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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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 (IRS Employer
incorporation or organization) Identification No.)
5425 Robin Hood Road
Suite 101B
Norfolk, Virginia 23513
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: - (757) 858-4054
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 No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 20, 1998: Common Stock - $13,671,827
The number of shares outstanding of the registrant's common stock as of
March 20, 1998: 13,671,827.
TFC ENTERPRISES, INC.
1997 FORM 10-K
TABLE OF CONTENTS
PART I........................................................................1
Item 1. Business
Item 2. Properties.......................................................13
Item 3. Legal Proceedings................................................13
Item 4. Submission of Matters to a Vote of Security Holders..............13
PART II......................................................................14
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.........................................................14
Item 6. Selected Financial Data.........................................14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................14
Item 8. Financial Statements and Supplementary Data.....................14
Item 9. Changes in and Disagreements with Accountants...................14
PART III.....................................................................15
Item 10. Directors and Executive Officers of the Registrant; Section
16(a) Beneficial Ownership Reporting Compliance.................15
Item 11. Executive Compensation..........................................15
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................................15
Item 13. Certain Relationship and Related Transactions...................15
PART IV......................................................................16
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.............................................16
Documents Incorporated by Reference
Portions of the registrant's Annual Report to Shareholders (the "Annual
Report") are incorporated by reference in Part II of this Form 10-K and portions
of the definitive Proxy Statement (the "1998 Proxy Statement") to be used in
connection with the 1998 Annual Meeting of Shareholders are incorporated by
reference in Part III of this Form 10-K
PART I
This Report contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Any statements contained in
this Report that are not statements of historical fact are forward-looking
statements. Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects" and similar expressions are intended to identify
forward-looking statements. The important factors discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," among
others, could cause actual results to differ materially from those indicated by
forward-looking statements made in this report and those presented elsewhere by
management from time to time. Please refer to the cautionary statement that
appears at the beginning of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for more information.
Item 1. Business
The Company
TFC Enterprises, Inc. (the "Company" or "TFCE") conducts its consumer
finance operations through two wholly-owned subsidiaries, The Finance Company
("TFC") and First Community Finance, Inc. ("FCF"). Through TFC, the Company is
engaged 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"). Installment
sales contracts are acquired on either an individual basis after the Company has
reviewed and approved the vehicle purchaser's credit application (a
"point-of-sale purchase"), or on a group basis through the purchase of a
dealer's portfolio of existing installment sales contracts (a "portfolio
purchase"). The Company focuses its point-of-sale business on installment sales
contracts originated by dealers with consumers who are United States military
enlisted personnel, primarily in the E-1 through E-5 grades. Portfolio purchases
are primarily from dealers who finance their own contracts with civilian
customers and sell them after origination in bulk. To achieve an acceptable rate
of return and provide for credit risks, contracts are purchased from dealers at
a discount to the remaining principal balance. Most of the discount is held in a
nonrefundable reserve against which credit losses are first applied.
The Company has been engaged in consumer finance activities since its
founding in 1977. The Company's point-of-sale purchases provide TFC with the
ability to direct the credit underwriting process at the initiation of the
installment sales contract. Participating dealers benefit by having a source of
financing for a group of customers who typically find financing difficult to
obtain, thereby increasing the number of vehicles sold and improving dealer
profitability. Consumers also benefit because the financing provided by the
Company enables them to purchase a vehicle they otherwise would not be able to
buy. As of December 31, 1997, $75.2 million, or 59% of the Company's net
contract receivables represented point-of-sale purchases, compared to $80.7
million, or 64% at December 31, 1996, and $134.3 million, or 78% at December 31,
1995.
TFC's portfolio purchase business emphasizes acquisitions of
portfolios of seasoned installment sales contracts. These contracts normally
have a payment history of at least three months. While the typical portfolio
purchase involves fewer than 100 individual contracts, TFC has, at times,
purchased portfolios totaling more than 1,000 contracts. Portfolio purchases
provide TFC with demographic diversification, as the majority of customers are
not military enlisted personnel. They also provide a payment history on which to
evaluate and price the credit risk of the contracts and a relatively efficient
mechanism for establishing dealer relationships in new areas. TFC's portfolio
purchases benefit dealers by providing an immediate source of liquidity. As of
December 31, 1997, $41.6 million, or 32% of the Company's portfolio of net
contract receivables was attributable to portfolio purchases, compared to $36.7
million, or 29% at December 31, 1996, and $32.3 million, or 19% at December 31,
1995.
Page 1
The Company's operations began in 1977 in Alexandria, Virginia, with
the founding of TFC by Robert S. Raley, Jr., the Company's current Chairman of
the Board, President and Chief Executive Officer, whose career has been
exclusively within the consumer finance industry. The Company was founded
specifically for the purpose of providing direct financing for the credit needs
of individuals having limited access to traditional sources of credit,
particularly young United States military enlisted personnel. Mr. Raley
recognized that the financing needs of that market segment were being ignored by
the traditional providers of consumer credit.
With the significant increase in interest rates in the late 1970s and
early 1980s, the Company incurred operating losses as a result of the increased
costs of its funding. To offset those losses, the Company opened a used car
dealership near Fort Belvoir in northern Virginia. Within several months of
opening the northern Virginia dealership, the Company opened a second used car
dealership in Norfolk, Virginia, the home of the world's largest naval base. The
operation of these dealerships generated sufficient operating income to enable
the Company to survive and provided the Company expertise in used automobile
financing, particularly to United States military enlisted personnel. With the
reduction in interest rates that occurred in the mid-1980's, the Company sold
its used car dealerships. The Company's experience in owning and managing used
car dealerships identified the need that used automobile dealers have for a
reliable source of financing.
TFC operates two service centers: the Point-of-Sale Service Center in
Norfolk, Virginia, and the Portfolio Purchase Service Center in Jacksonville,
Florida. During 1996, TFC closed a third service center in Dallas, Texas. In
addition, TFC operates point-of-sale Loan Production Offices ("LPOs") in
Jacksonville, Florida; Killeen, Texas; San Diego, California; Norfolk, Virginia;
and a portfolio purchase Loan Production Office in Norfolk, Virginia. The
Company expects to open a point-of-sale LPO in Tacoma, Washington in May 1998.
Historically, regional service centers were responsible for purchasing
and servicing contract receivables originated by dealers in their regions.
However, during 1996, TFC transferred the underwriting functions to the
point-of-sale and portfolio purchase LPOs to improve TFC's control over the
underwriting process. Additionally, during 1996 TFC moved the responsibility for
servicing point-of-sale accounts to the Norfolk service center and all servicing
of its portfolio purchase accounts to the Jacksonville service center to improve
TFC's collection results.
