to an increase
in net finance receivables (net of dealer reserves, nonrefundable acquisition
discount and allowance for credit losses) to $55.5 million at March 31, 1997,
including net finance receivables held for sale, from $47.2 million at
December 31, 1996. Total assets were $131.4 million at March 31, 1996 and net
finance receivables (net of dealer reserves, nonrefundable acquisition
discount and allowance for credit losses) were $118.0 million at such date.
This decline in assets and finance receivables is, in part, attributable to
the sale or securitization of Installment Contracts during 1996 and lower
Installment Contract acquisition levels resulting in reduced receivables
outstanding. The sale of Installment Contracts was part of the Company's
financing plan. SEE "--Liquidity and Capital Resources." The net amount of
owned or serviced Installment Contracts decreased to $143.0 million at
March 31, 1997 from $151.1 million at December 31, 1996. The net amount of
owned or serviced Installment Contracts was $179.3 million at March 31, 1996.
Total liabilities increased $8.9 million (16.6%) to $62.4 million at
March 31, 1997 from $53.5 million at December 31, 1996, primarily due to an
increase in total debt to $59.3 million at March 31, 1997 from $50.8 million
at December 31, 1996. The increase in total debt was primarily the result of
an increase in borrowings under the Revolving Credit Agreement to $41.4
million at March 31, 1997 from $31.8 million at December 31, 1996. SEE
"--Liquidity and Capital Resources." Total liabilities were $115.6 million
at March 31, 1996, which included total debt of $110.7 million primarily
comprised of borrowings under the Revolving Credit Agreement of $91.7 million.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain data relating to the Company's
results of operations for the three months ended March 31, 1997 and 1996:
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1996
------ ------
(DOLLARS IN THOUSANDS)
Automobile portfolio interest and fee income. . . $3,350 $8,017
------ ------
Total interest and fee income . . . . . . . . . . $3,427 $8,081
Total interest expense. . . . . . . . . . . . . . 1,450 2,389
------ ------
Net interest income before provision for
credit losses. . . . . . . . . . . . . . . . . . 1,977 5,692
Provision for credit losses . . . . . . . . . . . 375 2,696
------ ------
Net interest income after provision for
credit losses. . . . . . . . . . . . . . . . . . 1,602 2,996
------ ------
Other Income:
Servicing income (from Installment Contracts). . 781 677
Insurance products commissions . . . . . . . . . 2 21
------ ------
Total other income. . . . . . . . . . . . . . . . 783 698
------ ------
Salaries and related costs. . . . . . . . . . . . 2,035 1,744
Other operating expenses. . . . . . . . . . . . . 1,858 1,812
------ ------
Total operating expenses. . . . . . . . . . . . . 3,893 3,556
------ ------
Income (loss) before taxes. . . . . . . . . . . . (1,508) 138
Taxes . . . . . . . . . . . . . . . . . . . . . . -- 52
------ ------
Net income (loss) . . . . . . . . . . . . . . . .$(1,508) $ 86
------ ------
------ ------
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED
MARCH 31, 1996. The Company experienced a net loss of $1.5 million for the
three months ended March 31, 1997 compared to net income of $86,000 for the
comparable 1996 period, primarily due to the decrease in net interest income
before provision for credit losses as well as higher operating expenses.
Net interest income before the provision for credit losses decreased
64.9% to $2.0 million for the three months ended March 31, 1997 from $5.7
million for the comparable 1996 period, primarily as a result of a decline in
the outstanding balance of net finance receivables owned by the Company. The
net finance receivables outstanding (including finance receivables held for
sale) at March 31, 1997 decreased to $62.7 million from $135.9 million at
March 31, 1996, due to increased sales and securitizations of Installment
Contracts. SEE "--Liquidity and Capital Resources."
Total interest expense decreased to $1.5 million for the three months
ended March 31, 1997 from $2.4 million for the three months ended March 31,
1996. The decrease resulted from a decrease in the amount of average debt
outstanding, which was partially offset by higher borrowing rates. The total
debt outstanding at March 31, 1997 decreased to $59.3 million from $110.7
million at March 31, 1996. The average debt outstanding for the three months
ended March 31, 1997 decreased to $55.3 million from $114.3 million for the
three months ended March 31, 1996. The weighted average interest rate paid
for borrowed funds increased to 10.49% for the three months ended March 31,
1997 from 8.36% for the three months ended March 31, 1996.
