FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

The Money Store <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MONE)") else Response.Write("(Nasdaq: MONE)") end if %>
2840 Morris Avenue
Union, NJ 07083
(916) 554-8333
http://www.themoneystore.com

UNION CITY, CA (February 18, 1997)/FOOLWIRE/ --- The Money Store reported fourth quarter and year end results for fiscal 1996 on February 12th. They indicated that a number of people had phoned their investor relations department with specific questions recently in light of the problems with Mercury Finance and rumors that The Money Store might be facing similar problems. The company was unable to respond to the calls because they were in a quiet period before releasing earnings. So, no one has looked forward to the analyst conference call more than the company because, as the press release of their earnings indicates, there is nothing wrong with the company. On the contrary, although the stock has been hit 22-25% since the first of the year and roughly 35% since late last year, the company has been performing superbly.

The fourth quarter was exceptional with net income up 71% year-over-year and origination volume, revenues, and credit quality all strong. Earnings exceeded consensus estimates by a substantial margin once again ($0.48 per share versus estimates of $0.41 per share). All of this was accomplished while they build reserves, while they were conservative in their accounting assumptions relative to earnings, and while they kept a portion of their loans unsold, again building for the future.

FOURTH QUARTER RESULTS OVERVIEW. Fourth quarter was strong in all areas. Earnings of $29.8 million, which is a company record, were up 71% on a dollar basis and 41% on an earnings per share fully diluted basis. For the year, earnings on the same basis were up 48% to $86 million from $49 million. Backing up these earnings numbers were strong growth in revenues, strong growth in originations across all divisions. Revenues for the quarter were $243 million, up 51%. Originations for the quarter were $1.7 billion, up 38% year-over-year. Loan sales for the quarter were approximately $1.6 billion as they continue to sell less than they originate, pushing some of their earnings power out into the year.

SPREADS. Spreads were the best of the year in the fourth quarter, home equity most notably with spreads of 4.45%. All of these numbers show the robustness of their origination system as they grow volumes without sacrificing spreads. In fact, all spreads were increasing over the course of the year. Also important was that volume and spread growth came without the expense of hurting credit quality.

DELINQUENCY OVERVIEW. While their SBA and auto division delinquency actually improved for the fourth quarter, their home equity delinquency moved up only slightly, 21 basis points, to 5.95% 30 days and over, which is almost exactly where their modeling has been indicating throughout 1996. Credit losses were actually below their estimates and Wall Street estimates for the quarter and year.

TECHNOLOGY INVESTMENT. Expenses showed little improvement as they continued to make a heavy investment in their growth. They are still muscling through much of their growth by adding extra bodies to accommodate all of the volume and products they have added on over the last few years. Although they have been working hard, they have been investing in technology and process improvements to lower the expense structure. They were behind in technology when they began investing in this area in 1992. As a result, they have had to play catch-up technologically at the same time that loan originations have been growing dramatically (52% 5-year compounded growth rate) and at the same time they were rolling out new products such as auto, home improvement, and lines of credit. So, there was strong growth in originations overall plus rolling out new products and new lines of business. Their solution was, rather than to turn away from all of this additional marketshare and opportunity, to muscle through with additional bodies, which is obviously not the most efficient way, while they work on their technology to catch up.

EXPENSE GROWTH SLOWING. They are getting there. Incrementally in the fourth quarter versus the third quarter expenses were up 14% whereas last year in the fourth quarter versus third quarter expenses were up 19%. Another example would be their SBA area where volumes increased 44% but the headcount was down 7%. Similarly, they saw some efficiency gains, particularly in student loans. But, they aren't projecting great expense improvement in the short term either in home equity or auto, which are their largest expense growth areas. Nevertheless, they are very comfortable that they are on the right track and exceptionally pleased with the results overall and the direction of the company relative to managing its growth.

SERVICE LOAN PORTFOLIO GROWTH. In addition to the profit numbers, the company had several positive events occur in the fourth quarter. Their service loan portfolio grew to $12.2 billion, up 41% from where it was a year ago. Coupled with what they believe are conservative accounting assumptions, they are building a strong flow of finance income for future periods.