Through FCF, the Company is involved in the direct origination and
servicing of small consumer loans. FCF began operations in the first quarter of
1995 with the opening of two branches in Richmond, Virginia. Four additional
branches were opened in Virginia in 1995 and four branches were opened in North
Carolina during 1996. In 1997, one additional branch was opened in Virginia and
four branches were opened in North Carolina. The Company is evaluating
additional branch openings in 1998. Net contract receivables relating to FCF at
December 31, 1997, were $11.7 million, or 9% of the Company's net contract
receivables, compared to $8.8 million, or 7% at December 31, 1996, and $4.4
million or 3% of the net contract receivables at December 31, 1995.
Industry Overview
The automobile financing industry is dominated in certain respects by
commercial banks and captive finance companies of major automobile
manufacturers. While consumer credit risk classifications are not standardized,
those institutions generally focus on consumers that could be characterized as
being "low-risk" or "medium-risk" from a credit perspective. TFC's target market
involves consumers that are characterized as being "high-risk" from a credit
perspective.
The direct served consumer loan industry established in the early
1900's has traditionally been served by major national companies, smaller
regional companies and small local independent companies. Over the last 10-15
years many of the major national companies have retreated from or reduced their
involvement in this market.
Management's focus in 1996 and continuing in 1997 has been on
redirecting the Company toward those sectors of the market in which management
believes pricing more closely reflects the risk inherent in the business. Areas
of focus include the military point-of-sale business, portfolio purchases and
small direct consumer loans.
Page 2
Automobile Finance Operations
Dealer Selection and Program
Through its marketing efforts, TFC has established relationships with
dealers that originate installment sales contracts purchased by TFC, either
through point-of-sale purchases or portfolio purchases. TFC's relationships are
primarily with independent dealers that are not affiliated with an automobile
manufacturer, nor the Company.
To achieve an acceptable rate of return and provide for credit risks,
contracts are purchased from dealers at a discount to the remaining principal
balance. With respect to point-of-sale purchases, the discount is the difference
between TFC's purchase price from the dealer and the amount financed, net of the
cost of ancillary products. With respect to portfolio purchases, the discount is
the difference between TFC's purchase price and the amount of the remaining
principal balance on the contract. The amount of the discount at which contracts
are purchased reflects, among other things, a contract's interest rate, term and
credit risk. Contracts are purchased in accordance with applicable underwriting
criteria and pursuant to a Master Dealer Agreement in the case of point-of-sale
purchases, and an Asset Purchase Agreement in the case of portfolio purchases.
TFC believes that its dealer programs provide substantial benefits to
dealers by providing a source of financing for a group of customers who
typically find financing difficult to obtain, thereby increasing the number of
vehicles sold and improving dealer profitability. Additionally, TFC provides the
following services to dealers through its point-of-sale program: (1)
documentation designed to conform to applicable federal and state laws; (2)
timely response to credit applications; (3) timely payment for approved
installment contracts; and (4) access to a range of ancillary products.
Sales and Marketing
TFC markets primarily to independent used car dealers. Initial contacts
are pursued through telemarketing and followed up by personal visits to dealer
facilities by appropriate Loan Production Office marketing personnel. TFC also
establishes relationships with dealers through referrals from existing dealers
and independent marketing contractors. Other marketing efforts involve the
distribution of marketing brochures and advertisements in trade journals and
other industry publications directed to dealers. TFC also participates at
several of the Independent Automobile Dealers Association meetings and
conventions.
Competition
There are numerous providers of financing for the purchase of used
vehicles either through the direct financing of such purchases or on an indirect
basis through dealers. These financing sources include commercial banks, savings
and loans associations, consumer finance companies, credit unions, financing
divisions of automobile manufacturers, small sales contract companies and other
consumer lenders. Many of these providers of vehicle financing have
significantly greater resources than TFC and have relationships with established
dealer networks. TFC has focused on a segment of the market comprised of
consumers who typically do not meet the more stringent credit requirements of
the traditional sources of consumer financing and whose needs, as a result, have
historically not been consistently addressed by such financing sources. If,
however, the other providers of consumer finance were to assert a significantly
greater effort to penetrate TFC's targeted market segment, given their financial
strength, TFC could be materially and adversely affected by this type of
competition.
During the mid 1990's, there was a significant increase in the number
of competitors in the automobile non-prime finance industry markets in which TFC
operates and in the access to funds. The combination of increased competition
and the industry's improved access to funds resulted in a general increase in
prices offered to dealers for installment sales contracts. In certain sectors of
the market, prices increased to the point at which anticipated credit losses
relating to the contracts were not adequately reflected in prices offered to
dealers. As a result, the Company found it increasingly difficult to purchase
contracts at what it considers to be reasonable prices.
Management's focus since 1996 has been on redirecting the Company
toward those sectors of the market in which management believes pricing more
closely reflects the risk inherent in the business. Areas of focus will continue
to include the military point-of-sale and portfolio business lines. During 1996,
1997 and continuing into 1998, a number of the Company's competitors have
experienced financial problems that have restricted their ability to compete
with the Company
Page 3
in its core markets. Management believes that because of the problems faced by
its competitors, the Company may have a better opportunity, in 1998, to purchase
installment contracts from dealers on terms consistent with its pricing policies
than it has had over the past two years.
Point-of-Sale Purchase Program
In its point-of-sale program, TFC establishes relationships with
dealers that meet its financial, organizational and compliance criteria. TFC
currently makes point-of-sale purchases from dealers in approximately 30 states.
TFC purchases contracts relating to its point-of-sale program pursuant
to a Master Dealer Agreement. Upon entering into a Master Dealer Agreement, TFC
provides the dealer with necessary documentation for the origination of
installment sales contracts and trains its personnel regarding the use of TFC's
documentation. The Master Dealer Agreement contains representations and
warranties by the dealer to TFC with respect to certain matters, including the
security interest in the vehicle, and sets forth the general terms upon which
installment contracts will be purchased by TFC. The agreements are nonexclusive
and do not obligate a dealer to sell, or TFC to purchase, any particular
contract or volume of contracts. The Master Dealer Agreement may be terminated
at any time by TFC or by the dealer.
Typically, a dealer will submit a customer's credit application to more
than one financing source for review. Under TFC's program, a dealer is required
to provide TFC with a completed credit application which lists the applicant's
assets, liabilities, income, credit and employment history, and other personal
information bearing on the decision to extend credit.
The application and related information are then analyzed by one of
TFC's credit analysts. A credit analyst evaluates the applicant's ability to
make regular payments and other factors, including the amount of money to be
financed in relation to the purchase price and value of the vehicle. TFC
generally determines the value of the vehicle based upon the NADA's Used Car
Guide Books on Retail and Wholesale Values and/or the Kelley Blue Book. Upon
completion of the credit application review, a credit analyst will decide
whether to approve the financing as submitted, decline the financing or
conditionally approve the financing.
Typically, installment contracts are purchased by and assigned to TFC
at a price that reflects a discount from the amount financed. Most of the
discount is held in a non-refundable reserve against which credit losses are
first applied. The assigning dealer makes certain warranties as to the validity
of the contract and compliance with certain laws and generally agrees to
indemnify TFC for any claim, defense and set-off against the dealer that may be
asserted against TFC by reason of the assignment. TFC, at the time of purchase,
requires physical damage insurance on all automobiles covered by the installment
sales contracts that it purchases through its point-of-sale program. To the
extent that material terms of a contract prove to be inaccurate, TFC generally
has the right to require the dealer to repurchase such contract under the terms
of the Master Dealer Agreement.
