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Exhibit b-1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth unaudited pro forma consolidated financial
data for the Registrant for the year ended December 31, 1995 illustrating the
estimated effects of (i) the Registrant's purchase on September 30, 1995 of the
50% of the capital stock of City Mortgage Corporation Limited ("CSC-UK") which
was not previously owned by the Registrant (the "UK Acquisition") as if it had
occurred on May 2, 1995, the date CSC-UK commenced operations, (ii) the J&J
Acquisition as if it had occurred as of January 1, 1995 and (iii) the Heritable
Acquisition as if it had occurred as of January 1, 1995. The unaudited pro
forma consolidated financial data have been prepared using the purchase method
of accounting, whereby the total costs of the UK Acquisition, the J&J
Acquisition and the Heritable Acquisition will be allocated to the tangible and
intangible assets acquired and liabilities assumed based upon their respective
fair values at the effective date of the UK Acquisition, J&J Acquisition and
the Heritable Acquisition, respectively. The unaudited pro forma consolidated
financial data do not purport to represent what the results of operations or
financial position of the Company would have actually been if the UK
Acquisition, the J&J Acquisition and the Heritable Acquisition had in fact
occurred on such dates or to project the results of operations or financial
position of the Company for any future date or period.
FOR THE YEAR ENDED DECEMBER 31, 1995
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PRO FORMA ADJUSTMENTS
-----------------------------------
HISTORICAL CSC-UK J&J HERITABLE PRO FORMA
---------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES
Gain on sale of loans........... $ 38,198 -- $13,045(1) $ 15,654(2) $66,897
Mortgage origination income..... 2,963 -- -- 4,530(3) 7,493
Interest income................. 6,706 -- 1,435(4) 7,884(5) 16,025
Servicing income................ 777 -- -- -- 777
Earnings from partnership
interest..................... 482 -- -- -- 482
Other........................... 385 -- 279(6) -- 664
------- ------- ------- ------- -------
Total revenues.......... 49,511 -- 14,759 28,068 92,338
------- ------- ------- ------- -------
EXPENSES
Salaries and employee
benefits..................... 12,165 39(7) 1,926(8) 4,292(9) 18,422
Interest expense................ 4,610 -- 1,182(10) 2,923(11) 8,715
Selling expenses................ 2,895 -- 1,491(6) 4,456(3) 8,842
Other operating expenses........ 6,582 -- 2,531(6) 2,455(3) 11,568
Amortization of goodwill........ 494 819(12) 1,920(13) 4,120(14) 7,353
------- ------- ------- ------- -------
Total expenses.......... 26,746 858 9,050 18,246 54,900
------- ------- ------- ------- -------
Earnings before minority
interest, income taxes and
extraordinary item........... 22,765 (858) 5,709 9,822 37,438
Minority interest............... 2,379 (2,379)(15) -- -- --
------- ------- ------- ------- -------
Earnings before income taxes and
extraordinary item........... 20,386 1,521 5,709 9,822 37,438
Provision for income taxes...... 8,515 631(16) 2,369(16) 4,076(16) 15,591
------- ------- ------- ------- -------
Earnings before extraordinary
item......................... 11,871 890 3,340 5,746 21,847
Extraordinary item.............. (296) -- -- -- (296)
------- ------- ------- ------- -------
Net earnings...................... $ 11,575 $ 890 $ 3,340 $ 5,746 $21,551
======= ======= ======= ======= =======
Earnings per share before
extraordinary item.............. $ 0.50 N/A N/A N/A $ 0.84
Extraordinary item (per share).... (0.01) N/A N/A N/A (0.01)
------- ------- ------- ------- -------
Primary earnings per share........ $ 0.49 N/A N/A N/A $ 0.83
======= ======= ======= ======= =======
Weighted average shares
outstanding..................... 23,838 1,500(17) 548(18) 99(19) 25,985
======= ======= ======= ======= =======
Supplemental earnings per
share(20)....................... $ 0.80
=======
Supplemental weighted average
shares outstanding(21).......... 27,396
=======
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Notes to Unaudited Pro Forma Financial Statements for the year ended December
31, 1995
(1) Reflects gain on sale of approximately $19.6 million from the sale of
approximately $46.7 million of loans acquired as a result of the J&J
Acquisition as if such loans were sold under the mortgage loan repurchase
facility CSC-UK had with Greenwich prior to March 31, 1996 (the "Old
Greenwich Facility") with a participation by Greenwich in such gain of 33%.
