<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to_______________
Commission file number 0-28292
------------------------
BANK PLUS CORPORATION
(Exact name of Registrant as specified in its
charter)
Delaware 95-4571410
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4565 Colorado Boulevard 90039
Los Angeles, California (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (818) 241-6215
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No __
----
As of April 30, 1997, Registrant had outstanding 18,247,765 shares of Common
Stock, par value $.01 per share.
==============================================================================
<PAGE>
BANK PLUS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of March 31, 1997
and December 31, 1996........................................................................ 1
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996...................................................................... 2
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996...................................................................... 3
Notes to Consolidated Financial Statements................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................ 25
Item 2. Changes in Securities........................................................................ 27
Item 3. Defaults Upon Senior Securities.............................................................. 27
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 27
Item 5. Other Information............................................................................ 27
Item 6. Exhibits and Reports on Form 8-K............................................................. 28
a. Exhibits.................................................................................. 28
b. Reports on Form 8-K....................................................................... 30
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ -------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 103,871 $ 70,126
Due from brokers........................ -- 31,614
Investment securities available for
sale, at fair value.................... 154,769 156,251
Investment securities held to maturity
at amortized cost (market value of
$5,239 and $5,198 at March 31, 1997
and December 31, 1996, respectively)... 5,255 5,178
Mortgage-backed securities held for
trading................................ 10,866 14,121
Mortgage-backed securities available
for sale, at fair value................ 195,143 179,403
Mortgage-backed securities held to
maturity, at amortized cost (market
value of $25,103 and $27,169 at
March 31, 1997 and
December 31, 1996, respectively)....... 29,255 30,024
Loans receivable, net of allowances of
$52,882 and $57,508 at March 31, 1997
and December 31, 1996, respectively... 2,642,217 2,691,931
Interest receivable..................... 19,570 20,201
Investment in Federal Home Loan Bank
("FHLB") stock......................... 53,176 52,330
Real estate owned, net.................. 23,640 24,663
Premises and equipment, net............. 30,881 31,372
Other assets............................ 26,004 23,076
---------- ----------
$3,294,647 $3,330,290
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits................................ $2,516,991 $2,495,933
FHLB advances........................... 387,151 449,851
Commercial paper........................ 40,000 40,000
Mortgage-backed notes................... 100,000 100,000
Other liabilities....................... 36,762 31,099
---------- ----------
3,080,904 3,116,883
---------- ----------
Minority Interest: Preferred stock of
consolidated subsidiary................. 51,750 51,750
Stockholders' equity:
Common Stock:
Common stock, par value $.01 per share;
78,500,000 shares authorized;
18,245,265 shares outstanding at March
31, 1997 and December 31, 1996........ 182 182
Paid-in capital......................... 261,902 261,902
Unrealized (losses) gains on securities. (2,836) 1,043
Accumulated deficit..................... (97,255) (101,470)
---------- ----------
161,993 161,657
---------- ----------
$3,294,647 $3,330,290
========== ==========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
INTEREST INCOME:
Loans................................... $ 49,840 $ 56,180
Mortgage-backed securities.............. 4,304 504
Investment securities and other......... 4,563 3,368
----------- -----------
Total interest income................. 58,707 60,052
----------- -----------
INTEREST EXPENSE:
Deposits................................ 29,140 31,033
FHLB advances........................... 5,943 3,667
Other borrowings........................ 3,267 3,514
----------- -----------
Total interest expense................ 38,350 38,214
----------- -----------
NET INTEREST INCOME...................... 20,357 21,838
Provision for estimated loan losses..... 4,251 3,905
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
ESTIMATED LOAN LOSSES................... 16,106 17,933
----------- -----------
NONINTEREST INCOME (EXPENSE):
Loan fee income......................... 508 814
Gains on loan sales, net................ 7 --
Fee income from sale of
uninsured investment products.......... 1,513 1,199
Fee income on deposits and
other income........................... 750 790
Gains (losses) on securities and
trading activities, net................ 1,221 (83)
----------- ------------