Portfolio Purchase Program
Many dealers finance automobile sales through the use of their own
funds. TFC currently purchases portfolios of seasoned installment contracts from
such dealers in approximately 20 states. TFC limits consideration of dealers to
those that generate sufficient business volume, employ satisfactory credit
approval procedures and adequately monitor and report loan performance data.
Portfolio purchases are made pursuant to an Asset Purchase Agreement which
requires the dealer to make representations and warranties to TFC with respect
to each contract to be purchased by TFC and with respect to security interests
in the related vehicles. Unlike a point-of-sale purchase, with respect to which
TFC has the opportunity to verify various information relating to the
installment contract prior to its purchase, portfolio purchases are made
subsequent to the origination of the installment contract. Thus, the typical
Asset Purchase Agreement provides TFC with more extensive remedies than the
Master Dealer Agreement. Generally, if a representation or warranty is breached,
TFC, under the Asset Purchase Agreement, can require the dealer to repurchase
the contract. In certain cases, a special reserve or holdback is established,
against which payment defaults on contracts can be charged.
Generally, TFC purchases that portion of the dealer's portfolio that
meets or exceeds TFC's underwriting standards. TFC's due diligence normally
begins with a review of information obtained from the dealer on TFC's standard
information- gathering forms. Additional information is then obtained to verify
the dealer's compliance with licensing, bonding and
Page 4
organizational requirements. TFC then performs extensive due diligence
procedures that it has developed during its years of operation to determine
whether to do business with that particular dealer.
Within 90 days after completing a portfolio purchase, TFC confirms by
telephone various terms of most contracts with the purchaser of the vehicle. To
the extent that material terms of any contract prove to be inaccurate, TFC
generally has the right to require the dealer to repurchase such contract under
the terms of the Asset Purchase Agreement
Contract Origination and Purchase
Contracts in TFC's point-of-sale portfolio have initial durations
normally ranging from 18 to 48 months, with an average original maturity of
approximately forty months. Portfolio purchase contracts generally have an
average remaining maturity of 18 to 24 months at the time of purchase.
The following table sets forth for the periods indicated TFC's contact
volume as well as the number and average size of its contracts.
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Contracts purchased or originated:
Point-of-sale $ 85,311 $ 58,623 $231,877 $145,193 $101,615
Portfolio 70,520 61,391 61,261 76,990 53,583
---------- ---------- ---------- ---------- ----------
Total $155,831 $120,014 $293,138 $222,183 $155,198
========== ========== ========== ========== ==========
Number of contracts purchased or originated:
Point-of-sale 7,411 6,154 24,095 15,610 12,228
Portfolio 14,157 11,853 14,084 21,324 15,598
--------- ---------- ---------- ---------- ----------
Total 21,568 18,007 38,179 36,952 27,826
========= ========== ========== ========== ==========
Average size of contract: (in dollars):
Point-of-sale $ 11,511 $ 9,526 $ 9,623 $ 9,301 $ 8,310
Portfolio $ 4,981 $ 5,179 $ 4,349 $ 3,607 $ 3,435
Weighted average $ 7,228 $ 6,665 $ 7,678 $ 6,013 $ 5,577
The Finance Company's contract purchase volume is discussed more fully
in Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the TFC Enterprises, Inc. 1997 Annual Report, which is
incorporated herein by reference.
Ancillary Products
In connection with its point-of-sale business, TFC offers, through its
dealers in certain states, warranty products, as well as physical damage
insurance. These products are provided and underwritten by third-party vendors.
Accordingly, liabilities under the ancillary products are not obligations of
TFC. TFC offers these products to dealers so that they, in turn, may provide
vehicle purchasers a more complete line of products and services. By offering
these products, TFC is able to generate supplementary revenue without incurring
significant additional expenses. During 1997, 1996 and 1995, TFC generated gross
revenues of approximately $0.8 million, $1.2 million and $2.1 million,
respectively, from the sale of ancillary products through its dealers.
Collections
Payments on purchased installment sales contracts are received by TFC
through a number of different means. Payments are monitored by TFC to maintain
current information regarding each customer's current address and banking data.
Customers occasionally make payments in person at one of TFC's service centers
or Loan Production Offices. Collections Department personnel, at times, will
make a collection through a field visit to the customer.
Page 5
Monitoring the payment history of accounts and implementing appropriate
remedial action is the responsibility of the Collections Department within each
service center. At year-end 1997, a total of 139 employees, or 52% of TFC's
total full-time equivalent employees, worked in the Collections Departments of
the two service centers.
One of the primary responsibilities of the Collections Department is to
monitor customer accounts that are delinquent in payment. Collections Department
personnel work with customers to resolve payment problems and bring accounts to
current status at the earliest possible stage of delinquency. Collections
Department employees are compensated, in part, through bonuses tied to their
monthly collection performance.
When calling a delinquent account, Collections Department personnel
utilize TFC's Collections Training Manual developed by TFC. The manual specifies
the procedure to follow in different circumstances in order to maximize the
effectiveness of the call. Specific action with respect to a delinquent account
will depend on the customer's particular circumstances as well as the past
payment history of the account. However, in all cases, the primary focus is
resolving the problem causing the delinquency, arranging a modified payment
plan, or working out a settlement agreement. At times, Collections Department
personnel meet with customers in the field or at a service center.
When TFC has difficulty locating a customer, Collections Department
personnel will attempt to find the individual through skip tracing, which
utilizes various sources of information about a customer to which TFC has
access. All communications with and efforts to locate the customer are reflected
in TFC's data files.
In certain situations, TFC will repossess a vehicle. To the extent that
a deficiency balance exists upon repossession and sale of a vehicle, TFC may
take action to obtain a judgment.
Decisions to charge off accounts are made at the end of each month.
Accounts on which there has been no significant payment activity for 90 days are
generally charged off when they are 180 days contractually past due.
Additionally, the carrying value of repossessed assets is reduced, through
charge-off, to the lower of the unpaid contract balance or anticipated
liquidation proceeds. Once an account is charged off, it is transferred to the
Recovery Unit. Customers are called regularly and attempts are made to set up
repayment plans or workout settlement agreements as appropriate to a customer's
circumstances. Each Recovery Unit employee is responsible for keeping records of
all collection activity and for following up on callback and broken promise
dates as appropriate.
The Company's charge-off and delinquency experience is discussed more
fully in Management's Discussion and Analysis of Financial Condition and Results
of Operations included in the TFC Enterprises, Inc. 1997 Annual Report, which is
incorporated herein by reference.
