<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 29, 1997
BANK PLUS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-28292 95-1782887
(State or Other (Commission File Number) (IRS Employer Identification No.)
Jurisdiction of
Incorporation)
4565 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90039
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 549-3116
NONE
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This report is qualified in its entirety by reference to the documents
described herein and attached as exhibits hereto, which are incorporated herein
by this reference.
On July 29, 1997, Bank Plus Corporation ("Bank Plus") and Bank Plus'
wholly-owned subsidiary, Fidelity Federal Bank, A Federal Savings Bank
("Fidelity"), acquired Hancock Savings Bank, F.S.B., a Federal Savings Bank
("Hancock"), by means of a merger (the "Merger") of Hancock with and into
Fidelity, with Fidelity as the surviving federal savings bank, pursuant to the
terms and conditions of an Agreement and Plan of Merger dated June 25, 1997 by
and among Bank Plus, Fidelity and Hancock (the "Merger Agreement").
By virtue of the Merger, each share of common stock, par value $6.40 per
share ("Hancock Common Stock"), of Hancock issued and outstanding immediately
prior to the effective time of the Merger (the "Effective Time") was
automatically converted into the right to receive 0.8125 shares of BPC Common
Stock (as defined below) and cash in lieu of any fractional shares of BPC Common
Stock at the price of $11.3469 per share of BPC Common Stock. At the Effective
Time, each holder of a certificate representing shares of Hancock Common Stock
ceased to have any rights with respect to such shares, except the right to
receive such shares of BPC Common Stock and cash payable in lieu of fractional
share interests in accordance with the Merger Agreement.
The exchange ratio was determined in the following manner. By virtue of
the Merger, automatically and without any action on the part of the holders of
Hancock Common Stock, each share of Hancock Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares as to which
dissenters' rights were perfected under 12 C.F.R. Section 552.14, and any shares
of Hancock Common Stock that were owned by Hancock or any direct or indirect
wholly-owned subsidiary of Hancock) became and was converted into the right to
receive a number of shares, or fraction of a share, of common stock, par value
$.01 per share ("BPC Common Stock"), of Bank Plus (the "BPC Stock
Consideration") (rounded to the nearest 1/10,000 of a share of BPC Common Stock)
equal to the quotient obtained by dividing (a) the BPC Stock Consideration Value
(as defined below) by (b) the product of the Market Value Per BPC Share (as
defined below) times the number of shares of Hancock Common Stock issued and
outstanding immediately prior to the Effective Time. Notwithstanding any of the
foregoing, each holder of Hancock Common Stock who was otherwise entitled to
receive a fraction of a share of BPC Common Stock (after taking into account all
certificates delivered by such holder) received, in lieu thereof, cash (without
interest) in an amount equal to the product of such fractional share of BPC
Common Stock multiplied by the Market Value Per BPC Share.
"Market Value Per BPC Share" means the average of the daily closing sales
prices of a share of BPC Common Stock on the Nasdaq National Market ("NASDAQ"),
as reported in The Wall Street Journal, during the twenty (20) consecutive
trading days on which trades in BPC Common Stock occurred ending two (2) full
trading days prior to the Effective Time.
"BPC Stock Consideration Value" means the difference of Twelve Million
Twelve Thousand Dollars ($12,012,000) minus the "Price Adjustment" (as defined
below).
2
<PAGE>
"Price Adjustment" means the sum of (i) 4.25% of the difference, whether
positive or negative, of $190,073,000 minus the aggregate amount of deposits
(excluding brokered deposits) of Hancock at June 30, 1997 plus (ii) the
"Adjusted Net Book Value Differential" (as defined below); provided, however,
that the Price Adjustment shall never be less than zero.
"Adjusted Net Book Value Differential" means the difference, whether
positive or negative, of $3.787 million minus the "Adjusted Net Book Value" (as
defined below) of Hancock at June 30, 1997; provided, however, that if such
difference equals an amount between $0 and positive $50,000, inclusive, such
difference shall be deemed to equal $0.
"Adjusted Net Book Value" of Hancock at June 30, 1997 shall equal the
stockholders' equity of Hancock at June 30, 1997 determined in accordance with
GAAP applied consistently with prior periods, (a) less the sum of the following,
to the extent not already reflected in the calculation of Hancock's
stockholders' equity on Hancock's balance sheet at June 30, 1997: (i) Hancock's
costs and expenses of the transactions contemplated hereby, (ii) costs and
expenses associated with termination of Hancock leases on Hancock's Fairfax,
Glendale and Wilshire offices following the Effective Date, (iii) costs and
expenses associated with the termination of Hancock employees under Section 4.20
of the Agreement in contemplation of the Merger and (iv) costs and expenses
relating to the cash out of the options pursuant to Section 1.6 of the
Agreement, (b) plus any amount paid to Hancock upon exercise of an Option
between July 1, 1997 and the day ending two full trading days prior to the
Effective Time and (c) minus (plus) unrealized loss (gain) on securities
available for sale or held for investment on the day ending two full trading
days prior to the Effective Time.
Prior to the Merger, no material relationship existed between Hancock and
Bank Plus or Fidelity or any of their affiliates, directors or officers, or any
associate of any such directors or officers.
The Press Release of Bank Plus dated July 31, 1997, announcing the
completion of the acquisition described above is filed herewith as Exhibit 99.1.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Hancock.
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................... 5
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995:
Consolidated Statements of Financial Condition............................. 6
Consolidated Statements of Operations.................................... 7
Consolidated Statements of Stockholders' Equity.......................... 8
Consolidated Statements of Cash Flows.................................... 9
Notes to Consolidated Financial Statements............................... 10
FINANCIAL STATEMENTS AS OF JUNE 30, 1997 AND DECEMBER 31, 1996 AND FOR THE
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996:
Consolidated Statements of Financial Condition (Unaudited)............... 26
Consolidated Statements of Operations (Unaudited)........................ 27
Consolidated Statements of Cash Flows (Unaudited)........................ 28
Notes to Consolidated Financial Statements............................... 30
</TABLE>
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Hancock Savings Bank, FSB
Los Angeles, California:
We have audited the accompanying consolidated statements of financial
condition of Hancock Savings Bank, FSB and subsidiary (the "Company") as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Hancock Savings Bank, FSB and
subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, at December 31, 1996 and
1995, the Company did not meet the minimum capital requirements prescribed by
the Office of Thrift Supervision ("OTS"). During 1996 and 1995, the Company
operated under a regulatory agreement with the OTS that was superseded by a
Cease and Desist Order (the "Order") entered into with the OTS in March 1997.
The Order requires that, among other things, the Company must meet prescribed
capital ratios by no later than June 30, 1997. In addition, on May 2, 1997,
the Company was notified by the OTS that it is categorized as "significantly
undercapitalized," and was given a Prompt Corrective Action Directive (the
"Directive"). The Directive requires that, among other things, the Company
must submit a capital restoration plan to the OTS within 45 days of May 2,
1997.
If the Company is unable to meet minimum capital requirements of the Order
or the additional requirements of the Directive, the OTS may take such further
supervisory, enforcement or resolution action as it deems appropriate and can
ultimately appoint a conservator or receiver. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Deloitte & Touche LLP
April 17, 1997
(except Note
2 as to
which the
date is May
2, 1997)
5
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Cash..................................................... $ 5,450 $ 4,465
Federal funds sold....................................... 7,506 --
-------- --------
Cash and cash equivalents................................ 12,956 4,465
Interest-bearing deposits with financial institutions.... 2,476 1,587
Investments (Notes 3 and 4):
Mutual fund investments--available for sale............ 3,000 --
Mutual fund investments--trading....................... -- 8,198
Mortgage-backed securities--available for sale......... 196 236
Mortgage-backed securities--held to maturity........... 5,636 7,264
Investment securities--held to maturity................ 21,857 12,484
Loans receivable, net (Note 4)........................... 144,729 153,473
Real estate owned, net (Note 5).......................... 1,544 2,197
Accrued interest receivable (Note 6)..................... 1,260 1,270
Investment in stock of the Federal Home Loan Bank, at
cost.................................................... 1,338 1,260
Property and equipment, net (Note 7)..................... 1,591 1,696
Other assets............................................. 1,576 1,414
-------- --------
$198,159 $195,544
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Note 8)........................................ $190,073 $185,424
Accounts payable and other liabilities................... 1,485 2,155
SAIF accrual (Note 2).................................... 1,191 --
-------- --------
Total liabilities...................................... 192,749 187,579
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 10)
STOCKHOLDERS' EQUITY (Notes 2 and 11):
Common stock, $6.40 par value; authorized, 5,000,000
(1996) and 1,781,250 (1995) shares; issued and
outstanding, 1,302,463 (1996) and 728,034 (1995) shares. 8,336 4,660
Additional paid-in capital............................... 2,243 1,570
(Accumulated deficit) retained earnings.................. (5,133) 1,736
Net unrealized losses on securities available for sale,
net of taxes of $0 and $(1) at December 31, 1996 and
1995, respectively...................................... (36) (1)
-------- --------
Total stockholders' equity............................. 5,410 7,965
-------- --------
$198,159 $195,544
======== ========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans............................................. $11,962 $11,959 $10,275
Mortgage-backed securities........................ 404 465 471
Investment securities and other interest-earning
assets........................................... 1,755 1,397 1,165
Loan servicing fee income, net.................... 321 371 394
------- ------- -------
Total interest and dividend income.............. 14,442 14,192 12,305
------- ------- -------
INTEREST EXPENSE:
Deposits (Note 8)................................. 8,331 8,036 6,042
Other borrowings.................................. 4 3 7
------- ------- -------
Total interest expense.......................... 8,335 8,039 6,049
------- ------- -------
Net interest income............................. 6,107 6,153 6,256
PROVISION FOR ESTIMATED LOSSES ON LOANS (Note 4).... 6,975 3,499 1,549
------- ------- -------
NET INTEREST (LOSS) INCOME AFTER PROVISION FOR
ESTIMATED LOSSES ON LOANS.......................... (868) 2,654 4,707
------- ------- -------
REAL ESTATE INCOME (LOSS):
(Loss) income on real estate operations (Note 5).. (112) 123 (353)
Provision for loss on real estate held for sale
(Note 5)......................................... (400) (184) (476)
------- ------- -------
Net real estate loss............................ (512) (61) (829)
------- ------- -------
NONINTEREST INCOME:
Other loan fees................................... 92 84 53
Gain (loss) on sale of mutual fund investments.... 15 (131)
Excess servicing fees............................. 387
Bank charges...................................... 195 191 168
Other............................................. 318 265 277
------- ------- -------
Total noninterest income........................ 992 555 367
------- ------- -------
NONINTEREST EXPENSE:
Compensation and employee-related costs (Notes 10
and 11).......................................... 2,579 2,642 2,668
Facilities (Note 10).............................. 726 813 796
Office supplies................................... 201 194 228