3,999 2,720
----------- -----------
Provision for estimated real estate
losses................................. (742) (668)
Direct costs of real estate
operations, net........................ (1,559) (1,787)
------------ ------------
(2,301) (2,455)
Total noninterest income.............. ------------ ------------
1,698 265
----------- -----------
OPERATING EXPENSE:
Personnel and benefits.................. 6,701 6,973
Occupancy............................... 2,500 2,717
FDIC insurance.......................... 494 2,031
Professional services................... 2,620 2,503
Office-related expenses................. 848 1,086
Other................................... 1,173 1,317
----------- -----------
Total operating expense............... 14,336 16,627
----------- -----------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST IN SUBSIDIARY......... 3,468 1,571
Income tax (benefit) expense............ (2,300) 40
------------ ----------
EARNINGS BEFORE MINORITY INTEREST IN
SUBSIDIARY.............................. 5,768 1,531
Minority interest in subsidiary
(dividends on subsidiary
preferred stock)...................... 1,553 --
----------- ----------
NET EARNINGS............................. 4,215 1,531
Preferred stock dividends............... -- 1,553
----------- -----------
EARNINGS (LOSS) AVAILABLE FOR COMMON..... $ 4,215 $ (22)
STOCKHOLDERS............................ =========== ============
EARNINGS PER COMMON SHARE................ $0.23 $ --
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................. 18,245,265 18,242,465
=========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................... $ 4,215 $ 1,531
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating
activities:
Provisions for estimated loan
and real estate losses.................. 4,993 4,573
(Gains) losses on sale of
loans and securities.................... (1,228) 83
Amortization of deferred
items, net.............................. (491) (441)
FHLB stock dividend...................... (891) (649)
Depreciation and amortization............ 870 978
Purchases of mortgage-backed
securities ("MBS") held for
trading................................... (9,979) --
Principal repayments of MBS
held for trading.......................... 157 --
Proceeds from sales of MBS
held for trading.......................... 13,074 --
Interest receivable decrease
(increase)................................ 631 (921)
Other assets decrease
(increase)................................ 31,300 (5,180)
Deferred income tax benefit................ (2,404) --
Interest payable increase.................. 4,621 1,598
Other liabilities increase................. 1,292 1,724
--------- ---------
Net cash provided by
operating activities.................... 46,160 3,296
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities
available for sale........................ -- (67,575)
Purchases of MBS available for sale........ (66,547) --
Principal repayments of MBS
available for sale........................ 5,622 1,907
Proceeds from sales of MBS available
for sale.................................. 43,695 --
Principal repayments of MBS held to
maturity.................................. 77 --
Loans receivable decrease.................. 34,727 44,554
Net proceeds from sales of real
estate, net............................... 11,331 3,944
Premises and equipment (additions)
dispositions, net......................... (371) 236
---------- ---------
Net cash provided by (used
in) investing activities................ 29,227 (16,934)
--------- ----------
Cash Flows from financing Activities:
Demand deposits and passbook
savings, net increase (decrease).......... 6,336 (66,853)
Certificate accounts, net increase......... 14,722 45,047
Payments of preferred stock dividend....... -- (1,553)
Proceeds from FHLB advances................ 50,000 --
Repayments of FHLB advances................ (112,700) (60,000)
Short-term borrowings increase............. -- 59,900
--------- ---------
Net cash used in financing
activities.............................. (41,642) (23,459)
Net increase (decrease) in............. ---------- ----------
cash and cash equivalents............. 33,745 (37,097)
Cash and cash equivalents at the
beginning of the period................. 70,126 94,794
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.. $ 103,871 $ 57,697
========== =========
</TABLE>
(Continued on following page)
3
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash (paid) received during the period
for:
Interest on deposits, advances
and other borrowings................. $ (33,147) $ (35,939)
Income tax refund..................... -- 383
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Additions to real estate
acquired through foreclosure........... 12,666 8,874
Loans originated to finance
sale of real estate owned.............. 1,616 250
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
In the opinion of Bank Plus Corporation ("Bank Plus") and Bank Plus
together with its subsidiaries (the "Company"), the accompanying unaudited
consolidated financial statements, prepared from the Company's books and
records, contain all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of the Company's financial condition as of
March 31, 1997 and December 31, 1996, and the results of operations and
statements of cash flows for the three months ended March 31, 1997 and 1996.