Information Systems
The Company processes all data relating to its contract receivables and
financial reporting through a distributed network of computers. TFC's computer
systems are networked together to provide information to management for analysis
as well as automatic posting to the general ledger for financial reporting
purposes. The systems provide for complete contract processing from the purchase
of the contract, payment to the dealer, posting of payments and all other
collection activity from the inception date of the installment contract. The
Company has invested in technology that enables TFC to mechanically process and
score credit applications, thereby increasing capacity, reducing processing
time and improving standardization of credit underwriting without significant
staff increases. TFC's systems operate on software which has been adapted to the
specific manner in which TFC operates its business.
The TFC systems are interfaced with a predictive dialing system designed to
enhance collection activity by increasing the number of customer contacts per
collector hour. This system dials multiple telephone numbers simultaneously
based on parameters defined by the Collections Department. Calls are connected
automatically to a collector at the same time the customer's account is
displayed on the collector's computer screen. The process permits better control
of calling patterns for more effective calling and improved customer contact
rates. By eliminating busy signals, no answers and answering machines, the
system enables the collector to speak to more customers. The system also reports
collection performance by collector for improved supervision and results.
Page 6
First Community Finance uses a third-party computer system designed for
the consumer loan industry. Each branch processes all data relating to that
branch on a computer within the branch. The system provides for complete
contract processing from the closing of the loan, posting of payments and all
collection activity. These systems are networked together to provide
consolidated management information and automatic posting to the Company's
general ledger for financial reporting.
The Company believes that it has sufficient management information
systems in place, or in the process of being implemented, to meet the Company's
current and near-term future requirements.
Until recently computer programs were written to store only two digits
of date-related information in order to more efficiently handle and store data.
Thus the programs were unable to properly distinguish between the year 1900 and
the year 2000. Utilizing both internal and external resources, the Company is in
the process of defining, assessing and converting, or replacing, various
programs and hardware systems to make them Year 2000 compatible. The Company's
Year 2000 project is comprised of business applications which consist of the
Company's computer systems, as well as the computer system purchased from
third-party suppliers. It is estimated that the cost of addressing the year 2000
problem and making the Company's computer systems year 2000 compliant will not
be material.
Consumer Finance Operations
Consumer Loan Program
In its Consumer Loan Program, First Community Finance ("FCF")
originates direct loans through a branch network. Loans are obtained through
print media, customer referrals, renewals and other sources. Applications are
primarily received directly from the consumer either by telephone or in person
at one of the branches.
Once an application has been received, a background investigation is
performed on the applicant, including such things as employment and income
verification, residence verification, direct references from other creditors and
review of credit bureau files. This information is reviewed by a branch manager
or assistant manager to determine creditworthiness. If the applicant is
approved, the applicant would visit the appropriate branch to execute necessary
documents and receive funding.
Loan Origination
Most contracts have initial durations of 36 months or less.
The following table sets forth for the periods indicated FCF's loan
volume as well as the number and average size of its loans. (FCF commenced
operations in 1995.)
1997 1996 1995
---- ---- ----
Loans originated (in thousands) $ 16,023 $13,174 $6,257
======== ======= ======
Number of loans originated 7,093 6,623 3,254
======== ======= ======
Average size of loan $ 2,259 $ 1,989 $1,923
======== ======= ======
FCF's loan volume is discussed more fully in Management's Discussion
and Analysis of Financial Condition and Results of Operations included in the
TFC Enterprises, Inc. 1997 Annual Report, which is incorporated herein by
reference.
Page 7
Ancillary Products
In connection with its consumer loan business, FCF offers its customers
credit life insurance, credit accident and health insurance, and property
insurance. These products are provided and underwritten by third-party vendors.
Accordingly, liabilities under the ancillary products are not obligations of the
Company. These products protect the customer as well as providing supplementary
revenue to FCF. During 1997 and 1996, FCF generated gross revenues of
approximately $0.3 million and $0.1 million, respectively, from the sale of
ancillary products. Such revenues in 1995, FCF's first year of operation, were
not significant.
Collections
Payments on consumer loans are received by FCF primarily through the
mail or the customer pays at the appropriate branch. Each branch monitors
payments to maintain current information regarding each customer's current
address and banking data. Branch personnel, at times, will make a collection
through a field visit to the customer. Monitoring the payment history of the
accounts and implementing appropriate remedial action is the responsibility of
the branch.
One of the primary responsibilities of the branch is to monitor
customer accounts that are delinquent in payment. Branch personnel work with
customers to resolve payment problems and bring accounts to current status at
the earliest possible stage of delinquency. Specific action with respect to a
delinquent account will depend on the customer's particular circumstances as
well as the past payment history of the account. However, in all cases the
primary focus is resolving the problem causing the delinquency, arranging a
modified payment plan or working out a settlement. At times branch personnel
meet with the customers in the field or at the branch. When FCF has difficulty
locating a customer, collections personnel will attempt to locate the individual
through skip tracing, which utilizes various sources of information about a
customer to which FCF has access. All communications with and efforts to locate
the customer are reflected in FCF's data files.
Decisions to charge off accounts are made at the end of each month.
Accounts that reach a 180 day contractually past due status are generally
charged off. Once an account is charged off, collection activity will continue.
The Company's charge off and delinquency experience is discussed more fully in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the TFC Enterprises, Inc. 1997 Annual Report, which is
incorporated herein by reference.
Recoveries, Inc.
To capitalize on its collections expertise, the Company, in 1997,
formed a new subsidiary named Recoveries, Inc. which is designed to collect
debts for others. The Company is currently in the process of obtaining licenses
to enable it to operate in most states. Although management's plans are still
being formulated, Recoveries, Inc. is currently attempting to offer its debt
collection services to medical organizations and other third parties. During
1997, Recoveries, Inc. generated insignificant revenue, and operated at a loss.
Management cannot offer any assurance that Recoveries will generate revenue or
be profitable during 1998.
Regulation
The Company's businesses are subject to regulation and licensing under
various federal, state and local statutes and regulations. Most of the states in
which the Company operates limit the interest rate, fees and other charges that
may be collected. In addition, many states prescribe certain terms in the
contract.
Numerous federal and state consumer protection laws and related
regulations impose substantive disclosure requirements upon lenders and
servicers involved in motor vehicle financing. Some of the federal laws and
regulations include the Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Motor Vehicle Information and Cost Savings Act,
the Magnuson- Moss Warranty Act, the Federal Reserve Board's Regulations B and
Z, and the Soldiers' and Sailors' Civil Relief Act.
In addition, the Federal Trade Commission ("FTC") has adopted the
holder-in-due-course rule, which has the effect of subjecting persons that
finance consumer credit transactions (and certain related lenders and their
assignees) to all claims
Page 8
and defenses which the purchaser could assert against the seller of the goods
and services. With respect to used automobiles specifically, the FTC's rule on
Sale of Used Vehicles requires that all sellers of used vehicles prepare,
complete and display a Buyer's guide which explains the warranty coverage for
such vehicles. The Credit Practices Rules of the FTC impose additional
restrictions on sales contract provisions and credit practices.
Certain states where the Company operates have adopted motor vehicle
retail installment sales acts or variations thereof and consumer finance acts.