Service bureau and related equipment rental....... 280 300 325
SAIF insurance premium (Note 2)................... 1,750 535 512
Professional services............................. 348 427 299
Bank charges...................................... 209 217 215
Advertising....................................... 62 63 87
Other general and administrative (Note 2)......... 324 330 277
------- ------- -------
Total noninterest expense....................... 6,479 5,521 5,407
------- ------- -------
LOSS BEFORE PROVISION FOR INCOME TAX EXPENSE (BENE-
FIT)............................................... (6,867) (2,373) (1,162)
INCOME TAX EXPENSE (BENEFIT) (Note 9)............... 2 (698) (251)
------- ------- -------
NET LOSS............................................ $(6,869) $(1,675) $ (911)
======= ======= =======
LOSS PER SHARE...................................... $ (7.27) $ (2.30) $ (1.25)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
RETAINED SECURITIES
COMMON STOCK ADDITIONAL EARNINGS AVAILABLE FOR
---------------- PAID-IN (ACCUMULATED SALE, NET OF STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) TAXES EQUITY
--------- ------ ---------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994................... 728,034 $4,660 $1,570 $ 4,322 $ 118 $10,670
Unrealized
depreciation on
securities available
for sale, net of
taxes................ (172) (172)
Net loss.............. (911) (911)
--------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31,
1994................... 728,034 4,660 1,570 3,411 (54) 9,587
Unrealized
appreciation on
securities available
for sale, net of
taxes................ 53 53
Net loss.............. (1,675) (1,675)
--------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31,
1995................... 728,034 4,660 1,570 1,736 (1) 7,965
Issuance of common
stock................ 567,743 3,633 682 4,315
Stock options
exercised (Note 11).. 6,686 43 (9) 34
Unrealized
depreciation on
securities available
for sale............. (35) (35)
Net loss.............. (6,869) (6,869)
--------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31,
1996................... 1,302,463 $8,336 $2,243 $(5,133) $ (36) $ 5,410
========= ====== ====== ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $ (6,869) $ (1,675) $ (911)
Reconciliation of net loss to net cash provided
by (used in) operating activities:
Accretion of discounts on investments and
mortgage-backed securities................... (314) (191)
Net decrease (increase) in mutual fund
investments--trading......................... 8,198 (6,432) 14,862
(Gain) loss on mutual fund investments--
trading...................................... (15) 131
Amortization of deferred loan fees, net....... (210) (235) (315)
Provision for loan and real estate losses..... 7,375 3,683 2,025
Loss (gain) on sale of real estate............ 95 (62) 54
Depreciation.................................. 189 252 247
Decrease (increase) in accrued interest
receivable................................... 10 (177) (128)
Federal Home Loan Bank stock dividend......... (74) (60) (59)
(Increase) decrease in other assets........... (162) (845) 455
Deferred income taxes......................... 140 31
Accrual of special SAIF assessment............ 1,191
(Decrease) increase in accounts payable and
other liabilities............................ (670) 875 (104)
-------- -------- --------
Net cash provided by (used in) operating
activities................................. 9,073 (4,865) 16,097
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on mortgage-backed
securities..................................... 1,668 186 383
Proceeds from sales of mortgage-backed
securities--available for sale................. 1,727 --
Purchase of investment securities--held to
maturity....................................... (33,857) (15,323) (10,668)
Purchase of mortgage-backed securities-held to
maturity....................................... -- -- (1,982)
Proceeds from maturities of investment
securities--held to maturity................... 24,484 14,000 --
Purchase of mutual fund investments--available
for sale....................................... (3,000) --
Net decrease (increase) in loans................ 1,002 (6,740) (10,980)
Proceeds from sales of real estate.............. 1,648 1,668 1,576
Capitalized cost of real estate................. (549) (399) (92)
Purchase of Federal Home Loan Bank stock........ (4) (56) 120
Purchase of property and equipment.............. (84) (71) (47)
Net (increase) decrease in interest-bearing
deposits with financial institutions........... (889) 4,364 (1,345)
Other........................................... 1 (75) --
-------- -------- --------
Net cash used in investing activities....... (9,580) (719) (23,035)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificate account deposits
and money market accounts...................... 3,658 7,412 5,474
Net increase (decrease) in demand deposits and
passbook accounts.............................. 991 (772) 1,914
Proceeds from issuing common stock.............. 4,315 -- --
Proceeds from exercise of stock options......... 34 -- --
-------- -------- --------
Net cash provided by financing activities... 8,998 6,640 7,388
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS........ 8,491 1,056 450
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..... 4,465 3,409 2,959
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR........... $ 12,956 $ 4,465 $ 3,409
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION--Cash paid (received) for:
Interest........................................ $ 8,346 $ 8,036 $ 6,053
======== ======== ========
Income taxes.................................... $ 99 $ (171) $ (528)
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
ACTIVITIES:
Mortgage-backed securities transferred from
available for sale to held to maturity......... $ 7,542
========
Real estate acquired through foreclosure........ $ 8,558 $ 4,681 $ 7,353
======== ======== ========
Loans to facilitate sales of real estate owned.. $ 7,576 $ 3,387 $ 7,235
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Nature of Operations--The consolidated
financial statements include the accounts of Hancock Savings Bank, FSB (the
"Company") and its wholly owned subsidiary, Hancock Service Corporation. The
Company is primarily engaged in attracting savings deposits and making loans
collateralized by real estate and operates five branches serving individuals
and small to medium-sized businesses in the Southern and Central California
regions. Activities of the subsidiary are not material to the operations of
the Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
Investment Securities, Mortgage-Backed Securities and Mutual Fund
Investments--The Company's investments are classified into three categories
and accounted for as follows: (i) debt securities that the enterprise has the
positive intent and ability to hold to maturity are classified as held-to-
maturity securities and reported at amortized cost; (ii) debt and equity
securities that are bought and held principally for the purpose of selling in
the near term are classified as trading securities and reported at fair value,
with unrealized gains and losses included in earnings; and (iii) debt and
equity securities not classified as either held-to-maturity securities or
trading securities are classified as available-for-sale securities and
reported at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of stockholders' equity.
Loans Receivable--Loans are generally presented at amortized cost, based
upon the Company's intention and ability to hold the loans for the foreseeable
future.
Interest on loans receivable is accrued as earned, except nonaccrual loans
on which interest is normally discontinued whenever the payment of principal
or interest is considered to be in doubt. When a loan is placed on nonaccrual,
all previously accrued but not collected interest is reversed against current
period income.
The Company receives fees on loans that do not pertain to the origination
process. These fees are recorded as income at the time of payment. Fees and
costs associated with the loan origination process are deferred and amortized
as interest income over the lives of the loans, using the level yield method.
Allowance for Loan Losses--In each reporting period, the allowance for loan
losses is increased by provisions for losses charged against operations in
that period and recoveries of loans previously charged off, and is reduced by
charge-offs of loans recognized in that period.
The allowance is an estimate involving both subjective and objective
factors, and its measurement is inherently uncertain, pending the outcome of
future events. As discussed in Note 4, the Company has significant levels of
impaired loans subject to valuation estimation. Management's determination of
the adequacy of the allowance is based on an evaluation of the loan portfolio,
previous loan loss experience, current economic conditions, volume, growth and
composition of the loan portfolio, the value of collateral, and other relevant
factors. The Company's lending is concentrated in multi-family residential
loans and other real estate loans collateralized by properties in Southern and
Central California. Southern and Central California include areas that have
recently experienced adverse economic conditions, such as declining real
estate values. Such factors adversely affected some borrowers' ability to
repay loans and may indicate reductions in the value of collateral that may
become a source of repayment of some loans. In addition, the Company is
examined annually by regulatory authorities who have sometimes required
adjustments to the allowance. Although management believes the level of the
allowance as of December 31, 1996 is adequate to absorb losses inherent in the
loan portfolio, additional deterioration in the economy of the Company's
lending area and/or rising interest rates could result in levels of loan
losses that cannot be reasonably predicted at that date.
10
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Real Estate Owned--Real estate acquired through foreclosure is recorded at
estimated fair value at the time of foreclosure. Any subsequent operating
expense or income, reduction in estimated fair values, and gains or losses on
disposition of such properties are included in current operations.
Depreciation and Amortization--Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives, principally on a straight-line basis. Leasehold
improvements are amortized over the lives of the respective leases or the
service lives of the improvements, whichever is shorter.
Income Taxes--Deferred tax liabilities or assets are calculated by applying
applicable tax rates to the difference between the financial statement and tax
bases of assets and liabilities currently recognized in the financial
statements. Deferred taxes are provided for in the consolidated statements of
operations in the amount of the net change during the year of the deferred tax
balances in the consolidated statements of financial condition.
Statement of Cash Flows--For purposes of reporting cash flows, cash includes
cash on hand, amounts due from banks and federal funds sold.
Loss per Share--Loss per share is based upon the weighted average number of
shares of stock outstanding during each year. The weighted average number of
shares used in the calculation of loss per share is 944,837, 728,034 and
728,034 in 1996, 1995 and 1994, respectively. Stock options are not included
in the weighted average number of shares because they would have an
antidilutive effect.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements--Management does not believe that any
accounting pronouncements that became effective in 1996, 1995 or 1994, that
have been issued and will become effective at a future date, have had or would
have had (if adopted early) a material effect on the consolidated financial
statements for the three years ended December 31, 1996. Disclosure
requirements of new pronouncements have been included in these footnotes, if
applicable.
Reclassifications--Certain items in the consolidated financial statements
for 1995 and 1994 were reclassified to conform to the 1996 presentation.
2. REGULATORY MATTERS
Going Concern--The accompanying consolidated financial statements have been
prepared on a going-concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
As shown in the financial statements, the Company incurred net losses of
$6,869,000, $1,675,000 and $911,000 during the years ended December 31, 1996,
1995, and 1994, respectively. At December 31, 1996 and 1995, the Company was
not in compliance with certain provisions of a supervisory agreement (the
"Agreement") entered into with the Office of Thrift Supervision ("OTS") in
October 1994. At December 31, 1996 and 1995, the Company also was not in
compliance with minimum regulatory capital requirements prescribed by the OTS.