Pro forma gain on sale gives effect to the sale of all of J&J's loan
portfolio outstanding as of December 31, 1995 and not J&J's mortgage loan
production for 1995. As a result, the Company's gain on sale for such J&J
loans in 1995 may not be indicative of the gain on sale J&J would have had
for 1995 or for J&J's future loan originations.
(2) Reflects gain on sale of approximately $23.5 million from the sale of
approximately $124.9 million of loans acquired as a result of the Heritable
Acquisition as if such loans were sold under the Old Greenwich Facility
with a participation by Greenwich in such gain of 33%. Pro forma gain on
sale gives effect to the sale of such portion of Heritable's loan portfolio
and not Heritable's mortgage loan production for 1995. As a result, the
Company's gain on sale for such Heritable loans in 1995 may not be
indicative of the gain on sale Heritable would have had for 1995 or for
Heritable's future loan originations.
(3) Reflects the 1995 historical operating results for Heritable.
(4) Reflects the accretion of interest related to the mortgage servicing
receivables associated with the sale of loans acquired as a result of the
J&J Acquisition.
(5) Reflects the accretion of interest of $1.7 million related to the mortgage
servicing receivables associated with the sale of loans acquired as a
result of the Heritable Acquisition, and interest income of $6.2 million on
the remaining loan portfolio.
(6) Reflects the 1995 historical operating results for J&J.
(7) Reflects additional bonus expense resulting from the increased pre-tax
profits related to the pro forma effect of the UK Acquisition on May 2,
1995.
(8) Reflects historical J&J expense and the additional bonus expense resulting
from the increased pre-tax profits related to the pro forma effect of the
J&J Acquisition occurring on January 1, 1995.
(9) Reflects historical Heritable expense and the additional bonus expense
resulting from the increased pre-tax profits related to the pro forma
effect of the Heritable Acquisition occurring on January 1, 1995.
(10) Reflects interest expense on the remaining average debt balance after the
application of the proceeds of the assumed sale of loans on January 1, 1995
to pay down warehouse debt.
(11) Reflects interest expense related to the assumed warehouse debt supporting
Heritable's remaining loan portfolio.
(12) Reflects the amortization of the $19.7 million of goodwill for the period
May 2, 1995 through September 30, 1995 recognized as a result of the UK
Acquisition using the straight-line method over a 10-year period. The
Company acquired the 50% interest in CSC-UK not then owned by the Company
through the issuance to the three other shareholders of an aggregate of 3.6
million shares of the Company's Common Stock valued at $21.6 million. In
addition to the goodwill, the Company acquired assets of $9.0 million,
consisting primarily of mortgage servicing receivables, and assumed
liabilities of $4.1 million.
(13) Reflects the amortization of the $19.2 million of goodwill recognized as a
result of the J&J Acquisition using the straight-line method over a 10-year
period. CSC-UK acquired all the outstanding stock of J&J for L15.0 million
($22.7 million) and 548,000 shares of the Company's Common Stock valued at
$9.8 million. In addition to the goodwill, the Company acquired assets of
$53.8 million, consisting primarily of mortgage loans held for sale, and
assumed liabilities of $38.8 million.
(14) Reflects the amortization of the $41.2 million of goodwill recognized as a
result of the Heritable Acquisition using the straight-line method over a
10-year period. CSC-UK acquired all the outstanding stock of Heritable for
approximately $66.0 million, including 99,362 shares of the Company's
Common
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Stock valued at $2.5 million. In addition to the goodwill, the Company
acquired assets of $221.2 million, consisting primarily of mortgage loans
held for sale, and assumed liabilities of $193.2 million.