The provision for credit losses was $375,000 for the three months ended
March 31, 1997 as compared to $2.7 million for the three months ended March
31, 1996. The decline in the provision for
13
<PAGE>
credit losses was due, in part, to the decline in the outstanding balance of
net finance receivables owned (or held for sale) by the Company. SEE
"--Credit Loss Experience."
Other income, primarily generated from servicing income, increased 12.1%
to $783,000 for the three months ended March 31, 1997 from $699,000 for the
three months ended March 31, 1996, primarily due to an increase in servicing
income to $780,000 for the three months ended March 31, 1997 from $677,000
for the three months ended March 31, 1996. This increase reflects the
increased amount of servicing-retained sales and securitizations of finance
receivables by the Company. The Company derives its servicing income from
base servicing fees and bonus or excess servicing fees based on the
performance of the finance receivables serviced by the Company. SEE
"--Profitability."
Total operating expenses increased to $3.9 million for the three months
ended March 31, 1997 compared to $3.6 million for the three months ended
March 31, 1996. Salaries and related costs increased from the corresponding
period in 1996 to $2.0 million for the three months ended March 31, 1997, due
primarily to the substantial increase in the number of employees, normal pay
increases and increased benefits costs. The Company's other operating
expenses increased to $1.9 million for the three months ended March 31, 1997
compared to $1.8 million the three months ended March 31, 1996. Total
operating expenses (annualized) as a percentage of average net finance
receivables owned or serviced increased to 10.61% for the three months ended
March 31, 1997 as compared to 7.86% for the three months ended March 31, 1996.
No income tax expense was recorded for the three months ended March 31,
1997, while $52,000 was recorded for the three months ended March 31, 1996.
The decrease was due to the net loss experienced for the three months ended
March 31, 1997 versus a net profit for the corresponding period in 1996.
CREDIT LOSS EXPERIENCE
The Company's credit loss reserves are comprised of three components:
nonrefundable acquisition discount; an allowance for credit losses; and
refundable dealer reserves. The total of allowance for credit losses,
nonrefundable acquisition discount and dealer reserves equaled 11.82% and
13.34% of net owned finance receivables (including finance receivables held
for sale) at March 31, 1997 and 1996, respectively. The following discussion
reflects the Company's increased emphasis on the allowance for credit losses
and its reduced emphasis on nonrefundable acquisition discount to establish
credit loss reserves for the Company's Installment Contracts portfolio.
NONREFUNDABLE ACQUISITION DISCOUNT AND DEALER RESERVES. In order to
achieve an acceptable rate of return and appropriately reflect credit risks
generally associated with the Company's automobile finance business, the
Company purchases Installment Contracts from dealers at a discount from their
principal amount. The Company negotiates the amount of the discounts with
dealers based upon various criteria, including the credit risk associated
with the contracts being purchased and market pricing factors. The discount
is nonrefundable, is equal to the difference between (a) the total principal
amount to be repaid under the Installment Contract and (b) net funds paid to
the dealer, and is allocated to the nonrefundable acquisition discount
account. As part of the Company's financing of retail installment sales
contracts (other than Installment Contracts), refundable dealer reserves may
be established to protect the Company from losses associated with such
contracts, and are shown as a liability of the Company.
14
<PAGE>
The following table presents a reconciliation of the changes in
nonrefundable acquisition discount and dealer reserves for the three months
ended March 31, 1997 and 1996:
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
Balance at beginning of period . . . . . .$1,730 $9,423
Additions applicable to new volume . . . . 1,670 2,481
Reductions applicable to accounts sold . . -- (1,281)
Losses charged, net of recoveries . . . . (383) (4,802)
------ ------
Balance at end of period . . . . . . . . $3,017 $5,821
------ ------
------ ------
Balance at end of period as a
percentage of net finance receivables
(owned) at end of period (excluding
finance receivables held for sale) . . . .6.94% 4.29%
ALLOWANCE AND PROVISION FOR CREDIT LOSSES/CHARGE-OFFS. The Company
maintains an allowance for credit losses at a level that management believes
adequate to absorb potential losses in its finance receivables portfolio.
Management evaluates the adequacy of the allowance for credit losses by
reviewing credit loss experience and delinquency trends using static pool
analysis, the value of the underlying collateral and general economic
conditions and trends. If the amount of nonrefundable acquisition discount
associated with a specific pool of Installment Contracts is determined to be
insufficient, in the opinion of management, to absorb projected losses for
that pool, a provision for credit losses would be charged against earnings.