The Company's capital ratios cause the Company to be categorized as
"undercapitalized" under the prompt corrective action provisions (the "PCA
provisions") of the Federal
11
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deposit Insurance Act. As a result of this condition at December 31, 1995, the
Company received a Prompt Corrective Action Directive (the "1996 Directive")
from the OTS. Although the Company raised additional capital sufficient to
temporarily meet minimum regulatory requirements and to satisfy the targets
established in the 1996 Directive, additional net losses in 1996 again caused
the Company to fall out of compliance with minimum capital requirements.
During March 1997, the Company entered into a Cease and Desist Order (the
"Order") from the OTS. The Order replaces the Agreement, and requires the
Company to raise additional capital, by June 30, 1997, sufficient for the
Company to have minimum capital ratios required of an institution to be
categorized as "well capitalized" under PCA provisions. Alternatively, the
Company can merge or be acquired in order to be recapitalized. The Order also
requires the Company to submit reports to the OTS concerning recapitalization
efforts and to develop, submit to the OTS and implement various "plans," as
defined--a business plan, a management plan, a plan to increase the size of
the Board of Directors and enhance the Board's oversight of the Company, and
an internal audit plan.
On May 2, 1997, the Company was notified by the OTS that it is categorized
as "significantly undercapitalized" under PCA provisions, and received a new
Prompt Corrective Action Directive (the "1997 Directive"). The 1997 Directive
orders the Company to submit an acceptable capital restoration plan with 45
days of May 2, 1997. Also, because the Company is categorized as
"significantly undercapitalized," it is prohibited from growing total assets,
increasing compensation or paying bonuses to senior executive officers, making
acquisitions or opening new branches, and paying certain capital distributions
or management fees. Certain of these restrictions may be removed with OTS
permission and when a capital restoration plan is submitted by the Company and
approved by the OTS.
If the Company is unable to meet minimum capital requirements or other
conditions of the Order or the 1997 Directive, one or more regulatory
sanctions may result, including the appointment of a conservator or receiver.
These factors, among others, may indicate that the Company will be unable to
continue as a going concern. The consolidated financial statements do not
include the adjustments, if any, that might have been required had the outcome
of the above-mentioned uncertainties been known, or any adjustments relating
to the recoverability of recorded assets amounts or the amounts of liabilities
that may be necessary should the Company be unable to continue as a going
concern. The Company's continuation as a going concern is dependent on the
Company's ability to comply with the terms of the Order and the 1997
Directive, meet prescribed capital requirements, maintain sufficient liquidity
and, ultimately, return to profitability.
Management Plans--Management and the Board of Directors have begun efforts
to raise additional capital and comply with other terms of the Order and the
1997 Directive. Options being considered to raise capital include issuing
securities and being acquired by another institution. However, as of May 2,
1997, a specific course of action has not been decided and there are no firm
commitments from other parties to provide additional capital or to acquire the
Company.
Regulatory Capital Requirements--The Company is subject to various
regulatory capital requirements administered by federal banking regulatory
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory--and possibly additional discretionary--actions by regulators that,
if undertaken, could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company must meet specific capital guidelines
that involve quantitative measures of assets, liabilities and certain off-
balance sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgment by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation, notwithstanding the Order
and the 1997 Directive, to ensure capital adequacy require the Company to
maintain minimum amounts and ratios (set forth in the table
12
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
below) of total capital to risk-weighted assets of 8.0%, and of core capital
of 3.0% and tangible capital of 1.5%. In the table below, tier I capital to
average assets is substantially the same as core capital for the Company.
As of December 31, 1996 and 1995, the most recent notifications from the OTS
categorized the Company as "undercapitalized" under PCA provisions. As
discussed above, the Company was categorized as "significantly
undercapitalized" on May 2, 1997, and will be required to achieve capital
ratios enabling it to be categorized as "well capitalized" by June 30, 1997.
The following table represents the Company's actual and required capital
amounts and ratios as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
TO BE
CATEGORIZED
AS WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES(1) PROVISIONS(2)
------------- ------------- -------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------- -----
(000'S) (000'S) (000'S)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total capital (to risk weighted
assets)........................... $8,254 6.03% $10,959 8.0% $13,699 10.0%
Tier I Capital (to risk weighted
assets)........................... 6,637 4.84% N/A N/A 8,219 6.0%
Tier I (core) capital (to average
assets)........................... 6,637 3.34% 5,956 3.0% 9,926 5.0%
Tangible capital................... 6,637 3.34% 2,978 1.5% N/A N/A
As of December 31, 1995:
Total capital (to risk weighted
assets)........................... 9,738 6.87% 11,337 8.0% 14,172 10.0%
Tier I Capital (to risk weighted
assets)........................... 7,966 5.62% N/A N/A 8,503 6.0%
Tier I (core) capital (to average
assets)........................... 7,966 4.07% 5,867 3.0% 9,779 5.0%
Tangible capital................... 7,966 4.07% 2,934 1.5% N/A N/A
</TABLE>
- --------
(1) These ratios represent minimums required of all savings institutions.
(2) These ratios are the minimums required of the Company for capital adequacy
under the terms of the Order entered into with the OTS in 1997.
SAIF Assessment--During 1996, a special one-time assessment to recapitalize
the SAIF deposit insurance fund was imposed upon institutions holding SAIF-
insured deposits as of March 1995. Due to its weak capital position, the
Company obtained an exemption from having to pay this assessment during 1996.
However, management expects the exemption to expire if and when the Company
exceeds the capital targets specified in the Order, and if and when payment of
the assessment would not cause the Company to be in violation of capital
targets specified by the OTS. The Company accrued $1,191,000 at December 31,
1996. For purposes of reporting regulatory capital and determining compliance
with minimum capital ratios (see table above), the Company is not required to
deduct this accrual.
13
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1996 1995
----------------- -----------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mutual fund investments--available for
sale--
Invested in short-term U.S. Treasury
securities.............................. $ 3,026 $ 3,000
======= =======
Mutual fund investments--trading--
Invested in short-term U.S. Treasury
securities.............................. $ 8,198 $ 8,198
======= =======
Mortgage-backed securities--available for
sale--issued by
U.S. government agencies with stated
maturities after ten years.............. $ 206 $ 196 $ 238 $ 236
======= ======= ======= =======
Mortgage-backed securities--held to
maturity--issued by
U.S. government agencies with stated
maturities after ten years.............. $ 5,636 $ 5,642 $ 7,264 $ 7,267
======= ======= ======= =======
Investment securities--held to maturity--
issued by:
U.S. Treasury with stated maturities
within one year......................... $ 1,994 $ 2,000 $ 2,984 $ 2,970
FNMA, FHLMC and FHLB with stated maturity
within one through three years.......... 19,863 19,784 9,500 9,509
------- ------- ------- -------
$21,857 $21,784 $12,484 $12,479
======= ======= ======= =======
</TABLE>
Gross unrealized gains and losses on investments were as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
UNREALIZED UNREALIZED
------------ ------------
GAINS LOSSES GAINS LOSSES
----- ------ ----- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mutual funds--available for sale................... $26
Mortgage-backed securities--available for sale..... 10 $ 2
Mortgage-backed securities--held to maturity....... $ 6 $ 3
Investment securities--held to maturity............ 73 5
</TABLE>
Gross realized gains and (losses) included in earnings on mutual fund
investments held for trading purposes were $15,000 and $(131,000) in 1995 and
1994, respectively. During 1995, mortgage backed securities--available for
sale of $1,727,000 were sold. At the sale date, fair value of the securities
approximated cost. There were no sales of debt securities in 1996.
Although stated maturities of mortgage-backed securities are after ten
years, actual maturities are shorter due to scheduled payments and
prepayments.
14
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Real estate loans:
Conventional loans collateralized by first trust deeds:
Residential--one to four units......................... $ 43,272 $ 48,774
Residential--more than four units...................... 117,088 122,577
Commercial and land.................................... 26,897 30,057
Construction........................................... 7,071 4,377
Loans collateralized principally by second trust deeds... 2,091 1,636
-------- --------
196,419 207,421
-------- --------
Less:
Participants' portions, serviced for others (primarily
residential)............................................ 38,781 47,074
Deferred loan fees, net of costs....................... 508 544
Undisbursed loan funds................................. 3,914 1,677
Allowance for estimated losses......................... 8,498 4,917
Discount on loans and other............................ 234 37
-------- --------
51,935 54,249
-------- --------
Loans to depositors, secured by deposit accounts........... 74 154
Other loans................................................ 171 147
-------- --------
245 301
-------- --------
$144,729 $153,473
======== ========
Weighted average interest rate............................. 7.83% 8.00%
======== ========
</TABLE>
The Company originates both adjustable and fixed interest rate real estate
loans. At December 31, 1996, the composition of the fixed interest rate real
estate loans (net of participants' portions) was as follows:
<TABLE>
<CAPTION>
TERM TO MATURITY BOOK VALUE
---------------- ----------
(DOLLARS
IN
THOUSANDS)
<S> <C>
1 year--10 years................................................ $2,462
10 years to 20 years............................................ 139
Over 20 years................................................... 1,668
------
$4,269
======
</TABLE>
The adjustable rate real estate loans of $149,455,000 (net of participants'
portions and undisbursed loans), the majority of which adjust within one year,
have interest rate adjustment limitations and are generally indexed to the
Federal Home Loan Bank's Eleventh District cost of funds index, the federal
cost of funds index or the prime rate. Future market factors may affect the
correlation of the interest rate adjustment with the rates the Company pays on
the short-term deposits that have been primarily utilized to fund these loans.
At December 31, 1996, the Company had no outstanding commitments for new
loan originations.
15
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Activity in the allowance for estimated losses on loans is summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995 1994
------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year........................ $ 4,917 $2,135 $ 1,925
Provision for estimated losses on loans........... 6,975 3,499 1,549
Transfer (to) from contingent liability on loans
sold with recourse............................... (779) 49 (265)
Charge-offs....................................... (2,630) (746) (1,087)
Recoveries........................................ 10 130 13
Other............................................. 5 (150) --
------- ------ -------
Balance, end of year.............................. $ 8,498 $4,917 $ 2,135
======= ====== =======
</TABLE>
Loans for which impairment has been recognized in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 114 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Impaired loans with no specific valuation
allowances.................................... $ 876 $ 1,997
Impaired loans with specific valuation
allowances.................................... 12,673 13,198
Less specific valuation allowances............. (4,852) (2,717)
----------- -----------
Impaired loans, net of valuation allowances.... $ 8,697 $ 12,478
=========== ===========
Average recorded investment during the year.... $ 9,628 $ 10,598
Interest income recognized using cash basis of
accounting for impaired loans................. $ 49 $ 99
</TABLE>
The Company generally continues to recognize interest income on loans that
are considered to be impaired until they are over 60 days past due.