Such laws regulate, among other things, the interest rates and terms and
conditions of motor vehicle retail installment sales contracts and also impose
restrictions on consumer transactions and require sales contract disclosures in
addition to the requirements under federal law. Those requirements impose
specific statutory liabilities upon creditors who fail to comply.
The Company believes that it is in compliance with all applicable laws
and regulations.
Employees
At December 31, 1997, the Company had 331 full-time equivalent
employees. No employees are currently covered by collective bargaining
agreements. The Company believes that its employee relations are excellent.
The Company was incorporated under the laws of Delaware. The Company's
principal executive and administrative offices are located at 5425 Robin Hood
Road, Norfolk, Virginia 23513, and the Company's telephone number is (757)
858-4054. References to the Company include the Company's wholly owned
subsidiaries.
Risk Factors
In evaluating the Company, individuals should consider carefully all of
the information set forth throughout this Report and, in particular, should
evaluate the following risk factors.
Fluctuating Interest Rates and Dependence on Line of Credit
The Company's operations require substantial borrowing to provide
funding for the installment contracts purchased by TFC and originated by FCF.
Consequently, profitability is impacted by the difference between the rate of
interest paid on the funds it borrows and the rate of interest charged on the
installment contracts, which rate in some states is limited by law. Currently,
the principal source of borrowing by the Company is its revolving line of
credit, guaranteed by TFCEI (the "Line of Credit") with General Electric Capital
Corporation ("G.E. Capital"). The maximum amount of borrowings available under
the Line of Credit was $110 million at December 31, 1997. At December 31, 1997,
TFC had $89.6 million outstanding under the Line of Credit. The floating
interest rate for borrowings under the Line of Credit is equal to the average
30-day London Interbank Offered Rate ("LIBOR") plus 4.00%. Thus, future
increases in interest rates could adversely affect the Company's profitability.
In an effort to reduce its exposure to an increase in interest rates, TFC has
purchased an interest rate cap which ensures that the interest rate on $75
million of the borrowings under the Line of Credit will not exceed a LIBOR
ceiling of 6.5%. This interest rate cap expires September 30, 1998. In addition
to the purchase of interest rate caps, the Company believes it has certain
flexibility to increase the discount at which installment contracts are
purchased, or to increase the rate of interest charged on future installment
contracts (to the extent not limited by state law), in order to offset the
adverse impact of any interest rate increase on profitability.
The Finance Company has maintained a Line of Credit with G.E. Capital
since 1992. The current Line of Credit was executed in December 1996, amended in
April 1997 and Febraury 1998, and expires January 1, 1999. There is no assurance
that a new Line of Credit will be executed when the current Line of Credit
expires. If the new Line of Credit is not executed, TFC would be required to
seek alternative financing sources and repay its outstanding balance on or
before the expiration of the current Line of Credit on January 1, 1999. No
assurance can be given that alternative financing sources would be available in
such event. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resource."
Page 9
Defaults on Installment Contracts
The Company is engaged primarily in purchasing installment contracts
entered into by dealers with consumers who have limited access to traditional
sources of consumer credit. The inability of an individual to finance a used
automobile purchase by means of traditional credit sources is generally due to
such individual's past credit history or insufficient cash to make the required
down payment on an automobile. As a result, installment contracts purchased by
the Company are generally with purchases of automobiles who are considered to
have a higher risk of default on an installment contract than certain other
automobile purchasers. Accordingly, the consumer loan activities engaged in by
the Company typically have a higher risk of loss than those of other consumer
financings. While the Company believes that its expertise in used automobile
financing, particularly for United States military enlisted personnel, enables
it to evaluate and price accurately the higher risk associated with the
Company's business, a significant economic downturn in the markets in which the
Company operates could materially increase the number of charged off and
delinquent installment contracts experienced by TFC as compared to its
historical losses. If TFC were to experience a material increase in charge-offs
or delinquencies, its profitability could be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Losses and Delinquency."
Dependence Upon Key Executive
The Company's growth and development to date have been largely
dependent upon the services of Robert S. Raley, Jr., Chairman of the Board,
President and Chief Executive Officer. The loss of Mr. Raley's services could
have a material adverse effect on the Company.
Competition
There are numerous providers of financing for the purchase of used
automobiles either through the direct financing of such purchases or on an
indirect basis through a dealer. Those financing sources include commercial
banks, savings and loan associations, consumer finance companies, credit unions,
financing divisions of automobile manufacturers or automobile retailers, small
sales contract companies and other consumer lenders. Many of those providers of
automobile financing have significantly greater financial resources than TFC and
have relationships with established dealer networks. The Company has focused on
a segment of the market composed of consumers who typically do not meet the more
stringent credit requirements of the traditional consumer financing sources and
whose needs, as a result, have not been addressed consistently by such financing
sources. If, however, the other providers of consumer finance were to assert a
significantly greater effort to penetrate TFC's targeted market segment, TFC
could be materially and adversely affected.
Regulation
The Company's business is subject to regulation and licensing under
various federal, state and local statutes and regulations. The Company's
business operations are conducted in approximately 30 states and, accordingly,
the laws and regulations of such states govern the Company's operations
conducted in those states. Most states where the Company operates limit the
interest rate, fees and other charges that may be imposed by, or prescribe
certain other terms of, the contracts that the Company purchases and define the
Company's rights to repossess and sell collateral. In addition, the Company is
required to be, and is, licensed to conduct its operations in certain states. As
the Company expands its operations into other states, it will be required to
comply with the laws of such states.
An adverse change in those laws or regulations could have a material
adverse effect on the Company's profitability by, among other things, limiting
the states in which the Company may operate or the interest rate that may be
charged on installment contracts or restricting the Company's ability to realize
the value of any collateral securing contracts. The Company is not aware of any
materially adverse legislation currently pending in any jurisdiction where it
currently transacts business.
Restrictions on the Payment of Dividends
The Company currently intends to retain its earnings to finance the
growth and development of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Any future dividend
payments will depend upon the financial condition, funding requirements and
earnings as well as other factors that the Company's Board of
Page 10
Directors may deem relevant. As the Company is a legal entity separate and
distinct from TFC and as its revenues depend on the payment of dividends by TFC,
limitations on the ability of TFC to pay dividends to the Company will in turn
limit the ability of the Company to pay dividends to its stockholders. There are
certain restrictions on the payment of dividends in the form of various
affirmative and negative covenants included in the TFC's Line of Credit and the
Note Purchase Agreement relating to the Subordinated Non-Convertible Notes due
October 15, 1998 and the Note Purchase agreement relating to the Senior
Subordinated Notes due June 30, 2002.
Effect of Certain Charter, Bylaw and Statutory Provisions
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Amended and Restated
Bylaws (the "Bylaws") could delay or frustrate the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be beneficial, in the short
term, to the interest of the stockholders. For example, the Certificate of
Incorporation provides for a classified Board of Directors and for certain
limitations on the calling of a special meeting of stockholders and the Bylaws
require advance notice of stockholder proposals and nominations of directors.