Bank Plus is the holding company for Fidelity Federal Bank, a Federal
Savings Bank, and its subsidiaries (the "Bank" or "Fidelity") and Gateway
Investment Services, Inc. ("Gateway"). The Company's headquarters are in Los
Angeles, California. The Company offers a broad range of consumer financial
services, including demand and term deposits, uninsured investment products, and
loans to consumers, through 33 full-service branches, all of which are located
in Southern California, principally in Los Angeles and Orange counties. All
significant intercompany transactions and balances have been eliminated. Certain
reclassifications have been made to prior years' consolidated financial
statements to conform to the 1997 presentation.
In May 1996, the Bank completed a reorganization pursuant to which all of
the outstanding Class A Common Stock of Fidelity was converted on a one-for-one
basis into all of the outstanding common stock of Bank Plus and Bank Plus became
the holding company for Fidelity (the "Reorganization"). Bank Plus currently
has no significant business or operations other than serving as the holding
company for Fidelity and Gateway, which prior to the Reorganization was a
subsidiary of the Bank. All references to "Fidelity" prior to the
Reorganization include Gateway.
On February 9, 1996, the Bank's stockholders approved a one-for-four
reverse stock split (the "Reverse Stock Split") of the issued and outstanding
shares of the Bank's Common Stock. Upon effectiveness of the Reverse Stock
Split, each stockholder became the owner of one share of Common Stock for each
four shares of Common Stock held at the time of the Reverse Stock Split and
became entitled to receive cash in lieu of any fractional shares. All per share
data and weighted average common shares outstanding have been retroactively
adjusted to reflect the Reverse Stock Split.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and include all
information and footnotes required for interim financial statement presentation.
The financial information provided herein, including the information under the
heading Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" ("MD&A"), is written with the presumption that the users
of the interim financial statements have read, or have access to, the most
recent Annual Report on Form 10-K which contains the latest available audited
consolidated financial statements and notes thereto, as of December 31, 1996,
together with the MD&A as of such date.
Supplementary Earnings/Loss per Share Data
Net earnings/loss per common share for the three months ended March 31,
1997 and March 31, 1996, as adjusted to reflect the dividends on preferred stock
of subsidiary, was determined based on 18,245,265 and 18,242,465 shares
outstanding, respectively. Common stock equivalents for the three months ended
March 31, 1997 and 1996 did not impact the calculation of net earnings/loss per
share.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Bank Plus, through Fidelity, operates 33 full-service branches, all of which
are located in Southern California, principally in Los Angeles and Orange
Counties. The Company offers a broad range of consumer financial
servicesincluding demand and term deposits and loans to consumers. The Bank
closed its wholesale correspondent single family origination network and its
multifamily origination operations in the third quarter of 1994 due to the
economic and competitive environments. Since that time the Bank has entered into
strategic partnerships with established providers of consumer credit products
pursuant to which all consumer credit products made available to the Bank's
customers are referred to and underwritten, funded and serviced by the strategic
partners. In addition, through Gateway, a National Association of Securities
Dealers, Inc. ("NASD") registered broker/dealer, the Company provides customers
with uninsured investment products, including anumber of mutual funds, annuities
and unit investment trusts.
RECENT DEVELOPMENTS
Proposed Exchange Offer
The Company filed a registration statement with the Securities and Exchange
Commission (the "SEC") on Form S-4 on March 28, 1997 in connection with a
possible exchange offer of up to approximately $51.8 million of the Company's
12% Senior Notes due 2007 ("Senior Notes") for the 12% Noncumulative
Exchangeable Perpetual Preferred Stock, Series A ("Series A Preferred Stock")
issued by Fidelity in 1995. The terms of the Series A Preferred Stock provided
for the making of such an exchange offer. The Company has not commenced such an
exchange offer nor has it set any date for the commencement of such an exchange
offer and there can be no assurance as to the date on which, or whether, the
Company will commence such an exchange offer. Any offer of Senior Notes in
exchange of the Series A Preferred Stock will only be made, if at all, by means
of a prospectus.