Thereafter, interest is recognized on a cash basis.
Certain loan sales in 1989 contain defined recourse provisions. Gains on
such sales were reduced by the estimated effect of the recourse provisions.
Loans sold subject to recourse provisions had remaining unpaid principal
balances at December 31, 1996 and 1995 of $29,952,000 and $36,857,000,
respectively. At December 31, 1996 and 1995, the Company had pledged mortgage-
backed securities of $5,616,000 and $7,241,000, respectively, as security
relative to the recourse contingencies associated with these loans. Actual
losses incurred by the Company due to these recourse provisions may vary from
the Company's estimate due to a number of factors beyond the Company's
control. As of December 31, 1996 and 1995, a contingent liability of $989,000
and $216,000, respectively, was recorded and is included in other liabilities
on the consolidated statements of financial condition.
5. REAL ESTATE OWNED
Real estate owned consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Real estate acquired through foreclosure....... $ 1,735 $ 2,389
Allowance for estimated losses on foreclosed
real estate................................... (191) (192)
----------- -----------
$ 1,544 $ 2,197
=========== ===========
</TABLE>
16
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Real estate loss, net, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995 1994
----- ----- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
(Expense) income from foreclosed real estate........ $ (17) $ 61 $(299)
(Losses) gains on sale of foreclosed real estate.... (95) 62 (54)
----- ----- -----
(112) 123 (353)
Provision for estimated loss on real estate held for
sale............................................... (400) (184) (476)
----- ----- -----
$(512) $ (61) $(829)
===== ===== =====
</TABLE>
Activity in the allowance for estimated losses on real estate owned is
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995 1994
----- ---- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year........................... $ 192 $ 43 $ 255
Charge-offs.......................................... (401) (74) (688)
Provision for estimated losses on foreclosed real
estate.............................................. 400 184 476
Other additions...................................... 39
----- ---- -----
Balance, end of year................................. $ 191 $192 $ 43
===== ==== =====
</TABLE>
6. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loans and mortgage-backed securities............. $ 1,385 $ 1,462
Investments...................................... 296 198
----------- -----------
1,681 1,660
Less allowance for uncollectible interest........ 421 390
----------- -----------
$ 1,260 $ 1,270
=========== ===========
</TABLE>
7. PROPERTY AND EQUIPMENT
Property and equipment, net, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Bank premises owned--land......................... $ 420 $ 420
Bank premises owned--building..................... 1,030 1,030
Leasehold improvements............................ 969 965
Furniture and equipment........................... 2,736 2,658
Automobiles....................................... 14 14
----------- -----------
5,169 5,087
Less accumulated depreciation and amortization.... 3,578 3,391
----------- -----------
$ 1,591 $ 1,696
=========== ===========
</TABLE>
17
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1996 1995
----------------- -----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial checking accounts--noninterest-
bearing................................... $ 10,974 $ 9,530
Regular checking accounts.................. 11,806 1.00% 11,564 1.00%
Money market checking and savings accounts. 15,759 2.00% 18,592 2.00%
Passbook accounts.......................... 2,619 1.92% 3,314 1.93%
Certificate accounts under $100............ 148,502 5.39% 141,230 5.54%
Certificates of $100 and greater........... 413 4.60% 1,194 5.61%
-------- --------
$190,073 4.48% $185,424 4.55%
======== ========
</TABLE>
At December 31, 1996, maturities of certificate accounts are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
----------------------- ----------
(DOLLARS
IN
THOUSANDS)
<S> <C>
1997........................................................ $122,540
1998........................................................ 21,627
1999........................................................ 2,839
2000........................................................ 1,429
2001........................................................ 367
Thereafter.................................................. 113
--------
$148,915
========
</TABLE>
The Company's interest expense, by category, is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Regular checking accounts........................... $ 115 $ 127 $ 119
Money market checking and savings accounts.......... 338 447 490
Passbook accounts................................... 56 77 77
Certificate accounts under $100..................... 7,780 7,257 5,216
Certificates of $100, and greater................... 42 128 140
------ ------ ------
$8,331 $8,036 $6,042
====== ====== ======
</TABLE>
18
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES
Income tax expense (benefit) consists of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current taxes (benefit):
Federal..................................... $ -- $ (840) $ (351)
State....................................... 2 2 69
------- -------- --------
2 (838) (282)
------- -------- --------
Deferred taxes:
Federal..................................... 140 (170)
State....................................... 201
------- -------- --------
140 31
------- -------- --------
$ 2 $ (698) $ (251)
======= ======== ========
</TABLE>
The Company's provision for income taxes for the years ended December 31,
1996 and 1995 differs from the amounts determined by applying the statutory
federal tax rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Federal statutory tax rate................. (35.0)% (35.0)% (35.0)%
Increase (decrease) resulting from:
State income taxes, net of federal income
tax benefit............................. (7.5) (7.5) (7.5)
State net operating loss limitation...... 7.5 6.4
Valuation allowance--deferred tax asset.. 42.5 5.5 17.4
Other.................................... 0.1 (2.9)
------- ------- -------
0.0 % (29.4)% (21.6)%
======= ======= =======
</TABLE>
19
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax asset at December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
FEDERAL
Deferred tax liabilities:
Loan fees....................................... $ 252 $ 282
FHLB stock dividends............................ 251 226
Depreciation.................................... 11
Provision for loan loss......................... 108
Other........................................... 97 70
------------ ----------
708 589
------------ ----------
Deferred tax assets:
Deferred interest income........................ 241 124
Provision for losses on loans................... 428
Net operating losses............................ 1,201
Tax credits..................................... 51 63
Contribution carryforward....................... 7
Depreciation.................................... 4
SAIF assessment................................. 405
Other........................................... 6
------------ ----------
1,909 621
------------ ----------
Net deferred tax asset--federal, before valuation
allowance........................................ 1,201 32
Valuation allowance............................... (1,201) (32)
------------ ----------
Net deferred tax asset--federal................... -- --
------------ ----------
STATE
Deferred tax liabilities:
Loan fees....................................... $ 41 $ 56
FHLB stock dividends............................ 84 75
Other........................................... 32 23
------------ ----------
157 154
------------ ----------
Deferred tax assets:
Provision for losses on loans................... 312 574
Deferred interest income........................ 80 41
California franchise tax net operating loss
carryforward................................... 259 164
SAIF assessment................................. 135
------------ ----------
786 779
Net deferred tax asset--state, before valuation
allowance........................................ 629 625
Valuation allowance............................... (629) (625)
------------ ----------
Net deferred tax asset--state..................... -- --
------------ ----------
Net deferred tax asset--federal and state......... $ -- $ --
============ ==========
</TABLE>
20
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In computing taxes on income, savings and loan associations that meet
certain definitional tests and other conditions prescribed by the Internal
Revenue Code are allowed, within limitations, a bad debt deduction. Bad debt
deductions for income tax purposes are included in taxable income of later
years only if the bad debt reserve is used subsequently for purposes other
than to absorb bad debt losses. The bad debt deduction is considered a
temporary difference, and the effective federal tax rate is 35.0%. In
accordance with SFAS No. 109, a deferred tax liability has not been recognized
for the tax bad debt reserves that arose prior to December 31, 1987. At
December 31, 1996 and 1995, the amount of these reserves was approximately
$310,000. This amount represents allocations of earnings to bad debt reserves
and is a restriction on retained earnings. Under current law, if, in the
future, this portion of retained earnings is reduced for any purpose other
than net operating losses or tax bad debt losses, including distributions in
liquidation, federal income taxes will be imposed at the then-applicable
rates. Cash dividends paid in excess of current earnings would be deemed to be
paid from these reserves.
The Company has a net operating loss carryforward of approximately
$3,966,000 that expires 1998 through 2009.
A valuation allowance has been established against deferred tax assets
because of uncertainty as to the ultimate realization of these assets.
10. COMMITMENTS AND CONTINGENCIES
Leases--The Company conducts a majority of its operations in leased
facilities under noncancelable operating lease agreements and has an operating
agreement with its service bureau. Presented below is a schedule of minimum
rental payments due under these leases, which expire on various dates through
2003.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
----------- ----------
(DOLLARS
IN
THOUSANDS)
<S> <C>
1997........................................................... $503
1998........................................................... 240
1999........................................................... 83
2000........................................................... 75
2001........................................................... 34
Thereafter..................................................... 34
----
$969
====
</TABLE>
Certain leases provide for cost-of-living increases, as well as payment of
property taxes, insurance and other items.
Included in facilities expense for the years ended December 31, 1996, 1995
and 1994 are rental payments for office facilities of $380,000, $383,000, and
$392,000, respectively.
Litigation--The Company is involved in various litigation. In the opinion of
management, based on the advice of legal counsel, the disposition of all
pending litigation will not have a material effect on the Company's
consolidated financial statements.
Employee Benefits--The Company sponsors a defined contribution 401(k) plan
benefiting substantially all employees with over one year of service.
Participants may contribute up to 15% of their compensation (or the limit
allowed by the law, if less) to their plan each year. The Company matches 25%
of employee contributions up to 6% of compensation. For the years ended
December 31, 1996, 1995, and 1994, the Company contributed $13,000, $15,000,
and $12,000, respectively, in matching contributions. The Company offers no
other post-employment benefits.
21
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. STOCK OPTION PLANS
Under an employee stock option plan, options are issued with an exercise
price equal to market price at the date of grant and become exercisable 25%
annually, commencing on the first anniversary of the date of grant.
Changes in the status of stock options are summarized as follows:
<TABLE>
<CAPTION>
PRICE PER
OUTSTANDING SHARE
----------- --------------
<S> <C> <C>
Balance, January 1, 1994......................... 41,846 $5.00 to $7.00
Granted........................................ 14,000 $4.75
Terminated/expired............................. (13,651) $6.76 to $7.44
-------
Balance, December 31, 1994....................... 42,195
Granted........................................ 29,550 $3.50 to $3.85
Terminated/expired............................. (11,945) $4.75 to $7.27
-------
Balance, December 31, 1995....................... 59,800
Granted........................................ 10,000 $8.63
Terminated/expired............................. (8,439) $3.50 to $6.25
Exercised...................................... (6,686) $3.50 to $6.25
-------
Balance, December 31, 1996....................... 54,675
=======
</TABLE>
At December 31, 1996, options for 17,138 shares are exercisable at $3.50 to
$4.75 per share. An additional 13,575 options become exercisable in 1997 at
$3.50 to $8.63 per share. At December 31, 1996, there were 75,648 shares
available for future grant.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant date for
awards under the plan consistent with the methodology prescribed under SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net loss and
loss per share would have been increased by approximately $22,000, or $.02 per
share, during the year ended December 31, 1996, and $12,000, or $.02 per
share, during the year ended December 31, 1995. The fair value of the options
granted for the years ended December 31, 1996 and 1995 was estimated using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 0%, volatility of 79%, risk-free interest rate of 6.5%, and an
expected life of 4 years.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires that the Company disclose estimated fair values for its financial
instruments. Fair value estimates, methods and assumptions are set forth below
for the Company's instruments.