The Company's general policy is to charge off delinquent accounts when they
are deemed uncollectible, and in any event prior to their becoming 90 days
contractually delinquent. The Company experienced higher charge-off rates
during the three months ended March 31, 1997 than during the corresponding
period in 1996.
15
<PAGE>
The following table reflects the Company's allowance for credit losses
and provision for credit losses for the three months ended March 31, 1997 and
1996:
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
Balance at beginning of period . . . . $ 6,046 $10,808
Provision charged to expense . . . . . 375 2,696
Finance receivables charged off . . . (2,028) (1,519)
Recoveries . . . . . . . . . . . . . . (3) 23
------- -------
Balance at end of period . . . . . . . $ 4,390 $12,008
------- -------
------- -------
Allowance as a percentage of net
finance receivables (owned) at end of
period (excluding finance receivables
held for sale) . . . . . . . . . . . 10.10% 8.84%
DELINQUENCIES
The Company monitors delinquencies in the managed finance receivables
portfolio to gauge overall credit trends. Managed finance receivables that
were 30 days and greater contractually delinquent (net of unearned finance
charges) were $13.0 million, $16.6 million and $12.0 million, representing
9.1%, 11.0% and 6.7% of net managed finance receivables, as of March 31,
1997, December 31, 1996, and March 31, 1996, respectively. Managed finance
receivables that were 60 days and greater contractually delinquent (net of
unearned finance charges) were $3.0 million, $3.4 million and $3.3 million,
representing 2.1%, 2.2% and 1.9% of net managed finance receivables as of
March 31, 1997, December 31, 1996, and March 31, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through cash flow from operations,
borrowings under the Revolving Credit Agreement, proceeds from subordinated
indebtedness and from the periodic sale or securitization of Installment
Contracts and other finance receivables.
Net cash provided by (used in) operating activities totaled $628,000 and
$(2.3) million during the three months ended March 31, 1997 and 1996,
respectively. During these periods, the primary source or use of net cash
provided by (used in) operating activities has been net income, the net
change in the allowance for credit losses, the net change in the
nonrefundable acquisition discount account and the amount of net finance
receivables charged off.
Net cash provided by (used in) investing activities totaled $(8.0)
million and $9.9 million during the three months ended March 31, 1997 and
1996, respectively. During these periods, the primary source or use of net
cash provided by (used in) investing activities has been the proceeds from
the bulk sale of finance receivables, the amount of principal collected on
finance receivables and the level of finance receivables originated.
Net cash provided by (used in) financing activities, primarily as a
result of borrowings and repayments under the Revolving Credit Agreement,
totaled $8.7 million and $(7.9) million during the three months ended March
31, 1997 and 1996, respectively.
The self-liquidating nature of Installment Contracts and Other Loans
enables the Company to maintain higher debt-to-equity ratios than in most
other businesses. The amount of debt the Company
16
<PAGE>
incurs from time to time depends on the Company's need for cash and its
ability to borrow under the terms of the Revolving Credit Agreement. The
Company intends to meet its short- and long-term liquidity needs with cash
flow from operations, borrowings under the Revolving Credit Agreement, the
sale or securitization of finance receivables and the proceeds from the
issuance of securities in the capital markets.
The maximum availability under the Revolving Credit Agreement was $50
million at March 31, 1997. The facility matures June 30, 1997. The Company
has the option of borrowing funds under the Revolving Credit Agreement at an
interest rate equal to either the prime rate of the agent bank or the LIBOR
rate plus 2.5% (which rate represents an increase from the rate of LIBOR plus
2.0% that was available to the Company through September 26, 1996). On
March 31, 1997, the three-month LIBOR borrowing rate under the Revolving
Credit Agreement was 8.31% compared to 7.44% on March 31, 1996. The prime
rate was 8.50% on March 31, 1997 and the three-month LIBOR rate was 5.81% on
such date.
The Company must comply with customary financial and other covenants
under the Revolving Credit Agreement. At March 31, 1997, the Company was in
breach of the tangible net worth, interest coverage ratio and subordinated
debt limitation covenant under the Revolving Credit Agreement and the
interest coverage ratio covenant under its agreements with GECC. The Company
has received waivers with respect to these breaches (which, pursuant to the
Revolving Credit Agreement, are measured on the last day of each quarter) for
all periods through June 30, 1997. The Company expects to remain in
violation of these covenants for the near term. The waiver received in
respect of the breaches of the Revolving Credit Agreement had the effect of,
among other things: (i) reducing the amount of the facility to $50 million;
(ii) reducing the borrowing base, generally, to 82.5% (from 85%) of eligible
receivables under the Revolving Credit Agreement; and (iii) under certain
circumstances, reducing the borrowing base, generally, to 80% and 75% of
eligible receivables.