Registration of Common Stock
The Board of Directors of the Company has approved the filing of a
Registration Statement on Form S-4 (the "Acquisition S-4") of up to
approximately $75.0 million in shares of Bank Plus Common Stock (the
"Acquisition Shares") that may be issued from time to time in the future as
consideration (in whole or in part) for possible future acquisitions. The Board
(or an authorized committee thereof) will negotiate, determine and approve on
behalf of the Company the number of Acquisition Shares to be issued in any
acquisition and the terms and conditions of all agreements to be entered into by
the Company in connection therewith. Offers to sell any of the Acquisition
Shares, if any, will be made only pursuant to the prospectus constituting a part
of the Acquisition S-4.
BUSINESS STRATEGY
The Company's business strategy is to be a consumer-focused provider of
financial services, by enhancing its franchise to integrate its traditional
services and products (deposit services, checking and savings accounts) with the
offering of investment products through Gateway and consumer credit products
through strategic partners. As a part of such strategy, management continues to
explore new opportunities to expand the integrated sales platform, to increase
fee income growth, and to build upon the use of technology in delivering
financial products and services. In addition, the Company is continuing to focus
on improving the quality of its loan portfolio by reducing the level of problem
assets through aggressive management and increasing operating efficiency by
reducing and maintaining lower levels of operating expenses.
Fidelity has formed a plan to develop affinity credit card issuance programs
with strategic partners. These programs will include unsecured credit cards and
credit cards secured by real estate or by cash deposits. The Bank has recently
entered into contracts to establish such programs with two separate partners.
Fidelity will serve as issuer and owner of MasterCard credit card accounts and
will develop the card portfolio from prospects
6
<PAGE>
provided by the strategic partners. As part of the affinity partner agreements,
the strategic partners will have the right to purchase outstanding receivables
of these accounts at par and, in exchange, will provide credit enhancements to
guarantee full repayment of the Bank's outstanding receivables in the event of
cardholder defaults. The credit enhancements will include the funding of a
reserve account or pledging of collateral as receivables are funded by the Bank.
The Bank has committed to fund up to an aggregate outstanding balance of $425
million under the current programs. Two board members of one of the strategic
partners are also board members of Fidelity.
Additionally, as a part of its business strategy, the Company plans to
purchase assets (loans and securities) that may exceed $900 million in 1997.
This plan, in general terms, is based upon certain risk adjusted return and
liquidity objectives and is designed to increase the Company's securities and
loan portfolios to enhance the Company's earning capabilities. The proposed
increase in earning assets may be at a lower interest rate spread than the
Company's assets are currently yielding depending on available financing
sources. Accordingly, if the plan is implemented, the Company's interest rate
spread may decline. In conjunction with this plan, the Company continues its
exploration of other asset origination capabilities, customer base expansion and
acquisition opportunities for financial services institutions. If such
opportunities are pursued, they may limit the asset purchase strategy discussed
above to an amount significantly less than $900 million.
Consumer-Focused Provider of Financial Services
Management believes that, given the highly competitive nature of the financial
services industry and the regulatory constraints that the Company faces in
competing with unregulated companies, the Company must continue to expand from
its historical business focus and provide customers with a wider array of
products through a variety of delivery channels. The Company is pursuing the use
of various electronic delivery systems, which include an Internet bank, and
software to enhance customer convenience and the Company's fee income
opportunities. The Company is currently negotiating with a provider of
electronic delivery services to begin implementing an Internet bank. The
Internet bank will offer on-line transactional capabilities for selected bank
services with plans to expand to the alternative investment products currently
sold through the Company's integrated sales platform.
Management of Problem Assets
During the fourth quarter of 1995, the Bank adopted an Accelerated Asset
Resolution Plan (the "Plan") designed to aggressively dispose of, resolve or
otherwise manage a pool of primarily multifamily loans and real estate owned
("REO") that at that time had higher risk profiles than the remainder of the
Bank's multifamily loan portfolio. The Plan reflected both an acceleration in
estimated timing of asset resolution, as well as a potential change in recovery
method from the normal course of business. See "--Asset Quality--Accelerated
Asset Resolution Plan."
7
<PAGE>
Continued Reduction of Operating Expenses
During the first quarter of 1997 as compared to the same 1996 period, the
Company reduced quarterly operating expenses by 13.8% which included a reduction
in personnel expenses of 3.9% reflecting a reduction in the quarterly average of
full-time equivalent ("FTEs") employees of 12.2% (from 534 during the first
quarter of 1996 to 469 during the first quarter of 1997).