Cash and Interest-Bearing Deposits--The carrying amounts for cash and
interest-bearing deposits with financial institutions approximate fair value
because they mature in one year or less and do not present unanticipated
credit concerns.
Investments, Mortgage-Backed Securities and Mutual Fund Investments--The
fair value of investments, mortgage-backed securities, and mutual fund
investments is estimated based on bid prices published in financial newspapers
or bid quotations received from securities dealers.
22
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loans Receivable--Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated by type, such as first
mortgage, second mortgage and nonmortgage loans. Each loan category is further
segmented into fixed- and adjustable-rate interest terms and by performing and
nonperforming categories.
The fair value of performing nonmortgage loans is calculated by the static
discounted cash flow approach. These loans are assumed to be level payment,
amortizing loans that generate monthly cash flow of interest and principal.
Loans that reprice in more than three months are assumed to be fixed-rate
loans, while loans that reprice in three months or less are assumed to be
adjustable-rate loans with maturities assumed to be equal to the average
maturity of the fixed-rate loans.
The fair value of performing one-to-four mortgage loans is calculated by the
option-based approach. Cash flows consist of scheduled principal, interest and
prepaid principal. Prepayments were calculated by using a prepayment equation
that relates the prepayment rate for a particular period to, among other
things, the difference between the mortgage coupon rate and the current market
interest rate. The coupon rate for adjustable-rate mortgages reflects any
reported discount from the fully indexed rate and is constrained by any annual
cap or lifetime cap that may apply.
The fair value for performing other first-mortgage loans and second-mortgage
loans is calculated by the static discounted cash flow approach. These loans
are assumed to be level payment, amortizing loans that generate monthly cash
flows of interest and principal. No prepayment assumptions are used unless the
loan terms specify a balloon payment.
The fair value for significant nonperforming loans is based on recent
external appraisals of collateral. If appraisals are not available, estimated
cash flows are discounted using a rate commensurate with the risk associated
with the estimated cash flows. Assumptions regarding credit risk, cash flows
and discount rates are judgmentally determined using available market
information and specific borrower information.
Investment in the Stock of the Federal Home Loan Bank--The carrying amounts
approximate fair values, as the stock may be sold back to the Federal Home
Loan Bank at fair value.
Deposit Liabilities--The fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, savings, NOW, money market and
checking accounts, is equal to the amount payable on demand as of December 31,
1996 and 1995. The fair value of fixed maturity deposits is calculated using
the discounted value of contractual cash flows. The discount rate is based on
the current wholesale certificate of deposit ("CD") interest rate.
23
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fixed maturity deposits are considered retail deposits and are assumed to
remain on deposit until scheduled maturity. In addition to principal and
accumulated interest, the cash flows of retail CDs include an estimate of the
noninterest costs attributable to maintaining such deposits, based on an
industry-wide average noninterest cost of retail CD balances at December 31,
1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents.................. $ 12,956 $ 12,956 $ 4,465 $ 4,465
Interest-bearing deposits with financial
institutions.............................. 2,476 2,476 1,587 1,587
Investments:
Mutual fund investments--available for
sale (trading 1995)..................... 3,000 3,000 8,198 8,198
Mortgage-backed securities--available for
sale.................................... 196 196 236 236
Mortgage-backed securities--held to
maturity................................ 5,636 5,642 7,264 7,267
Investment securities--held to maturity.. 21,857 21,784 12,484 12,479
Loans receivable, net...................... 144,729 144,695 153,473 154,821
Investment in stock of the Federal Home
Loan Bank................................. 1,338 1,338 1,260 1,260
Interest-bearing deposits.................. 179,099 179,613 175,894 176,786
Noninterest-bearing deposits............... 10,974 10,974 9,530 9,530
</TABLE>
Limitations--Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the Company's financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
24
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
1996:
Interest income................ $3,669 $3,526 $ 3,651 $ 3,596 $14,442
Interest expense............... 2,098 2,057 2,072 2,108 8,335
Provision for estimated losses
on loans...................... 250 300 1,252 5,173 6,975
Real estate loss, net.......... 111 83 24 294 512
Noninterest income............. 106 144 149 593 992
Noninterest expense............ 1,334 1,357 1,259 2,529 6,479
Income tax (benefit) expense... (5) (43) 11 39 2
------ ------ ------- ------- -------
Net loss....................... $ (13) $ (84) $ (818) $(5,954) $(6,869)
------ ------ ------- ------- -------
Loss per share................. $(0.02) $(0.12) $ (0.29) $ (6.84) $ (7.27)
====== ====== ======= ======= =======
1995:
Interest income................ $3,331 $3,560 $ 3,635 $ 3,666 $14,192
Interest expense............... 1,810 2,022 2,094 2,113 8,039
Provision for estimated losses
on loans...................... 63 435 2,652 349 3,499
Real estate loss, net.......... 76 (35) 8 12 61
Noninterest income............. 158 115 133 149 555
Noninterest expense............ 1,342 1,371 1,357 1,451 5,521
Income tax expense (benefit)... 85 (51) (519) (213) (698)
------ ------ ------- ------- -------
Net income (loss).............. $ 113 $ (67) $(1,824) $ 103 $(1,675)
====== ====== ======= ======= =======
Earnings (loss) per share...... $ 0.16 $ (.09) $ (2.51) $ 0.14 $ (2.30)
====== ====== ======= ======= =======
</TABLE>
25
<PAGE>
HANCOCK SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars amount in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Cash $4,621 $5,450
Fed Funds sold 48,191 7,506
------------------------
Cash and cash equivalents 52,812 12,956
Interest-bearing deposits with financial institutions 1,582 2,476
Investments
Mutual fund investments - available for sale - 3,000
Investment Securities 992 21,857
Mortgage-backed securities - held to maturity - 5,636
Mortgage-backed securities - available for sale 3,772 196
Loans receivable, net (net of allowance for losses of $6,987 and $4,091 141,691 144,729
Accrued interest receivable 1,140 1,260
Real estate held for sale, net 3,396 1,544
Investment in stock of the Federal Home Loan Bank - at cost 1,290 1,338
Property and equipment, net 1,413 1,591
Other assets 1,726 1,576
------------------------
209,814 198,159
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $203,674 $190,073
Accounts payable and other liabilities 2,757 1,485
SAIF Accrual 1,191
------------------------
Total liabilities 206,431 192,749
------------------------
Stockholders' equity
Common stock, $6.40 par value; authorized
5,000,000 shares; issued and outstanding,
1,302,862 shares 8,338 8,336
Additional paid in capital 2,243 2,243
Retained earnings (7,182) (5,133)
Unrealized holding gains (losses) on mortgage-backed securities, net of t (16) (36)
------------------------
Total stockholders' equity 3,383 5,410
------------------------
209,814 198,159
========================
</TABLE>
26
<PAGE>
HANCOCK SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AMOUNT IN THOUSANDS)
<TABLE>
<CAPTION> Six Months Ended
June 30
------------------
1997 1996
(Unaudited)
<S> <C> <C>
Interest and dividend income
Loans receivable $5,737 $6,058
Mortgage-backed securities 130 216
Investment securities 1,318 752
Loan servicing fee income, net 94 169
------------------
Total 7,279 7,195
------------------
Interest Expense
Deposits 4,266 4,152
Other Borrowings 1 3
------------------
Total 4,267 4,155
------------------
3,012 3,040
Provision for estimated losses on loans 510 550
------------------
Net interest income after provision for
estimated losses on loans 2,502 2,490
Real estate operations
Real estate operations, net (49) (61)
Provision for loss on real estate (46) (133)
------------------
(95) (194)
------------------
Non interest income (loss)
Other loan fees 31 42
Gain (loss) on sale of mutual funds and investment securiti (182) (57)
Settlements on judicial foreclosures 85 -
Other 328 265
------------------
Total 262 250
------------------
Non interest expense
Compensation and employee-related cost 2,370 1,329
Facilities 680 374
Advertising 5 31
Office Supplies 122 96
Service bureau and related equipment rental 165 140
Other general and administrative 1,374 721
------------------
Total 4,716 2,691
------------------
Loss before for income tax benefit (2,047) (145)
Income tax benefit 2 (48)
NET LOSS (2,049) (97)
Net loss per share ($1.57) ($0.13)
Weighted average shares outstanding 1,302,564 728,034
</TABLE>
27
<PAGE>
HANCOCK SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,049) (97)
Reconciliation of net loss to net cash (used in ) provided by
operating activities:
Accretion of discounts on investments - (16)
Net decrease in mutual fund investments-trading 8,198
Amortization of deferred loan fees, net (120) (110)
Loss on sale of investment securities-available for sale 182
Provision for loan and real estate losses 556 683
Gain/(loss) on sale of real estate (19) 54
Depreciation 205 96
Decrease in accrued interest receivable 120 56
Federal Home Loan Bank stock dividend (48) (34)
(Increase) decrease in other assets (150) 125
Increase(decrease) in accounts payable and other liabilities 81 (1,802)
--------------------
Net cash (used in) provided by operating activities (1,242) 7,153
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on mortgage-backed securities 1,880 1,063
Proceeds from sale of mortgage backed securtiy available for sale 190
Purchase of investment securities - held to maturity (14,992) (12,975)
Proceeds from maturities of investment securities - held to maturity 2,000 10,500
Procedds from sales of investment securities- available for sale 33,713
Purchase of mutual fund investments - available for sale (3,875)
Proceeds from sale of mutual fund investments - available for sale 2,972
Net (increase) decrease in loans 927 882
Proceeds from sales of real estate 58 705
Capitalized cost of real estate (216) (496)
Proceeds from sale of Federal Home Loan Bank stock 90
Purchase of property and equipment (27) (30)
Net decrease (increase) in interest-bearing deposits with financial institutions 894 (1,992)
Other 6 (4)
--------------------
Net cash used(provided for) in investing activities 27,495 (6,222)
--------------------
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
HANCOCK SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificate account deposits and money market $ 12,095 1,470
accounts
Net increase (decrease) in demand deposits and passbook 1,506 (569)
accounts
Proceeds from exercise of stock options 2
Net cash provided by financial activities 13,603 901
---------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 39,856 1,832
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12,956 4,465
---------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 52,812 6,297
=====================
SUPPLEMENT DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid (received) for :
Interest $ 4,249 4,155
=====================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
ACTIVITIES:
Real estate acquired through foreclosure $ 3,288 5,742
=====================
Loans to facilitate sales of real estate owned $ 1,567 5,245
=====================
Investment securities transferred from held to maturity to available
for sale $ 34,850
===========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
HANCOCK SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
NOTE 1--BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATIONS
The unaudited consolidated financial statements include the accounts of
Hancock Savings Bank, F.S.B., a Federal Savings Bank (the "Company") and its
wholly owned subsidiary, Hancock Service Corporation. Activities of the
subsidiary are not material to operations of the Company. All significant
intercompany transactions and balances have been eliminated. The accounting and
reporting policies of the Company conform with generally accepted accounting
principles and general practice within the banking industry.