No assurance can be given that the Company's lenders and GECC will not
take adverse action. The Company is continuing negotiations with its current
lenders and alternative lenders to provide financing beyond June 30, 1997.
In any event, the Company anticipates relying more heavily during 1997 and
thereafter upon alternative funding sources, such as securitization
financing. No assurance can be given that the Revolving Credit Agreement, or
an equivalent facility, will be in place beyond June 30, 1997, or that
alternative funding transactions will be successfully completed, although
management does believe that existing and/or alternative funding sources will
continue to provide the Company with sufficient liquidity to maintain
existing operations.
At March 31, 1997, the Company had total debt of $59.3 million as
compared to $50.8 million at December 31, 1996 and $110.7 million at
March 31, 1996. At March 31, 1997, $8.6 million was available under the
Revolving Credit Agreement from committed financial institutions. The
following table presents the Company's debt instruments and the weighted
average interest rates on such instruments for the periods indicated:
17
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,,
--------------------------------- FOR THE TWELVE MONTHS
1997 1996 ENDED DECEMBER 31, 1996
-------------- --------------- -----------------------
BALANCE RATE BALANCE RATE BALANCE RATE
------- ------ -------- ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SENIOR:
Revolving Credit Agreement....... $41,400 8.33% $ 91,700 7.38% $31,763 8.05%
Loan from Commonly
Controlled Company............. 289 6.75% 963 6.75% 1,065 6.75%
SUBORDINATED:
Notes payable.................... 17,628 12.18% 18,087 12.14% 17,978 12.15%
------- -------- -------
Total debt........................ $59,317 10.49% $110,750 8.36% $50,806 9.47%
------- -------- -------
------- -------- -------
</TABLE>
The following table sets forth information with respect to maturities of
senior and subordinated debt at March 31, 1997:
LOANS FROM
COMMONLY
SENIOR BANK CONTROLLED SUBORDINATED
YEAR LINES OF CREDIT COMPANY NOTES PAYABLE TOTAL
---- --------------- ---------- ------------- -------
(DOLLARS IN THOUSANDS)
1997........ $41,400 $289 $ 90 $41,779
1998........ 833 833
1999........ 806 806
2000........ 867 867
2001........ 809 809
Thereafter.. 14,223
------- ----- ------- --------
Total... $41,400 $289 $17,628 $59,317
------- ----- ------- --------
------- ----- ------- --------
The Company has purchased interest rate caps and interest rate collars
in an aggregate notional amount of $45 million. The interest rate cap
purchased by the Company in an aggregate notional amount of $15 million
protects the Company against increases in the interest rate of a portion of
its revolving debt if the three-month LIBOR rate exceeds 10.5%. The interest
rate cap expires in July, 1998.
The interest rate collars purchased by the Company in an aggregate
notional amount of $30 million protect the Company against increases in the
interest rate of its revolving debt when the three-month LIBOR rate exceeds
8%. The Company must make payments to the counterparties to the interest
rate collars if three-month LIBOR falls below 5%. The interest rate collars
expire in September, 2000.
The GECC Agreement provides for the purchase by GECC of Installment
Contracts, on a revolving basis, having a maximum principal amount of up to
$80 million outstanding at any time. The original term of the GECC Agreement
expires June 25, 1997, however, the GECC Agreement provides for an automatic
one-year extension through June 25, 1998.
Total stockholders' equity at March 31, 1997 was $8.8 million as
compared to $10.3 million at December 31, 1996 and $15.7 million at March 31,
1996. The Company's ability to pay dividends is limited by the Revolving
Credit Agreement.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to the lawsuits described below, the Company is involved in
litigation in the normal course of business. The Company believes that the
resolution of such normal-course-of-business matters will not have a material
adverse effect on its financial position or results of operations. The
Company regularly initiates legal proceedings as a plaintiff in connection
with its routine collection activities.
The company has been named as a defendant in the following described
lawsuits:
1. REHM V. EAGLE FINANCE CORP. is pending in the United States
District Court for the Northern District of Illinois and is designated by
case number 96 C 2455. The plaintiff has filed a class action complaint
alleging that the Company and three of its directors and officers have
violated Section 10(b) of the Securities and Exchange Act and Rule 10b-5
promulgated thereunder. The litigation is now proceeding with discovery,
although no discovery responses have been provided, and no depositions have
been taken. The Company intends to defend vigorously the claims made in the
complaint.