While the Company intends to continue to control and, if possible, reduce
operating expenses, a portion of the expense savings experienced in prior
periods will be devoted to certain business initiatives. The Company also
intends to expend resources as it evaluates and pursues additional funding and
earning asset acquisition opportunities. Furthermore, management does not
believe that additional significant personnel reductions would be appropriate
without significantly increasing operational risks. Accordingly, the levels of
operating expense reductions experienced in prior periods should not be expected
for future periods.
RESULTS OF OPERATIONS
The Company reported net earnings available to common stockholders of $4.2
million, after minority interest in subsidiary (dividend on subsidiary preferred
stock) of $1.6 million ($0.23 per common share; computed on the basis of
18,245,265 weighted average common shares outstanding) for the three months
ended March 31, 1997. This compares to net earnings of $1.5 million before
dividends on preferred stock of subsidiary of $1.6 million ($0.00 per common
share after giving effect to the dividends on preferred stock of subsidiary;
computed on the basis of 18,242,465 weighted average common shares outstanding)
for the three months ended March 31, 1996.
Net earnings for the three months ended March 31, 1997, as compared to the
same period in 1996, reflect: (a) decreased operating expenses of $2.3 million
primarily due to lower Federal Deposit Insurance Corporation ("FDIC") insurance
costs due to the recapitalization of the Savings Association Insurance Fund (the
"SAIF") in 1996 and an upgrade in the Bank's assessment classification, (b)
increased noninterest income of $1.4 million due primarily to gains on sales of
mortgage-backed securities ("MBS") and (c) increased income tax benefit of $2.3
million (see "--Income Taxes"). These favorable changes were partially offset by
(a) increased provision for estimated loan losses of $0.3 million and (b) the
minority interest in subsidiary (dividend on subsidiary preferred stock) of $1.6
million which were reported in 1996 as preferred stock dividends after net
earnings.
NET INTEREST INCOME
Net interest income is the difference between interest earned on loans, MBS
and investment securities ("interest-earning assets") and interest paid on
savings deposits and borrowings ("interest-bearing liabilities"). For the three
months ended March 31, 1997, net interest income totaled $20.4 million,
decreasing by $1.4 million from $21.8 million for the comparable period in 1996.
Net interest income is affected by (a) the average volume and repricing
characteristics of the Company's interest-earning assets and interest-bearing
liabilities, (b) the level and volatility of market interest rates, (c) the
level of nonaccruing loans ("NPLs") and (d) the interest rate spread between the
yields earned and the rates paid.
8
<PAGE>
The following table presents the primary determinants of net interest income
for the three months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------
1997 1996
-------------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
DAILY YIELD/ DAILY YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
----------- -------- ------- ----------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans ................................ $2,749,569 $49,840 7.25% $3,004,641 $56,180 7.48%
MBS .................................. 238,074 4,304 7.23 30,430 504 6.63
Investment securities................. 227,827 3,672 6.54 147,639 2,720 7.39
Investment in FHLB stock ............. 52,930 891 6.83 49,866 648 5.21
---------- ------- ---------- -------
Total interest-earning assets ... 3,268,400 58,707 7.19 3,232,576 60,052 7.43
------- -------
Noninterest-earning assets ............ 61,003 52,017
---------- ----------
Total assets .................... $3,329,403 $3,284,593
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits ...................... $ 292,785 788 1.09 $ 304,643 755 0.99
Savings deposits ..................... 119,158 928 3.16 154,724 899 2.33
Time deposits ........................ 2,088,103 27,424 5.33 2,116,138 29,379 5.57
---------- ------- ---------- -------
Total deposits ...................... 2,500,046 29,140 4.73 2,575,505 31,033 4.83
---------- ------- ---------- -------
Borrowings ............................ 570,957 9,210 6.54 444,591 7,181 6.48
---------- ------- ---------- -------
Total interest-bearing liabilities .. 3,071,003 38,350 5.06 3,020,096 38,214 5.08
---------- ------- ---------- -------
Noninterest-bearing liabilities ........ 44,532 35,973
Preferred stock issued by consolidated
subsidiary ............................ 51,750 51,750
Stockholders' equity ................... 162,118 176,774
--------- ----------
Total liabilities and equity ........... $3,329,403 $3,284,593
========== ==========
Net interest income; interest rate
spread ................................ $20,357 2.13% $21,838 2.35%
======= ==== ======= ====
Net yield on interest-earning assets
("net interest margin") ............... 2.44% 2.68%
==== ====
Average nonaccruing loan balance
included in average loan balance .... $ 61,709 $ 72,325
========== ==========
Net delinquent interest reserve removed
from interest income ................ $ 1,581 $ 1,691
======= =======
Reduction in net yield on
interest-earning assets due to
delinquent interest ................... 0.19% 0.21%
==== ====
</TABLE>
9
<PAGE>
The following tables present the dollar amount of changes in interest income
and expense for each major component of interest-earning assets and interest-
bearing liabilities and the amount of change attributable to changes in average
balances and average rates for the periods indicated. Because of numerous
changes in both balances and rates, it is difficult to allocate precisely the
effects thereof. For purposes of these tables, the change due to volume is
initially calculated as the change in average balance multiplied by the average
rate during the prior period and the change due to rate is calculated as the
change in average rate multiplied by the average volume during the prior period.