The consolidated financial statements have been prepared in accordance with
the requirements for interim financial statement presentation and, therefore, do
not include all footnotes normally required for complete financial statement
disclosure. While management believes that the disclosures presented are
sufficient to make the information not misleading, reference may be made to the
consolidated financial statements and notes thereto included elsewhere in this
document for the year ended December 31, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated statements of financial condition and statements
of operations, and cash flows reflect, in the opinion of management, all
material adjustments necessary for a fair presentation of the Company's
financial position as of June 30, 1997 and results of operations and cash flows
for the three and six month periods ended June 30, 1997 and 1996. The results of
operations for the three and six month period ended June 30, 1997 are not
necessarily indicative of the results of operations for the full year ending
December 31, 1997.
Certain items in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
NOTE 2--LOSS PER SHARE
Loss per share is computed using the weighted average number of common shares
outstanding during the period. The weighted average number of common shares
outstanding for the three and six month periods ended June 30, 1997 and 1996 was
1,302,564 and 728,034, respectively. Stock options are not included in the
weighted average number of shares because they would have an antidilutive
effect.
NOTE3--INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------------- ------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ------ --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mutual fund investments -- available for sale................... $ -- $ -- $ 3,026 $ 3,000
Investment securities -- held to maturity...................... -- -- 21,857 21,784
Investment securities -- available for sale..................... 991 992 -- --
Mortgage-backed securities -- held to maturity.................. -- -- 5,636 5,642
Mortgage-backed securities -- available for sale................ 3,789 3,772 206 196
</TABLE>
Gross unrealized gains and losses on investments consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
--------------- ---------------
GAINS LOSSES GAINS LOSSES
----- ------ ----- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mutual fund investments -- available for sale......................... $ $ -- $ -- $ 26
Investment securities -- held to maturity............................. -- -- -- 73
Investment securities -- available for sale........................... 1 -- -- --
Mortgage-backed securities -- held to maturity........................ -- -- 6 --
Mortgage-backed securities -- available for sale...................... -- 17 -- 10
</TABLE>
30
<PAGE>
(b) Pro Forma Financial Information of Bank Plus.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements are
based on the historical consolidated Balance Sheet and Statements of Operations
of Bank Plus and Hancock, adjusted to give effect to the Merger, using the
purchase method of accounting for business combinations. Under the purchase
method of accounting, the purchase price will be allocated to the assets
acquired and liabilities assumed based on their estimated fair values at
closing.
The unaudited pro forma combined condensed Balance Sheet as of June 30, 1997
assumes that the Merger occurred as of that date and reflects the combination of
the historical financial position of Bank Plus with the historical financial
position of Hancock as of June 30, 1997 after giving effect to the purchase
accounting and other Merger-related adjustments described in the respective
Notes herein.
The unaudited pro forma combined condensed Statements of Operations for the
fiscal year ended December 31, 1996 and for the six months ended June 30, 1997
combine the historical results of operations of Bank Plus for those periods with
the historical results of operations of Hancock for the same periods and assumes
that the Merger occurred at the beginning of the periods presented.
The following unaudited pro forma combined condensed financial statements have
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Bank Plus and Hancock.
These pro forma financial statements are presented for illustrative purposes
only and are not indicative of the operating results that would have been
achieved or the financial position that would have existed had the Merger been
consummated on the dates indicated in the preceding paragraphs, nor are they
indicative of the future operating results or financial position of the combined
companies.
31
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1997
BANK PLUS HANCOCK COMBINED ADJUSTMENTS (4) PRO FORMA
---------- -------- --------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents $ 116,651 52,812 $ 169,463 96 (1) $ 169,559
Investment securities 161,694 992 162,686 - 162,686
Mortgage-backed
securities 231,902 3,772 235,674 - 235,674
Deposits and other
investments - 1,582 1,582 - 1,582
Loans receivable, net
of allowances 2,650,874 141,691 2,792,565 (5,445)(1) 2,787,120
Other assets 153,136 8,965 162,101 15,280 (1) 177,381
---------- -------- ---------- ------- ----------
$3,314,257 $209,814 $3,524,071 $ 9,931 $3,534,002
========== ======== ========== ======= ==========
LIABILITIES
Deposits $2,498,106 $203,674 $2,701,780 $ (103)(1) $2,701,677
FHLB advances 569,846 - 569,846 - 569,846
Other liabilities 27,483 2,757 30,240 1,421 (2) 31,661
---------- -------- ---------- ------ ----------
Total Liabilities $3,095,435 $206,431 $3,301,866 $1,318 $3,303,184
---------- -------- ---------- ------ ----------
MINORITY INTEREST:
Preferred stock of subsidiary 51,750 - 51,750 - 51,750
STOCKHOLDERS' EQUITY
Common stock 183 8,338 8,521 (8,328)(3) 193
Paid-in surplus 261,940 2,243 264,183 9,759 (3) 273,942
Unrealized losses on securities (1,045) (16) (1,061) - (1,061)
Accumulated deficit (94,006) (7,182) (101,188) 7,182 (3) (94,006)
---------- -------- ---------- ------ ----------
Total stockholders' equity 167,072 3,383 170,455 8,613 179,068
---------- -------- ---------- ------- ----------
Total Liabilities and Equity $3,314,257 $209,814 $3,524,071 $ 9,931 $3,534,002
========== ======== ========== ======= ==========
(1) Represents the fair value adjustments and recognition of intangible assets (core deposit intangible of
8.6 million and goodwill of 6.6 million) recorded in connection with the purchase price allocation.
(2) Represents recognition of liablities for direct costs to be incurred in connection with the Merger
relating to lease exit costs, severance expense and professional services.
(3) Represents adjustment of equity accounts to reflect issuance of shares in connection with the Merger and elimination of Hancock
equity accounts, based on the exchange of shares of Bank Plus Common Stock. Based on the BPC Stock Consideration Value of
$12,012,000, a Market Value Per BPC Share of $11.3469 and Hancock stock outstanding of 1,302,862, the total number of shares of
Bank Plus Common Stock issued was 1,058,575.
(4) Due to the Company's current tax status, there are no net tax adjustments recorded as a result of the
Merger under the purchase accounting method.
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------------------------------------
Bank Plus Hancock Combined Adjustments Pro Forma
----------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest income $ 117,162 $ 7,279 $124,441 $ - $ 124,441
Interest expense 76,479 4,267 80,746 624 (1) 81,370
----------- ---------- -------- -------- -----------
Net interest income (expense) 40,683 3,012 43,695 (624) 43,071
Provision for estimated
loan losses 8,502 510 9,012 - 9,012
----------- ---------- -------- -------- -----------
Net interest income after
provision for estimated loan losses 32,181 2,502 34,683 (624) 34,059
Other income 3,747 167 3,914 - 3,914
Operating expenses 29,377 4,716 34,093 (1,422) (3) 32,671
----------- ---------- -------- -------- -----------
Earnings (loss) before
income taxes and minority interest
in subsidiary 6,551 (2,047) 4,504 798 5,302
Income tax (benefit) expense (4,800) 2 (4,798) - (4,798)
Earnings (loss) before
minority interest in subsidiary 11,351 (2,049) 9,302 798 10,100
Minority interest in subsidiary 3,886 - 3,886 - 3,886
(preferred stock dividend) ----------- ---------- -------- -------- -----------
Net earnings (loss) $ 7,465 $ (2,049) $ 5,416 $ 798 $ 6,214
============ ========== ======== ======== ===========
Net earnings (loss) per
common share $ 0.41 $ (1.57) $ 0.32 (4)
Weighted average common
shares outstanding 18,247,019 1,302,564 19,305,594 (4)
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------
Bank Plus Hancock Combined Adjustments Pro Forma
----------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest income $ 237,913 $ 14,442 $252,355 $ - $ 252,355
Interest expense 152,623 8,335 160,958 1,248 (1) 162,206
Net interest income
(expense) 85,290 6,107 91,397 (1,248) 90,149
Provision for estimated
loan losses 15,610 6,975 22,585 - 22,585
----------- ---------- -------- ----------- -----------
Net interest income after
provision for estimated loan losses 69,680 (868) 68,812 (1,248) 67,564
Other income 2,246 480 2,726 - 2,726
Operating expenses 82,451 6,479 88,930 439 (2) 89,369
----------- ---------- -------- ----------- -----------
Loss before
income taxes and minority interest
in subsidiary (10,525) (6,867) (17,392) (1,687) (19,079)
Income tax (benefit) expense (1,093) 2 (1,091) - (1,091)
Loss before
minority interest in subsidiary (9,432) (6,869) (16,301) (1,687) (17,988)
Minority interest in subsidiary
(preferred stock dividend) 4,657 - 4,657 - 4,657
----------- ---------- -------- ----------- -----------
Net loss $ (14,089) $ (6,869) $(20,958) $ (1,687) $ (22,645)
Preferred stock dividends 1,553 - 1,553 - 1,553
Net loss available for
common stockholders $ (15,642) $ (6,869) $(22,511) $ (1,687) $ (24,198)
=========== ========== ======== =========== ===========
Loss per common share $ (0.86) $ (7.27) $ (1.25)(4)
Weighted average common
shares outstanding 18,242,887 944,837 19,301,462 (4)
</TABLE>
Pro forma adjustments:
(1) Represents the amortization of the core deposit intangible of $8.6 million
over 7 years (the useful life over which the benefit of the intangible
asset is expected to be realized) and the amortization of the fair value
adjustment of interest bearing deposits over their estimated remaining
maturities.