2. CLEVELAND V. WALLACE AUTO SALES, INC. ET AL. was filed on September
19, 1996 in the United States District Court for the Northern District of
Illinois and is designated by Case Number 96 C 6045. The complaint alleges
that the Company has violated the Illinois Consumer Fraud Act, the Illinois
Sales Finance Agency Act and the Federal Racketeer Influenced and Corrupt
Organizations Act arising out of the Company's purchase of retail installment
sales contracts through which the plaintiffs purchased a used automobile.
The complaint is alleged as a class action, and includes unnamed, and still
unknown, directors and officers of the Company. The Company has filed a
Motion to Dismiss, and the parties are awaiting a ruling from the court. No
discovery has been taken. The Company intends to defend vigorously the
claims made in the complaint.
3. SOLARMAR SYSTEMS CORP V. EAGLE FINANCE CORP., RONALD B. CLONTS ET
AL. was filed on September 14, 1995 in Circuit Court of the Eleventh Judicial
Circuit, Dade County, Florida, and is designated as Case No. 95-18056-CA-01.
This suit arose out of a settlement agreement entered in 1988 between the
plaintiff and the predecessor to the Company (the "Settlement Agreement"),
following the plaintiff's bankruptcy. The Company (E.F. Wonderlic &
Associates, Inc.) purchased promissory notes from the plaintiff that the
plaintiff had received in connection with the sale of hot water heating
systems to Florida homeowners. The complaint filed against the Company
alleges that the Company breached the Settlement Agreement and fraudulently
induced the plaintiff to enter into it. The plaintiff's complaint was
dismissed in June, 1996, with leave to amend, primarily on the grounds that
the claims were time-barred by the applicable Florida statute of limitations.
The plaintiff filed an amended complaint in June, 1996, which asserted
essentially the same claims of fraud, violations of the Federal Racketeer
Influenced and Corrupt Organizations Act and fraud in the inducement. The
Company intends to defend vigorously the claims made in the complaint.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
19
<PAGE>
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K - The Company did not file any reports on Form 8-K
during the three months ended March 31, 1997.
20
<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.
EAGLE FINANCE CORP.
Date: May 14, 1997 ROBERT J. BRAASCH
------------------------------------
Robert J. Braasch
President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
S-1
<PAGE>
EXHIBIT INDEX
--------------
Exhibit
No. Description
- ------- -----------
11 Statement re computation of per share earnings
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
EAGLE FINANCE CORP.
COMPUTATION OF NET INCOME PER SHARE
For the Three Months Ended March 31, 1997 and 1996
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Income data:
1. Income (loss) before income taxes . . . . . . . . . . $ (1,508) $ 138
2. Applicable income taxes . . . . . . . . . . . . . . . -- 52
-------- ------
3. Net income (loss) . . . . . . . . . . . . . . . . . . $ (1,508) $ 86
-------- ------
-------- ------
Number of outstanding shares:
4. Weighted average common shares
outstanding, adjusted for stock splits . . . . . . . 4,189 4,189
5. Weighted average shares of treasury
stock outstanding, adjusted for
stock splits . . . . . . . . . . . . . . . . . . . -- --
6. Weighted average shares reserved for stock
options (utilizing the treasury stock method) . . . -- 115
7. Common shares outstanding (Line 4-5+6) . . . . . . . 4,189 4,304
Net income (loss) per share:
8. Net income (loss) per common shares (Line 3/4) . . . ($0.36) $0.02
9. Fully diluted net income (loss) per common (Line 3/7). ($0.36) $0.02
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,621,761
<SECURITIES> 545,000
<RECEIVABLES> 67,549,409
<ALLOWANCES> 7,130,730
<INVENTORY> 0
<CURRENT-ASSETS> 39,494,776
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,162,140
<CURRENT-LIABILITIES> 44,734,190
<BONDS> 17,628,231
0
0
<COMMON> 41,891
<OTHER-SE> 8,757,828
<TOTAL-LIABILITY-AND-EQUITY> 71,162,828
<SALES> 0
<TOTAL-REVENUES> 4,210,454
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,893,147
<LOSS-PROVISION> 375,000
<INTEREST-EXPENSE> 1,450,326
<INCOME-PRETAX> (1,508,019)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,508,019)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