Any change that remains after such calculations is allocated proportionately to
changes in volume and changes in rates.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
COMPARED TO MARCH 31, 1996
FAVORABLE (UNFAVORABLE)
---------------------------------------
VOLUME RATE NET
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income:
Loans............................ $ (4,654) $ (1,686) $ (6,340)
Mortgage-backed securities....... 3,750 50 3,800
Investment securities............ 1,304 (352) 952
Investment in FHLB stock......... 40 203 243
---------- ---------- ----------
Total interest income......... 440 (1,785) (1,345)
---------- ---------- ----------
Interest expense:
Deposits:
Demand deposits................. 33 (66) (33)
Savings deposits................ 237 (266) (29)
Time deposits................... 460 1,495 1,955
---------- ---------- ----------
Total deposits................ 730 1,163 1,893
Borrowings....................... (1,713) (316) (2,029)
---------- ---------- ----------
Total interest expense.......... (983) 847 (136)
---------- ---------- ----------
Decrease in net interest income... $ (543) $ (938) $ (1,481)
========== ========== ==========
</TABLE>
The $1.4 million decrease in net interest income between the first quarter
1997 and the first quarter 1996 was primarily the result of decreased rates on
average interest-earning assets combined with an increase in the average level
of interest-bearing liabilities. This was partially offset by an increase in
the level of interest-earning assets and decreased rates on interest-bearing
liabilities.
ASSET/LIABILITY MANAGEMENT
The objective of interest rate risk management is to maximize the net interest
income of the Company while controlling interest rate risk exposure. Banks and
savings institutions are subject to interest rate risk when assets and
liabilities mature or reprice at different times (duration risk), against
different indices (basis risk) or for different terms (yield curve risk). The
decision to control or accept interest rate risk can only be made with an
understanding of the probability of various scenarios occurring. Having
liabilities that reprice more quickly than assets is beneficial when interest
rates fall, but may be detrimental when interest rates rise.
The Company manages interest rate risk by, among other things, maintaining a
portfolio consisting primarily of adjustable rate mortgage ("ARM") loans. ARM
loans comprised 97% of the total loan portfolio at March 31, 1997 and 1996. The
percentage of monthly adjustable ARMs to total loans was approximately 76% and
75% at March 31, 1997 and 1996, respectively. Interest sensitive assets provide
the Company with a degree of long-term protection from rising interest rates. At
March 31, 1997, approximately 93% of Fidelity's total loan portfolio consisted
of loans which mature or reprice within one year, compared to approximately 92%
at March 31, 1996. Fidelity has in recent periods been negatively impacted by
the fact that increases in the interest rates accruing on Fidelity's ARM loans
lagged the increases in interest rates accruing on its deposits due to reporting
delays and contractual look-back periods contained in the Bank's loan documents.