The Company also is subject to provisions of Delaware corporation law that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an "interested
stockholder") for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. Those
provisions could discourage or make more difficult a merger, tender, offer or
similar transaction, even if favorable to the Company's stockholders.
Authorized Preferred and Common Stock
Pursuant to the Certificate of Incorporation, shares of preferred stock
and Common Stock may be issued in the future without further stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
any preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporation transactions, could have the effect of making
it more difficult for a third party to acquire, or effectively preventing a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of preferred
stock.
Executive Officers of the Company
The executive officers of TFCE, TFC and FCF are as follows:
Name Age* Position
Robert S. Raley, Jr. 60 Chairman of the Board of Directors of TFCE, TFC and FCF,
President and Chief Executive Officer of TFCE and TFC, and
Executive Vice President of FCF
Ronald G. Tray 56 Vice President of TFCEI and Director of Management
Information Systems, Executive Vice President and Chief
Operating Officer of TFC
Craig D. Poppen 39 Vice President, Treasurer and Chief Financial Officer of
TFCEI and FCF, Executive Vice President, Treasurer and
Chief Financial Officer of TFC
Rick S. Lieberman 41 Senior Vice President and Chief Lending Officer of TFC
G. Kent Brooks 61 President and Chief Executive Officer of FCF
Fletcher A. Cooke 54 General Counsel and Secretary of TFCEI and TFC
*As of December 31, 1997
Robert S. Raley, Jr. founded TFC in 1977. From that time through
December 1992, he served as Chief Executive Officer of TFC. In 1996, Mr. Raley
was appointed President and Chief Executive Officer of TFCE and was reappointed
to
Page 11
that position for TFC. Prior to founding TFC, Mr. Raley was employed by Major
Financial Services, Silver Spring, Maryland, for 17 years in various positions,
including Vice President and Director of Operations. Mr. Raley was a Director
of TFCE from 1984 through April 1990 and has been a Director of TFCE since May
1990. Mr. Raley currently serves as Chairman of the Board.
Ronald G. Tray joined TFC as a Vice President and Director for
Management Information Systems in 1989. Mr. Tray was appointed Chief Operating
Officer of TFC in 1996. Prior to joining TFC, Mr. Tray was President of the Mid-
Atlantic Division, Mtech Corporation, a data processing service bureau for
banks, located in Fairfax, Virginia. In 1996, Mr. Tray resigned as a Director of
TFCE, a position he had held since 1993.
Craig D. Poppen, CPA, joined TFC as Chief Financial Officer in 1998.
From 1988 until 1995, Mr. Poppen was employed by Ernst & Young LLP. From 1995
until 1997, Mr. Poppen was employed by KPMG Peat Marwick LLP, and from 1997
until January 1998, Mr. Poppen was employed by New Dominion Pictures, Inc., a
television production company where he served as Chief Financial Officer.
Rick S. Lieberman, Senior Vice President and Chief Lending Officer of
TFC. Mr. Lieberman joined TFC in 1989 and has served the Company in several
capacities, including General Manager, Vice President of the Norfolk Regional
Service Center. Prior to joining TFC, he was with ITT Consumer Financial
Corporation for 8 years.
G. Kent Brooks joined FCF in 1994 as President. Prior to that, he was
with Peoples Finance Corporation, Richmond, Virginia, from 1956 to 1980, the
last eight years of which he served as President. From 1980 to 1992, Mr. Brooks
served as a Senior Vice President and Regional Manager for Provident Financial
Corporation, subsequent to its acquisition of Peoples Financial Corporation.
From 1992 to 1993, Mr. Brooks was with American General Finance, subsequent to
its acquisition of Provident Financial Corporation. Mr. Brooks has been a
Director of FCF since 1994.
Fletcher A. Cooke joined TFC in 1997 as General Counsel. Prior to
that, he was with A.T. Massey Coal Company, Inc. as Assistant General Counsel
and Corporate Secretary from January 1991 to April 1996. Mr. Cooke was
Associate General Counsel with The Pittston Company from 1980 to 1991.
Item 2. Properties
The Company's principal executive offices and Point-of-Sale Service
Center, Point-of-Sale Loan Production Office and Portfolio Loan Production
Office located in Norfolk, Virginia consist of approximately 27,000 square feet
of space pursuant to a lease expiring in 2006. The Company's Portfolio Service
Center and Point-of-Sale Loan Production Office located in Jacksonville, Florida
consists of approximately 17,000 square feet of space pursuant to a lease
expiring in 2001. The Company's Point-of-Sale Loan Production Office in Killeen,
Texas consists of approximately 2,300 square feet of space pursuant to a lease
expiring in January 1999. The Company's Point-of-Sale Loan Production Office in
San Diego, California, consists of approximately 1,100 square feet of space
pursuant to a month-to-month lease. The Company's planned Point- of-Sale Loan
Production Office in Tacoma, Washington, consists of approximately 1,500 square
feet of space pursuant to a lease that commences in April 1998 and expires in
March 1999. First Community Finance, Inc.'s branch offices, on a combined basis,
total approximately 18,400 square feet of space pursuant to leases expiring in
1998 to 2000.
The Company believes that its facilities are adequate for its current
and near-term future requirements.
Item 3. Legal Proceedings
The Company is a party to several legal actions which are ordinary,
routine litigation incidental to its business. The Company believes that none of
those actions, either individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1997.
Page 12
PART II
The information required by Part II, Items 5, 6, 7 and 8 has been
incorporated herein by reference to the TFC Enterprises, Inc. 1997 Annual Report
as set forth below, in accordance with General Instruction G(2) of Form 10-K.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Since December 22, 1993, TFC Enterprises, Inc. Common Stock has traded
on the NASDAQ National Market System under the symbol "TFCE." Share price
information with respect to the Common Stock is set forth in the "Selected
Quarterly Data" table included in the TFC Enterprises, Inc. 1997 Annual Report,
which is incorporated herein by reference.
As of March 20, 1998, there were approximately 2,194 holders of the
Common Stock, including approximately 122 holders of record. No cash dividends
have been paid with respect to the Common Stock since issuance. The Company has
no current plans to pay any cash dividends relating to the Common Stock in the
foreseeable future, although any dividends on the Common Stock will be at the
sole discretion of the Company's Board of Directors and will depend upon the
Company's profitability and financial condition, capital requirements, statutory
restrictions, requirements of the Company's lenders, future prospects and other
factors deemed relevant by the Company's Board of Directors. If any dividends
are paid to the holders of Common Stock, all holders will share equally on a per
share basis.
The Company has not issued any of its authorized preferred stock.
Item 6. Selected Financial Data
Information included in the section entitled "Five-Year Summary of
Selected Financial Data" in the TFC Enterprises, Inc. 1997 Annual Report is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information included in the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the TFC
Enterprises, Inc. 1997 Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of TFC Enterprises, Inc.,
including notes thereto, are presented in the TFC Enterprises, Inc. 1997 Annual
Report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
None.