(2) Represents the amortization of goodwill of $6.6 million over 15 years (the
useful life over which the benefit of the intangible asset is expected to
be realized).
(3) Represents the amortization of goodwill of $6.6 million over 15 years and
an adjustment to reduce operating expenses by $1.6 million for costs
incurred by Hancock related to the Merger.
(4) Pro forma earnings (loss) per share and weighted average common shares
outstanding are based on the number of common shares that would have been
outstanding had the Merger occurred January 1, 1996 and 1997.
33
<PAGE>
(c) Exhibits
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated June
25, 1997 by and among Bank Plus,
Fidelity and Hancock (incorporated by
reference to Exhibit 2.2 to the Form
S-4 of Bank Plus filed with the
Commission on June 30, 1997)
4.1 Certificate of Incorporation of Bank
Plus (incorporated by reference to
Exhibit 3.1 to the Form 8-B of Bank
Plus filed with the Commission on April
22, 1996)
4.2 By-laws of Bank Plus (incorporated by
reference to Exhibit 3.2 to the Form
8-B of Bank Plus filed with the
Commission on April 22, 1996)
23.1 Consent of Deloitte & Touche LLP
99.1 Press Release dated July 31, 1997.
</TABLE>
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANK PLUS CORPORATION
Date: August 13, 1997 By: /s/ Godfrey B. Evans
---------------------
Godfrey B. Evans
Executive Vice President, General Counsel
and Corporate Secretary
35
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated June 25, 1997
by and among Bank Plus, Fidelity and Hancock
(incorporated by reference to Exhibit 2.2 to the
Form S-4 of Bank Plus filed with the Commission
on June 30, 1997)
4.1 Certificate of Incorporation of Bank Plus
(incorporated by reference to Exhibit 3.1 to the
Form 8-B of Bank Plus filed with the Commission
on April 22, 1996)
4.2 By-laws of Bank Plus (incorporated by reference
to Exhibit 3.1 to the Form 8-B of Bank Plus
filed with the Commission on April 22, 1996)
23.1 Consent of Deloitte & Touche LLP
99.1 Press Release dated July 31, 1997.
</TABLE>
36
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-16649 of Bank Plus Corporation on Form S-8 of our report dated April 17,
1997 (except Note 2, which is dated May 2, 1997), on the consolidated financial
statements of Hancock Savings Bank, FSB and subsidiary (which report expresses
an unqualified opinion and includes explanatory paragraphs referring to
regulatory matters and the uncertainty about Hancock's ability to continue as a
going concern) appearing in the Current Report on Form 8-K of Bank Plus
Corporation dated July 29, 1997.
DELOITTE & TOUCHE LLP
Los Angeles, California
August 13, 1997
<PAGE>
EXHIBIT 99.1
[LETTERHEAD FOR BANK PLUS CORPORATION]
NEWS
RELEASE
================================================================================
BANK PLUS CORPORATION REPORTS SECOND - QUARTER 1997 EARNINGS,
IMPROVEMENT IN ASSET QUALITY AND COMPLETION OF
PREVIOUSLY - ANNOUNCED ACQUISITION OF HANCOCK SAVINGS BANK
Los Angeles, July 31, 1997 -- Bank Plus Corporation (NASDAQ: BPLS) ("Bank Plus"
or the "Corporation"), and its subsidiaries (the "Company"), which include
Fidelity Federal Bank, FSB ("Fidelity" or the "Bank"), today reported 1997
second-quarter net earnings of $3.3 million after preferred dividend of $2.3
million, or $0.18 per common share, compared to net earnings of $4.2 million
after preferred dividend of $1.6 million, or $0.23 per common share, for
the first quarter of 1997 and net earnings of $0.7 million after preferred
dividend of $1.6 million for the second quarter of 1996, or $0.04 per common
share. The Corporation also reported that the levels of delinquent loans and
nonperforming assets at June 30, 1997 were the lowest reported since December
1991, and that the previously-announced acquisition of Hancock Savings Bank, FSB
("Hancock"), a Los Angeles-based institution with five branches, has been
completed.
SECOND-QUARTER 1997 OPERATING RESULTS
Net interest income of $20.4 million was the same as the 1997 first quarter and
down $1.4 million, or 6.6%, from the 1996 second-quarter level. The net yield
on interest-earning assets for the quarter was 2.45%, compared to 2.44% for the
1997 first quarter and 2.66% for the 1996 second quarter. The decrease in net
yield from the 1996 second quarter was primarily the result of lower rates on
average interest-earning assets combined with an increase in the average level
of interest-bearing liabilities.
The 1997 second-quarter provision for estimated loan losses of $4.3 million was
unchanged from the first quarter and $0.3 million higher than the 1996 second
quarter.
(more)
<PAGE>
Net noninterest income of $2.0 million increased $0.3 million from the first
quarter, primarily due to lower expenses related to real estate operations, and
increased $1.1 million from the 1996 second quarter, due primarily to higher
gains on securities activities and higher fee income from the sale of uninsured
investment products.
Operating expenses of $15.0 million increased $0.7 million, or 4.9%, from the
first quarter, and decreased $1.5 million, or 9.1%, from 1996 second-quarter
levels. Operating efficiency (operating expenses divided by net interest income
and noninterest income, excluding nonrecurring items) was 64.8% in the 1997
second quarter, compared to 62.0% in the first quarter. Average staffing levels
for the 1997 second quarter of 475 FTE were approximately 1% above the first
quarter and 6% below 1996 second-quarter levels.
Second-quarter 1997 net earnings included a $2.5 million tax benefit which was
recorded under Statement of Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes, compared to a $2.3 million tax benefit recorded in
the first quarter. Under SFAS 109, the recognition of a tax benefit relating to
net operating loss carry-forwards is dependent upon a "more likely than not"
expectation of the generation of future earnings, based upon the weight of
available evidence. The Company's recent earnings history, in which it has
realized book earnings, before unusual items and preferred dividends, for each
of the six consecutive quarters ended June 30, 1997, and other available
evidence, indicated that a tax benefit may be recorded for the quarter ended
June 30, 1997.
ASSET QUALITY IMPROVEMENT
The levels of delinquent loans and nonperforming assets at June 30, 1997 were
the lowest reported since December 1991.
During the 1997 second quarter, total delinquent loans decreased to $47.5
million, or 1.68% of total loans, from $62.9 million, or 2.35% of total loans,
at March 31, 1997, and decreased from $74.8 million, or 2.62% of total loans, at
June 30, 1996. During the second quarter, nonperforming assets fell to $56.8
million, or 1.61% of total assets, from $63.4 million, or 1.94% of total assets,
at June 30, 1996.
(more)
<PAGE>
Included in nonperforming assets at June 30, 1997 were nonaccruing delinquent
loans of $33.2 million and real estate owned of $23.6 million, compared to $39.7
million and $23.7 million at March 31, 1997, and $43.3 million and $20.5 million
at June 30, 1996, respectively.
Total classified assets increased $14.6 million, or 10.1%, from March 31, 1997
to $159.5 million at June 30, 1997. This increase was due to the net impact of
the inclusion of Hancock's classified assets with those of Fidelity's at the end
of the second quarter. Total nonperforming classified loans decreased by $6.5
million, or 16.5%, for the same period.
ACQUISITION OF HANCOCK SAVINGS BANK
On July 29, 1997, the Company completed the previously announced acquisition of
all of the outstanding common stock of Hancock Savings Bank, FSB a Los
Angeles-based institution with five branches, which will be merged into
Fidelity. The Company issued approximately 1,059,000 new shares of Bank Plus
Common Stock in consideration for the Hancock stock, in a transaction valued at
approximately $12 million. The total number of shares of Bank Plus Common Stock
outstanding at July 31, 1997, including the shares issued for the Hancock
acquisition, was approximately 19,308,000.
The acquisition of Hancock was accounted for as a purchase and has been
reflected in the consolidated statement of condition of the Company as of June
30, 1997. The Company's consolidated statement of operations will include the
revenues and expenses of the acquired business beginning July 1, 1997. The
transaction is expected to be accretive to earnings per share in 1997.
The Company identified a core deposit intangible of approximately $8.6 million,
which will be amortized over seven years, the estimated average life of the
deposits acquired. The excess of the purchase price over the estimated fair
value of the net assets acquired amounted to approximately $6.6 million, which
has been accounted for as goodwill and will be amortized over 15 years. This
allocation was based on preliminary data and may be revised at a later date.
(more)
<PAGE>
Capital Position
As of June 30, 1997, the Bank's tangible, core and risk-based capital ratios
were 5.92%, 6.15% and 11.75%, respectively, exceeding the minimum regulatory
capital requirements for classification as a "well-capitalized" institution.
Common stockholders' equity totaled $179.1 million at June 30, 1997, with a book
value per common share outstanding of $9.27, compared to a book value of $8.88
per common share at March 31, 1997.
This news release contains forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those in the forward-looking statements due to potential risks and
uncertainties such as changing economic and interest rate trends, competitive
conditions, as well as the fact that the integration of Hancock and Fidelity
involves a number of risks and uncertainties, including customer retention and
Hancock's asset quality.
Bank Plus Corporation is the holding company for Fidelity Federal Bank, FSB,
which offers a broad range of consumer financial services, including demand and
time deposits and mortgage loans. In addition, through its affiliate Gateway
Investment Services, Inc., a NASD-registered broker/dealer, Fidelity provides
customers of the Bank with investment products, including mutual funds,
annuities and unit investment trusts. Fidelity operates through 38 full-service
branches, all of which are located in Southern California, principally in Los
Angeles and Orange counties.
Contact: Neil L. Osborne, SVP, Fidelity Federal Bank, FSB, (818) 549-3116.