(15) Reflects adjustment related to elimination of the 50% equity earnings for
the period prior to the UK Acquisition.
(16) Reflects tax impact of the pro forma adjustments recorded at a 41.5%
effective rate.
(17) Reflects the adjustment (for the partial year from May 2, 1995 through
September 30, 1995) of the 3.6 million shares of Common Stock issued in the
UK Acquisition as if those shares were issued and outstanding for the
entire period from May 2, 1995 through December 31, 1995.
(18) Reflects the impact of the 548,000 shares of Common Stock issued in the J&J
Acquisition remaining outstanding for the entire year ended December 31,
1995.
(19) Reflects the impact of the 99,362 shares of Common Stock issued in the
Heritable Acquisition remaining outstanding for the entire year ended
December 31, 1995.
(20) Gives effect to the application of a portion of the net proceeds of the
December 1995 public offering to repay outstanding debt at the time of such
offering as if such application occurred on January 1, 1995, resulting in a
net increase of $464,000 in net earnings due to a reduction in interest
expense.
(21) Gives effect to the inclusion of 1,411,200 shares of Common Stock at $8.37
per share net to the Company to repay the outstanding debt as discussed in
Note 20 above.
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The following tables set forth unaudited pro forma consolidated financial
data for the Registrant for the six months ended June 30, 1996 illustrating the
estimated effects of (i) the J&J Acquisition as if it had occurred as of January
1, 1995 and (ii) the Heritable Acquisition as if it had occurred as of January
1, 1995. The results of operations of J&J and Heritable are included in the
Company's historical results from April 23, 1996 and June 14, 1996,
respectively, the dates of their respective acquisitions. The unaudited pro
forma consolidated financial data have been prepared using the purchase method
of accounting, whereby the total costs of the J&J Acquisition and the Heritable
Acquisition will be allocated to the tangible and intangible assets acquired and
liabilities assumed based upon their respective fair values at the effective
date of the J&J Acquisition and the Heritable Acquisition, respectively. The
unaudited pro forma consolidated financial data do not purport to represent what
the results of operations or financial position of the Company would have
actually been if the J&J Acquisition and the Heritable Acquisition had in fact
occurred on such date or to project the results of operations or financial
position of the Company for any future date or period.
FOR THE SIX MONTHS ENDED JUNE 30, 1996
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PRO FORMA ADJUSTMENTS
------------------------
HISTORICAL J&J HERITABLE PRO FORMA
---------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES
Gain on sale of loans................... $ 104,237 $(19,567)(1) $ (23,488)(2) $ 61,182
Mortgage origination income............. 2,192 -- 1,650(3) 3,842
Interest income......................... 9,478 (376)(4) 2,650(5) 11,752
Servicing income........................ 1,356 -- -- 1,356
Earnings from partnership interest...... 260 -- -- 260
Other................................... 636 134(6) -- 770
-------- -------- -------- --------
Total revenues.................. 118,159 (19,809) (19,188) 79,162
EXPENSES
Salaries and employee benefits.......... 20,653 (429)(7) 1,877(8) 22,101
Interest expense........................ 6,382 483(9) 1,340(10) 8,205
Selling expenses........................ 4,375 753(6) 1,760(3) 6,888
Other operating expenses................ 9,807 975(6) 317(3) 11,099
Amortization of goodwill................ 1,527 600(11) 1,888(12) 4,015
-------- -------- -------- --------
Total expenses.................. 42,744 2,382 7,182 52,308
-------- -------- -------- --------
Earnings before income taxes............ 75,415 (22,191) (26,370) 26,854
Provision for income taxes.............. 31,297 (9,209)(13) (10,944)(13) 11,144
-------- -------- -------- --------
Net earnings.............................. $ 44,118 $(12,982) $ (15,426) $ 15,710
======== ======== ======== ========
Earnings per share:
Primary................................. $ 1.46 N/A N/A $ 0.51
======== ======== ======== ========
Fully diluted........................... $ 1.41 N/A N/A $ 0.51
======== ======== ======== ========
Weighted average shares outstanding:
Primary................................. 30,152 548(14) 99(15) 30,799
======== ======== ======== ========
Fully diluted........................... 31,941 548(14) 99(15) 32,588
======== ======== ======== ========
Supplemental earnings per share(16)....... $ 0.51
========
Supplemental weighted average shares
outstanding(17)......................... 31,625
========
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Notes to Unaudited Pro Forma Financial Statements for the six months ended June
30, 1996
(1) Reflects an adjustment to the gain on sale on approximately $46.7 million
of J&J loans that, for pro forma purposes, are shown as sold in fiscal
1995.