Page 13
PART III
The information required by Part III, Items 10, 11, 12, and 13 has been
incorporated herein by reference to the Company's 1998 Proxy Statement as set
forth below, in accordance with General Instruction G(3) of Form 10-K.
Item 10. Directors and Executive Officers of the Registrant; Section 16(a)
Beneficial Ownership Reporting Compliance
Information relating to directors of the Company and compliance with
Section 16(a) of the Exchange Act is set forth in the sections entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's 1998 Proxy Statement and is incorporated herein by
reference. Pursuant to General Instruction G(3) of Form 10-K, certain
information concerning the executive officers of the Company is set forth under
the caption entitled "Executive Officers of the Company" in Part I, Item 1, of
this Form 10-K.
Item 11. Executive Compensation
Information regarding compensation of officers and directors of the
Company is set forth in the section entitled "Executive Compensation" in the
Company's 1998 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding ownership of certain of the Company's securities
is set forth in the section entitled "Security Ownership of Management and
Certain Beneficial Owners" in the Company's 1998 Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationship and Related Transactions
Information regarding certain relationships and related transactions
with the Company is set forth in the section entitled "Certain Relationships and
Related Transactions" in TFC's 1998 Proxy Statement and is incorporated herein
by reference.
Page 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
(1) Financial Statements
The Consolidated Financial Statements of TFC
Enterprises, Inc. and the Auditor's Report thereon, are incorporated herein by
reference. Applicable pages in the TFC Enterprises, Inc. 1997 Annual Report are
as follows:
Consolidated Financial Statements:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Operations for the Years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity
for the Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
Report of Ernst & Young LLP, Independent Auditors, on
Schedule I
Schedule I - Financial Information of Registrant -
TFC Enterprises, Inc.
All other schedules for which provision is made in
the applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable and
therefore have been omitted.
(3) Exhibits
The exhibits listed on the accompanying Exhibit Index
are filed or incorporated by reference as part of this Form 10-K and
such Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K (filed during the fourth quarter of 1997):
None.
Page 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/Robert S. Raley, Jr.
------------------------------------------
Robert S. Raley, Jr.
Chairman of the Board, President and
Chief Executive Officer
Dated March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date:
/s/Robert S. Raley, Jr. Chairman of the Board March 31, 1998
- ------------------------------------ and Director, President
and Chief Executive Officer
/s/Walter S. Boone, Jr. Director March 31, 1998
- ------------------------------------
Walter S. Boone, Jr.
/s/Douglas B. Bywater Director March 31, 1998
- ------------------------------------
Douglas B. Bywater
/s/Andrew M. Ockershausen Director March 31, 1998
- ------------------------------------
Andrew M. Ockershausen
/s/Phillip R. Smiley Director March 31, 1998
- ------------------------------------
Phillip R. Smiley
/s/Linwood R. Watson Director March 31, 1998
- ------------------------------------
Linwood R. Watson
/s/Craig D. Poppen Chief Financial Officer March 31, 1998
- ------------------------------------ (Principal Accounting and
Craig D. Poppen Financial Officer)
Page 16
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
3.1 Amended and Restated Certificate of Incorporation of TFC *
Enterprises, Inc. (Incorporated by reference to the
Registrant's Registration Statement on Form S-1, Commission File
No. 33-70638, previously filed with the Commission on October
21, 1993.)
3.2 Amended and Restated Bylaws of TFC Enterprises, Inc. (Incorporated by reference to the *
Registrant's Registration Statement on Form S-1, Commission File No. 33-70638,
previously filed with the Commission on October 21, 1993.)
3.3 Second Amendment to Amended and Restated Bylaws of TFC *
Enterprises, Inc. regarding the number of directors comprising
the Board of TFC Enterprises, Inc. (Incorporated by reference to
the Registrant's Form 10-K for the fiscal year ended December
31, 1995, Commission File No. 1-11121, previously filed with the
Commission.)
4 Form of Common Stock Certificate of the TFC Enterprises, Inc. *
(Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Commission File No. 33-70638, previously
filed with the Commission on October 21, 1993.)
10.1 Form of Master Dealer Agreement. **
10.2 Form of Asset Purchase Agreement. **
10.3 Form of Motor Vehicle Installment Sale Contract, *
Truth-in-Lending Disclosure, Promissory Note and Security
Agreement. (Incorporated by reference to the Registrant's
Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21,
1993.)
10.4 Note Purchase Agreement among TFCEI Acquisition Corp. and *
Connecticut General Life Insurance Company (("CIGNA") and
certain affiliates of CIGNA dated October 24, 1988, relating to
$6,500,000 in original principal amount of 14% Senior Notes due
October 15, 1988, and Amendment Nos. 1 and 2. (Incorporated by
reference to the Registrant's Registration Statement on Form
S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
10.5 Note Purchase Agreement among The Finance Company and CIGNA and
certain affiliates of CIGNA dated October 25, 1988, relating *
to $6,435,000 in original principal amount of 13.5% Subordinated
Non-Convertible Notes due October 15, 1998, and $65,000 in
original principal amount of 13.5% Subordinated Convertible
Notes due October 15, 1998, and Amendment Nos. 1, 2, 3, and 4.
(Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Commission File No. 33-70638, previously
filed with the Commission on October 21, 1993.)
10.6 Amendment No. 5 to Note Purchase Agreement among The Finance
Company and CIGNA and certain affiliates of CIGNA dated October
25, 1998, relating to $6,435,000 in original principal amount
of 13.5% Subordinated Non-Convertible Notes due October 15,
1998, adn $65,000 in original principal amount of 13.5%
Subordinated Convertible Notes due October 14, 1998.
10.7 Employment Agreement between The Finance Company and Robert S. Raley, Jr. dated *
October 22, 1992. (Incorporated by reference to the Registrant's Registration Statement on
Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
Page 1
Exhibit Sequential
No. Description Page No.
10.7 The Finance Company 401(k) Savings Plan dated May 1, 1991, and *
Amendment No. 1 dated August 1, 1993. (Incorporated by
reference to the Registrant's Registration Statement on Form
S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
10.9 TFCEI Employee Stock Purchase Plan dated December 20, 1993. *
(Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Commission File No. 33- 70638, previously
filed with the Commission on October 21, 1993.)
10.10 Forms of Junior Subordinated Promissory Notes. (Incorporated by reference to the *
Registrant's Registration Statement on Form S-1, Commission File No. 33-70638,
previously filed with the Commission on October 21, 1993.)
10.11 Employment Agreement between Ronald G. Tray and The Finance
Company dated January 1, 1995. (Incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.12 TFC Enterprises, Inc. 1995 Long-Term Incentive Plan.. (Incorporated by reference to the *
Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)`
10.13 Stock Option Award Agreement between George R. Kouri and TFC Enterprises, Inc. dated *
October 27, 1994. (Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.14 Stock Option Award Agreement between Joseph R. Becka and TFC Enterprises, Inc. dated *
October 27, 1994. (Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.15 Stock Option Award Agreement between Preston K. Gnagey and TFC Enterprises, Inc. dated *
October 27, 1994. (Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.16 Stock Option Award Agreement between Ronald G. Tray and TFC Enterprises, Inc. dated *
October 27, 1994. (Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.17 Stock Option Award Agreement between Charles M. Johnston and TFC Enterprises, Inc. *
dated October 27, 1994. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994, Commission File No. 1-11121, previously filed with
the Commission.)