NEW OFFICES. They opened 32 new offices in the year, 11 in the fourth quarter alone including several in mortgage where they had been on a 2-year hiatus. This will continue to drive the retail volume which is the core of their mortgage company.

CAPITAL. They successfully placed $133 million in preferred stock in the fourth quarter which, along with their fourth quarter earnings puts their capital at $583 million at year end which is up 142% from a year earlier. The strong capital position puts them in a very competitive position entering 1997 relative to many of their peers.

S&P RATING OF BBB. As evidence of their additional capital and the bolstering of their capital position, they received a BBB rating by Standard & Poors for the company in the fourth quarter. They are comfortable that this will enable them to lower their cost of borrowing going forward and should position them to have a lower cost of securitization of their loans which can have a profound impact going forward on earnings.

ANSWERS TO A FEW OF THE QUESTIONS THEY HAVE ASKED AND COULDN'T ANSWER RECENTLY. They normally don't respond to rumors and the like, but since the stock has been so adversely impacted, they think it makes sense to raise the issues and dispel them so they can move forward. First, there was considerable speculation that they would miss their earnings targets for the quarter. Obviously this is not the case and they have no idea where this came from.

RUMOR -- TECHNOLOGY PROBLEMS. Second, there were questions that they were having technology problems that would lead to either a large write-off against earnings for technology costs or that the technology glitches would manifest in delinquency problems. Again, both counts are untrue. They expense all of their technology costs quarterly, so there is nothing to ever write off and the delinquency numbers are very strong. They did reorganize, as they often do. They are constantly, it seems, in a state of reorganization of some of their areas to become more efficient. This was in the technology or IT area, much like they reorganized in accounting a year ago, pushing more and more of the responsibility down to the divisional level. That may possibly be the reason there was some talk, but they have absolutely no issues in the technology area and think they are going to be much stronger in that area just as they feel they are now much stronger in accounting as a result of pushing their accounting down to divisional levels.

RUMOR -- AUTO BUSINESS. The third rumor or question they got was regarding their auto business in light of the problems with Mercury and Jayhawk which led to concerns about The Money Store hitting the analyst estimates. Their response is threefold. First, they are not in the same end of the business as Jayhawk, which is in a business where they typically advance fifty cents on the dollar, or Mercury which Money Store would categorize as a company that writes somewhat deeper credit and smaller loans at higher rates than Money Store. Money Store thinks their portfolio is a very different type of portfolio. From day one they have been writing what they categorize as B paper as opposed to deeper C and D paper. Second, the Money Store's auto portfolio is less than 4% of their outstanding, so even if they were to substantially increase their reserves here (not that they need to), it would not impact their overall earnings materially. They are big believers in making mistakes when the business is small so they can tinker with it before it gets to be too much of a factor. So, with auto representing less than 4% of their outstanding, they have the ability to do that should that ever occur. In light of what has happened to Jayhawk and Mercury and all the publicity about the auto finance business, The Money Store recently reassessed their auto business and continue to be very comfortable with its progress.

HOME EQUITY. Originations for the fourth quarter were very strong, $1.2 billion, a 35% increase obviously off a much bigger base. For the year they had record volume of $4.2 billion. There were several leading areas for home equity. The first is home improvement. They are very pleased with the growth of originations, the growth of dealer network, the spreads in that business and the fact that it is not an easy business for someone else to duplicate.

RETAIL. In general performance in the fourth quarter and for the year was very good for retail. Again, it is a big barrier to entry that they have such a strong and vibrant retail business. One area that was good in the retail end of the business for them last year were direct marketing where their proprietary database continued to drive down the cost of origination and proved to be cheaper than television as a source of new business so they will continue to invest in this area.

HELOC. Other areas that were interesting -- they rolled out their HELOC product (Home Equity Line of Credit) on a test basis. Their intent was not to garner tremendous volume, but to see how it worked and debug the origination and servicing systems that they built for this product. They were very pleased with the results in Q4 and are ready for a more active rollout of their HELOC product as they enter 1997. They continue to believe that this is a product that will satisfy a lot of their customers. They have by far, they believe, the most active number of callers looking for home equity loans from them. Generally, people have asked questions about competition. They feel their brand is stronger than ever. The number of calls continues to increase and the brand helps them on the indirect side of the business.

