The FINOVA Group Inc. announces 37% increase in second quarter net income

Business Wire, July 18, 1995

PHOENIX--(BUSINESS WIRE)--July 18, 1995--The FINOVA Group Inc. (formerly known as GFC Financial Corporation) (NYSE:FNV) today reported record results led by strong new business volume and portfolio growth for the second quarter ended June 30, 1995.

Net income for the second quarter of 1995 was $23.6 million ($0.85 per common share) up from $17.3 million ($0.73 per common share) for the comparable period in 1994, an increase of 37% in net income and 16% in earnings per common share. In the 1995 period, the company's average outstanding shares were 17% higher than during the same period in 1994.

Sam Eichenfield, chairman and chief executive officer of FINOVA, said he was pleased with the company's continued strong growth, the improved earnings and the strengthened balance sheet during the second quarter of 1995. "We were able to generate in excess of $1 billion of new revolving or term business and $800 million of factored volume in the first six months of the year while increasing our backlog and growing the portfolio at an annual rate slightly in excess of 17%," Eichenfield said.

"At the same time, our portfolio quality continued to improve, with nonearning assets declining to $164 million or 2.6% of ending funds employed and securitizations as of June 30, 1995."

Eichenfield also said that "interest margins earned are a healthy 5.8% and the G&A expense ratio continues to improve, declining to 45% of interest margins earned."

Interest margins earned, as a percent of average earning assets, were 5.8% for the six months of 1995 compared to 6.0% for the 1994 period. This reduction in interest margins was expected in 1995 due to the cost of the hedges that the company entered into to lock in the spread between its lending and borrowing rates on approximately 50% of its floating-rate debt ($1.5 billion) and to the diminishing ratio of the higher yielding businesses relative to the total portfolio.

The increase in the amount of interest margins earned more than offset higher provisions for credit losses and higher selling, administrative and other operating expenses ("G&A expenses"). Loss provisions, which increased by $6.7 million, were due primarily to the growth of the portfolio. The reserves, including the accrued liabilities for possible credit losses applicable to the securitized portfolio, were 2.0% of ending funds employed and securitizations and 78% of nonaccruing assets.

G&A expenses for the second quarter of 1995 were higher than the comparable 1994 period, but declined as a percent of interest margins earned to 44.8% for the second quarter of 1995 from 47.2% for the first quarter of 1995 and 46.2% for 1994. Higher G&A expenses are primarily attributable to the addition of TriCon Capital, acquired in April 1994, as well as to higher marketing expenses incurred in connection with the higher volume of new business added during the year, partially offset by lower problem account costs.

Income taxes were higher in the second quarter of 1995 due to an increase in income before income taxes, which more than offset a lower effective income tax rate resulting from state income tax adjustments. Excluding those state income tax adjustments, the incremental income tax rate for the company is approximately 40%.

The FINOVA Group Inc. is a Phoenix-based major domestic commercial finance company providing secured financing and leasing products from $500,000 to $35 million to medium sized businesses. FINOVA also offers inventory and sales financing programs to manufacturers, distributors and dealers nationwide. -0-

                      The FINOVA Group Inc.
                  and Consolidated Subsidiaries
                  Summary of Consolidated Income
                           (Unaudited)
          (dollars in thousands, except per share data)