10.18 Office Lease, dated June 1, 1995, by and between AFW No. 39 *
Corporation and The Finance Company. (Incorporated by
reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1994, Commission File No. 1-11121, previously
filed with the Commission.)
10.19 Lease Agreement, dated April 28, 1995, between Three Oaks Plaza, Ltd. and The Finance *
Company, Inc. (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1995, Commission File No. 1-11121, previously filed with the
Commission.)
10.20 Note purchase agreement among The Finance Company and *
Connecticut General Life Insurance Company ("CIGNA") and
certain affiliates of CIGNA dated June 30, 1995, relating to
$10,000,000 in original principal amount of 9.38% Senior
Subordinated Notes due June 30, 2003. (Incorporated by reference
to the Registrant's Form 10-Q for the quarter ended June 30,
1995, Commission File No. 1-11121, previously filed with the
Commission.)
10.21 Lease Agreement as of June 6, 1995, between Professors' Fund III *
Limited Partnership and The Finance Company regarding the
premises located at 6170 Cornerstone Court East, San Diego,
California. (Incorporated by reference to the Registrant's Form
10-Q for the quarter ended June 30, 1995, Commission File No.
1-11121, previously filed with the Commission.)
Page 2
Exhibit Sequential
No. Description Page No.
10.22 Amendment to Employment Agreement between The Finance Company *
and Ronald G. Tray dated July 27, 1995 (effective as of
January 1, 1995). (Incorporated by reference to the Registrant's
Form 10-Q for the quarter ended June 30, 1995, Commission File
No. 1-11121, previously filed with the Commission.)
10.23 Amendment No. 1 to note purchase agreement, dated as of June 30, *
1995, by and between The Finance Company and Connecticut
General Life Insurance Company ("CIGNA") regarding CIGNA's
consent to the Company's $25 million credit facility with
NationsBank. (Incorporated by reference to the Registrant's Form
10-Q for the quarter ended September 30, 1995, Commission File
No. 1-11121, previously filed with the Commission.)
10.24 Amendment No. 8 to Note Purchase Agreement, dated as of October *
25, 1988, by and between The Finance Company and CIGNA
regarding CIGNA's consent to the Company's $25 million credit
facility with NationsBank. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended September 30, 1995,
Commission File No. 1-11121, previously filed with the
Commission.)
10.25 Second Amendment to Employment Agreement between Ronald G. Tray *
and The Finance Company dated January 1, 1996. (Incorporated
by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 1-11121, previously
filed with the Commission.)
10.26 Amendment No. 9 and Waiver and Forbearance Agreement by and *
among The Finance Company, CIGNA, and certain affiliates of
CIGNA, dated as of January 31, 1996, relating to 13.5% Senior
Subordinated Notes. (Incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 1-11121, previously filed with the
Commission.)
10.27 Amendment No. 2 and Waiver and Forbearance Agreement by and *
among The Finance Company, CIGNA, and certain affiliates of
CIGNA, dated as of January 31, 1996, relating to 9.38% Senior
Subordinated Notes, dated as of January 31, 1996. (Incorporated
by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 1-11121, previously
filed with the Commission.)
10.28 Amended and Restated Motor Vehicle Installment Contract Loan and *
Security Agreement dated December 20, 1996 between The Finance
Company and General Electric Capital Corporation. (Incorporated
by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1996, Commission File No. 1-11121, previously
filed with the Commission.)
10.29 Amendment No. 1 to Amended and Restated Motor Vehicle *
Installment Contract Loan and Security Agreement dated April
4, 1997 by and between The Finance Company and General Electric
Capital Corporation. (Incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended December 31,
1996, Commission File No. 1-11121, previously filed with the
Commission.)
10.30 TFC Enterprises, Inc. Warrant to Purchase Common Stock dated *
December 20, 1996. (Incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended December 31,
1996, Commission File No. 1-11121, previously filed with the
Commission.)
10.31 Allonge to Warrant to Purchase Common Stock dated April 4, 1997. *
(Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.32 TFC Enterprises, Inc. Warrant to Purchase Common Stock dated *
April 4, 1997. (Incorporated by reference to the Registrant's
Form 10-K for the fiscal year ended December 31, 1996,
Commission File No. 1-11121, previously filed with the
Commission.)
10.33 Amended and Restated Registration Rights dated April 4, 1997 *
between TFC Enterprises, Inc. and General Electric Capital
Corporation. (Incorporated by reference to the Registrant's Form
10-K for the fiscal year ended December 31, 1996, Commission
File No. 1-11121, previously filed with the Commission.)
Page 3
Exhibit Sequential
No. Description Page No.
10.34 TFC Enterprises, Inc. Guaranty dated April 4, 1997. *
(Incorporated by reference to the Registrant's Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.35 First Community Finance, Inc. Guaranty dated April 4, 1997.
(Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.36 The Insurance Agency, Inc. Guaranty dated April 4, 1997. *
(Incorporated by reference to the Registrant's Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.37 Securities Pledge Agreement dated April 4, 1997 by TFC *
Enterprises, Inc. and General Electric Capital Corporation.
(Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.38 Security Agreement dated April 4, 1997 between TFC Enterprises, *
Inc., The Finance Company, First Community Finance, Inc., The
Insurance Agency, Inc., and its subsidiaries and General
Electric Capital Corporation (Incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended December 31,
1996, Commission File No. 1-11121, previously filed with the
Commission.)
10.39 Amendment No. 3 and Waiver of Note Agreement by and among The *
Finance Company, CIGNA, and certain affiliates of CIGNA, dated
as of April 4, 1997, relating to 13.5% Senior Subordinated
Notes. (Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
10.40 Amendment No. 10 and Waiver of Note Agreement by and among The *
Finance Company, CIGNA, and certain affiliates of CIGNA, dated
as of April 4, 1997, relating to 9.375% Senior Subordinated
Notes. (Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended December 31, 1996, Commission File No.
1-11121, previously filed with the Commission.)
**13 Annual report to security holders.
**21 List of subsidiaries of TFC Enterprises, Inc.
**23 Consent of Ernst & Young LLP.
**99.1 The Financial Statements and notes thereto which appear on pages
___ through ___ of TFC Enterprises, Inc. 1997 Annual Report to
Shareholders (filed as Exhibit 13 to this Form 10-K) are
incorporated herein by reference.
**99.2 Financial Statement Schedule I.
- --------------------------------------------------------
* (Not filed herewith. In accordance with Rule 12b-32 of the General
Rules and Regulations under the Securities Exchange Act of 1934, the
exhibit is incorporated by reference).
** Filed herewith.
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