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
(Unaudited)
Assets:
Cash and due from banks $ 169,559 $ 70,126
Certificates of deposit 1,582 -
Investment securities available for sale, at fair value 157,354 156,251
Investment securities held to maturity, at amortized cost 5,332 5,178
Mortgage-backed securities held for trading 10,767 14,121
Mortgage-backed securities available for sale, at fair value 196,942 179,403
Mortgage-backed securities held to maturity, at amortized cost 27,965 30,024
Loans receivable, net of allowances 2,787,120 2,691,931
Interest receivable 20,809 20,201
Investment in FHLB stock 55,246 52,330
Real estate owned, net 23,640 24,663
Premises and equipment, net 32,238 31,372
Other assets 45,448 54,690
----------- -----------
$ 3,534,002 $ 3,330,290
=========== ===========
Liabilities and stockholders' equity:
Liabilities: $ 2,701,677 $ 2,495,933
Deposits 569,846 449,851
FHLB advances - 40,000
Commercial paper - 100,000
Mortgage-backed notes 31,661 31,099
----------- -----------
Other liabilities 3,303,184 3,116,083
----------- -----------
Minority Interest: Preferred stock of subsidiary 51,750 51,750
Stockholders' equity:
Common stock, par value $0.01 per share:
19,308,340 and 18,245,265 shares outstanding 193 182
at June 30, 1997 and December 31, 1996
Paid-in capital 273,942 261,902
Unrealized (losses) gains on securities (1,061) 1,043
Accumulated deficit (94,006) (101,470)
----------- -----------
179,068 161,657
----------- -----------
$ 3,534,002 $ 3,330,290
=========== ===========
</TABLE>
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter ended Six months ended
----------------------------- ----------------------------
June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 49,384 $ 54,096 $ 99,224 $ 110,276
Mortgage-backed securities 4,673 756 8,977 1,260
Investment securities and other 4,398 4,704 8,961 8,074
----------- ----------- ----------- -----------
Total interest income 58,455 59,556 117,162 119,610
----------- ----------- ----------- -----------
Interest Expense:
Deposits 29,572 29,787 58,712 60,822
FHLB advances 8,034 3,175 13,977 6,842
Other borrowings 523 4,828 3,790 8,342
----------- ----------- ----------- -----------
Total interest expense 38,129 37,790 76,479 76,006
----------- ----------- ----------- -----------
Net Interest Income 20,326 21,766 40,683 43,604
Provision for estimated loan losses 4,251 3,905 8,502 7,810
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Estimated Loan Losses 16,075 17,861 32,181 35,794
----------- ----------- ----------- -----------
Noninterest Income (Expense):
Loan fee Income 512 560 1,020 1,374
Gains on loan sales, net 21 6 28 6
Fee income from sale of uninsured
investment products 1,550 1,092 3,063 2,291
Fee income on deposits and other income 796 874 1,546 1,664
Gains on securities and trading
activities, net 995 235 2,216 152
----------- ----------- ----------- -----------
3,874 2,767 7,873 5,487
----------- ----------- ----------- -----------
Provision for estimated real estate
losses (620) (578) (1,362) (1,246)
Direct costs of real estate operations,
net (1,205) (1,237) (2,764) (3,024)
----------- ----------- ----------- -----------
(1,825) (1,815) (4,126) (4,270)
----------- ----------- ----------- -----------
Total noninterest income 2,049 952 3,747 1,217
----------- ----------- ----------- -----------
Operating Expense:
Personnel and benefits 7,086 6,833 13,787 13,806
Occupancy 2,788 2,689 5,288 5,406
FDIC insurance 587 1,931 1,081 3,962
Professional services 2,138 2,780 4,758 5,283
Office-related expenses 832 846 1,680 1,932
Other 1,610 1,459 2,783 2,776
----------- ----------- ----------- -----------
Total operating expense 15,041 16,538 29,377 33,165
Earnings Before Income Taxes and Minority
Interest in Subsidiary 3,083 2,275 6,551 3,846
Income tax (benefit) expense (2,500) 53 (4,800) 93
----------- ----------- ----------- -----------
Earnings before Minority Interest in
Subsidiary 5,583 2,222 11,351 3,753
Minority interest in subsidiary
(dividends on subsidiary preferred
stock) 2,333 1,552 3,886 1,552
----------- ----------- ----------- -----------
Net Earnings 3,250 670 7,465 2,201
Preferred stock dividends - - - 1,553
----------- ----------- ----------- -----------
Earnings Available for Common
Stockholders $ 3,250 $ 670 $ 7,465 $ 648
=========== =========== =========== ===========
Earnings Per Common Share $ 0.18 $ 0.04 $ 0.41 $ 0.04
=========== =========== =========== ===========
Weighted Average Common Shares
Outstanding 18,248,754 18,242,465 18,247,019 18,242,465
=========== =========== =========== ===========
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
At or for the quarter ended At or for the six months ended
----------------------------- --------------------------------
June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Financial Data for the Period: $ 72,792 $ 1,144 $ 79,280 $ 1,394
Real estate loans funded/purchased $ 41,053 $ 28,008 $ 79,458 58,367
Uninsured investment product sales 1.79% 2.00% 1.77% 2.02%
Operating expenses to average assets 64.82% 68.06% 63.39% 67.77%
Operating efficiency ratio (1)
Financial Data at end of the Period:
GVA to NPAs 59.79% 50.77%
Total loan allowance and writedowns to gross loans 2.10% 2.54%
Loan GVA to loans 1.19% 1.13%
Loan GVA to nonaccruing loans ("NPLs") 100.95% 74.04%
NPLs to total loans 1.19% 1.54%
Stockholders' equity per common share $ 9.27 $ 9.55
Common shares outstanding 19,308,340 18,242,465
Full-time equivalent employees 475 504
Headcount 551 568
Regulatory Capital Ratios:
Core capital to adjusted total assets 6.15% 6.86%
Core capital to risk-weighted assets 10.50% 11.32%
Total capital to risk-weighted assets 11.75% 12.58%
Weighted Average Yield for the Period:
Loans 7.27% 7.38% 7.26% 7.43%
Mortgage-backed securities 7.33% 7.09% 7.28% 6.90%
Investments 6.47% 6.70% 6.48% 6.75%
------------- ------------- ------------- -------------
Combined interest-earning assets 7.21% 7.32% 7.19% 7.38%
------------- ------------- ------------- -------------
Weighted Average Cost for the Period:
Deposits 4.81% 4.68% 4.74% 4.76%
Borrowings 5.70% 6.30% 6.25% 6.38%
------------- ------------- ------------- -------------
Combined interest-bearing liabilities 4.98% 4.95% 5.02% 5.01%
------------- ------------- ------------- -------------
Interest Rate Spread for the Period 2.23% 2.37% 2.17% 2.37%
============= ============= ============= =============
Net Yield on Interest-earning Assets for
the Period 2.45% 2.66% 2.46% 2.68%
============= ============= ============= =============
</TABLE>
(1) The efficiency ratio is computed by dividing total operating expense by net
interest income and noninterest income, excluding nonrecurring items,
provisions for estimated loan and real estate losses, direct costs of real
estate operations and gains/losses on sale of securities.
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, March 31, December 31
1997 1997 1996
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Nonperforming Assets ("NPAs"):
NPLs $ 33,176 $ 39,713 $ 36,125
Foreclosed real estate 23,640 23,640 24,863
------------- ------------- ------------
Total NPAs $ 56,816 $ 63,353 $ 60,788
============= ============= ============
NPAs to total assets 1.61% 1.92% 1.83%
============= ============= ============
NPAs and Troubled Debt Restructurings ("TDRs"):
NPAs $ 56,816 $ 63,353 $ 60,788
TDRs 44,628 42,696 45,196
------------- ------------- ------------
Total NPAs and TDRs $ 101,644 $ 106,049 $ 105,984
------------- ------------- ------------
NPAs and TDRs to total assets 2.88% 3.22% 3.18%
============= ============= ============
Classified Assets:
NPAs $ 56,816 $ 63,353 $ 60,788
Performing classified loans 101,245 80,128 111,248
Other classified assets $ 1,404 1,382 2,060
------------- ------------- ------------
Total classified assets $ 159,465 $ 144,863 $ 174,096
============= ============= ============
Classified assets to total assets 4.51% 4.40% 5.23%
============= ============= ============
Loan Delinquencies by Property Type:
Single Family:
30 to 59 days $ 3,514 $ 4,933 $ 4,986
60 to 89 days 1,469 1,947 3,479
90 days and over 5,617 6,770 7,747
------------- ------------- ------------
10,600 13,650 16,212
------------- ------------- ------------
Multifamily (2 to 4 units):
30 to 59 days 1,528 1,856 1,023
60 to 89 days 741 958 1,790
90 days and over 2,544 5,527 5,959
------------- ------------- ------------
4,813 8,341 8,772
------------- ------------- ------------
Multifamily (5 to 36 units):
30 to 59 days 2,894 5,100 5,617
60 to 89 days 5,160 3,545 6,130
90 days and over 13,406 21,041 18,071
------------- ------------- ------------
21,460 29,686 29,818
------------- ------------- ------------
Multifamily (37 units and over);
30 to 59 days 3,156 1,755 2,460
60 to 89 days - - -
90 days and over 3,037 4,162 2,671
------------- ------------- ------------
6,193 5,917 5,131
------------- ------------- ------------
Commercial and Industrial
30 to 59 days 545 3,184 873
60 to 89 days - 115 269
90 days and over 3,846 1,982 1,405
------------- ------------- ------------
4,391 5,281 2,547
------------- ------------- ------------
Total Loan Delinquencies, net $ 47,457 $ 62,875 $ 62,480
As a % of Total Net Loan Portfolio ============= ============= ============
1.68% 2.35% 2.29%
============= ============= ============
</TABLE>
Note: All numbers are presented net of reserves and writedowns.
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
HANCOCK SAVINGS BANK IMPACT AS OF JUNE 30, 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
At June 30, 1997
-----------------------------
Bank Plus Bank Plus
before after
Acquisition Acquisition
----------- -----------
(unaudited)
<S> <C> <C>
Balance Sheet Data: $ 3,314,257 $ 3,534,002
Total Assets 2,650,874 2,787,120
Total loans, net 23,835 33,490
Loan GVA 47,194 59,964
Total allowance for estimated loan losses 20,244 23,640
REO, net 2,498,106 2,701,677
Deposits 569,846 569,846
FHLB advances - -
Other borrowings 167,072 179,068
Stockholders' equity 9.15 9.27
Stockholders' equity per common share 18,249,765 19,308,340
Common shares outstanding
Asset Quality Data:
NPAs $ 46,183 $ 56,816
NPAs to total assets 1.39% 1.61%
Nonaccruing loans to total loans, net 0.98% 1.19%
Classified assets $ 140,194 $ 159,465
Classified assets to total assets 4.23% 4.51%
Regulatory Capital Ratios:
Tangible capital ratio 6.39% 5.92%
Core capital ratio 6.39% 6.15%
Risk-based capital ratio 12.24% 11.75%
Other Data:
Number of:
Real estate loan accounts (in thousands) 10,708 11,298
Deposit accounts (in thousands) 188,183 205,444
Retail branch offices 33 38
</TABLE>