(2) Reflects an adjustment to the gain on sale on approximately $124.9 million
of Heritable loans, that, for pro forma purposes, are shown as sold in
fiscal 1995.
(3) Reflects historical results for the period January 1, 1996 to June 14, 1996
for Heritable.
(4) Reflects reduced interest accreted as a result of lower mortgage servicing
receivables recorded under the Old Greenwich Facility for J&J loans that,
for pro forma purposes, are shown as sold in fiscal 1995.
(5) Reflects reduced interest accreted as a result of lower mortgage servicing
receivables recorded under the Old Greenwich Facility for Heritable loans
that, for pro forma purposes, are shown as sold in fiscal 1995, offset by
interest income on loans acquired in the Heritable Acquisition but not
sold.
(6) Reflects historical results for the period January 1, 1996 to April 23,
1996 for J&J.
(7) Reflects historical J&J expense for the period January 1, 1996 to April 23,
1996 adjusted for the reduction in bonus expense resulting from lower pro
forma pre-tax earnings for the six month period ended June 30, 1996.
(8) Reflects historical Heritable expense for the period January 1, 1996 to
June 14, 1996 adjusted for the reduction in bonus expense resulting from
lower pro forma pre-tax earnings for the six month period ended June 30,
1996.
(9) Reflects interest expense on the average debt balance on warehouse debt
plus advances under the Old Greenwich Facility related to the J&J loans.
(10) Reflects interest expense on the average debt balance on warehouse debt
plus advances under the Old Greenwich Facility related to the Heritable
loans.
(11) Reflects amortization of the $19.2 million of goodwill recognized as a
result of the J&J Acquisition for the period January 1, 1996 to April 23,
1996 using the straight-line method over a 10-year period. CSC-UK acquired
all the outstanding stock of J&J for L15.0 million ($22.7 million) and
548,000 shares of the Company's Common Stock valued at $9.8 million. In
addition to the goodwill, the Company acquired assets of $53.8 million,
consisting primarily of mortgage loans held for sale, and assumed
liabilities of $38.8 million.
(12) Reflects amortization of the $41.2 million of goodwill recognized as a
result of the Heritable Acquisition for the period January 1, 1996 to June
14, 1996 using the straight-line method over a 10-year period. CSC-UK
acquired all the outstanding stock of Heritable for approximately $66.0
million, including 99,362 shares of the Company's Common Stock valued at
$2.5 million. In addition to the goodwill, the Company acquired assets of
$221.2 million, consisting primarily of mortgage loans held for sale, and
assumed liabilities of $193.2 million.
(13) Reflects tax impact of the pro forma adjustments recorded at a 41.5%
effective rate.
(14) Reflects the impact of the 548,000 shares of Common Stock issued in the J&J
Acquisition remaining outstanding for the six month period ended June 30,
1996.
(15) Reflects the impact of the 99,362 shares of Common Stock issued in the
Heritable Acquisition remaining outstanding for the six month period ended
June 30, 1996.
(16) Gives effect to the application of a portion of the net proceeds to be
received by the Company from the Offering to repay outstanding debt at the
time of the Offering as if such application had occurred on January 1,
1995, resulting in a net increase of $433,000 in net earnings due to a
reduction in interest expense.
(17) Gives effect to the inclusion of 825,500 shares of Common Stock at $31.53
per share net to the Company to repay the outstanding debt as discussed in
Note 16 above.
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