SBA LENDING. This arena saw a healthy increase in volume, up 44%, and very strong growth in profits for the year. Obviously this is a year that did not have the impact of government regulations curtailing loan size as they had in 1995. They saw a 44% increase in originations for the year and 24% in the fourth quarter. Significantly, headcount was down 7% for the year and they have very strong momentum here and very strong momentum in home equity going into 1997. Another interesting thing that happened in this business that they have reported on was their HFS preferred vendor relationship which is a strategic alliance for them to provide conventional as well as SBA financing for HFS hotel franchisees (Days Inn, Howard Johnson, Ramada Inns, Super 8, etc.). They are beginning to build a pipeline of loans from HFS which, on the conventional side, have terms pretty similar to the SBA program but with a loan-to-value that is capped typically at 65-70%, so they have a lower loan-to-value. They are very optimistic about entering into this business. It is one they have been in through the SBA business so they have been able to track franchise finance results for a number of years. But, now having to go and do it on the conventional non-guaranteed basis, they think over the next year or two will open up a whole new market for them.

EDUCATION. This area also had a good bounce-back from 1995 when they were impacted by direct lending. They did see the government's direct lending business slow down. The government's share of market did not increase dramatically this year and Money Store was able, in turn to grow their originations about 22% for the quarter and 24% for the year. They also opened 15 states in the last year with only one new office. They are doing it essentially with marketing people without full offices. They are very pleased and probably will see good expense containment.

AUTO FINANCE. Everyone seems to be sensitized to the auto finance business these days. The Money Store is not a new company in underwriting non-prime credit. This October they will have been in that business for 30 years and most of the senior management team including the speaker have been here for 20 years or so. They have extensive experience in monitoring portfolio performance and providing credit provisions on a pooled basis. They think that experience directly applies to their non-prime auto financing because they look at every pool on a static pool basis. So, they are constantly looking at that. They lend in the prime segment to the B customers, not the D or E customer and it really is a different profile. Delinquency at year end was 3.03% in the auto area, down 16 basis points from where it was at the end of September. Charge-offs were up to $3.5 million but they were projecting charge-offs at 4% and the annualized rate in the fourth quarter was 2.93%, well within what they had anticipated for the year. They feel very comfortable that the portfolio is performing in line with their expectations. Their originations continue to grow, up to $146 million. They opened a lot of offices over the last year but again this only represents roughly 3.9% of their overall portfolio. The fourth quarter spread in auto was 10.32%, the highest of the year, as they continue to see through the course of the year, increasing spreads in auto and in mortgage and they think it is critical to understanding their competitive position. They have a very robust capability of originating loans that continues to become more diversified and continues to be stronger as they mature as a company. They think that is reflected not only in increasing volumes, but increasing volumes while maintaining quality credit and while increasing spreads.

CREDIT QUALITY. Their delinquency in the home equity division increased marginally 21 basis points to 5.95% 30 days and over. Quality increased marginally, it's within what they had expected for the year. This may trend up over the course of 1997 to 6.50-6.75%, but they are very comfortable with that. They also continue to add to reserves both in absolute and relative terms. The allowance at December 31st overall was 2.56% of their at-risk portfolio which is the highest in the company's history. Their reserves now are 5.1 times the annualized charge-off rate for all of 1996.

BALANCE SHEET. They now have $583 million worth of shareholder's equity, an investment grade rating of BBB from Standard and Poors. They have roughly $1.4 billion in unsold loans which represents future finance income.

PREFERRED STOCK. They reported fully diluted and primary earnings per share and this is due to the issuance of their preferred stock during the fourth quarter. The preferred stock is only included in the calculation of fully diluted numbers and is if they were converting the preferred stock to common stock on a reporting date of 12/31/96 and using a conversion ratio and the closing stock price on that date.

STOCK PRICE. They are pleased with their results for the fourth quarter and the year. They are also concerned about the recent stock performance, but not at all concerned about the company's prospects. As of February 11th, they had lost somewhere between ten and eleven points since the end of the year. Before the earnings release they were trading at a P/E multiple that was less than some of their peers.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.