At March 31, 1997, 93% of the Bank's
10
<PAGE>
loans, which are indexed to the Eleventh District Cost of Funds Index ("COFI"),
as with all COFI portfolios in the industry, do not reprice until some time
after the industry liabilities composing COFI reprice. The Company's liabilities
reprice generally in line with the cost of funds of institutions which comprise
the Federal Home Loan Bank (the "FHLB") Eleventh District. In the Company's
case, the lag between the repricing of its liabilities and its ARM loans indexed
to COFI is approximately four months. Thus, when rates rise sharply, as in the
latter part of 1996 and early 1997, there will be upward pressure on rates paid
on deposit accounts and wholesale borrowings, and the Company's net interest
income will be adversely affected until the majority of its interest-earning
assets fully reprice. Conversely, in a falling interest rate environment, such
as the period in early 1996, interest income will be positively affected.
The Company utilizes various financial instruments in the normal course of its
business. By their nature all such instruments involve risk, and the maximum
potential loss may exceed the value at which such instruments are carried. As is
customary for these types of instruments, the Company usually does not require
collateral or other security from other parties to these instruments. The
Company manages its credit exposure to counterparties through credit approvals,
credit limits and other monitoring procedures. The Company's Credit Policy
Committee makes recommendations regarding counterparties and credit limits which
are subject to approval by the Board of Directors.
The Company may employ interest rate swaps, caps and floors in the management
of interest rate risk. An interest rate swap agreement is a financial
transaction where two counterparties agree to exchange different streams of
payments over time. An interest rate swap involves no exchange of principal
either at inception or upon maturity; rather, it involves the periodic exchange
of interest payments arising from an underlying notional principal amount.
Interest rate caps and floors generally involve the payment of a one-time
premium to a counterparty who, if interest rates rise or fall above or below a
predetermined level, will make payments to the Company at an agreed upon rate on
a notional amount of money for the term of the agreement, until such time as
interest rates fall below or rise above the cap or floor level.
During the third quarter of 1996, the Company entered into a one-year advisory
agreement with an investment advisor, pursuant to which the advisor will
recommend investments, subject to prior approval and direction of the Company,
and execute investment purchases in accordance with the Company's investment
strategy. Under this agreement, outstanding forward commitments to purchase
adjustable rate MBS totaled $27.5 million at March 31, 1997. Also outstanding in
relation to this managed portfolio at March 31, 1997, were $28.0 million
notional amount of interest rate caps which will mature in 2003, $5.0 million
notional amount interest rate swaps which will mature in 2002 and $7.0 million
notional amount of put options on treasury futures with an exercise date in
1997.
The Company is also considering plans to purchase assets (loans and
securities) that may exceed $900 million in 1997. See "--Business Strategy."
11
<PAGE>
The following table sets out the maturity and rate sensitivity of the
interest-earning assets and interest-bearing liabilities as of March 31, 1997.
"Gap," as reflected in the table, represents the estimated difference between
the amount of interest-earning assets and interest-bearing liabilities repricing
during future periods as adjusted for interest-rate swaps and other financial
instruments as applicable, and based on certain assumptions, including those
stated in the notes to the table.
MATURITY AND RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
MATURITY OR REPRICING
-----------------------------------------------------------------------------------------
WITHIN 3 4-12 1-5 6-10 OVER 10
MONTHS MONTHS YEARS YEARS YEARS TOTAL
----------- ------------ ------------ ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Cash.................................. $ 69,902 $ -- $ -- $ -- $ -- $ 69,902
Investment securities (1) (2)......... 53,176 2,209 116,181 -- 41,634 213,200
MBS (1)............................... 54,921 1,853 -- 6,711 171,779 235,264
Loans receivable:
ARMs and other adjustables (3)...... 2,042,231 477,753 93,354 4,414 111 2,617,863
Fixed rate loans.................... 635 5,473 3,499 14,778 60,877 85,262
---------- ---------- ---------- --------- -------- ----------
Total gross loans receivable........ 2,042,866 483,226 96,853 19,192 60,988 2,703,125
---------- ---------- ---------- --------- -------- ----------
Total.............................. 2,220,865 487,288 213,034 25,903 274,401 $3,221,491
---------- ---------- ---------- --------- -------- ==========
INTEREST-BEARING LIABILITIES:
Deposits:
Checking and savings accounts (4)... 347,974 -- -- -- -- $ 347,974
Money market accounts (4)........... 65,343 -- -- -- -- 65,343
Fixed maturity deposits:
Retail customers................... 13,688 1,250,615 821,523 4,800 1,289 2,091,915
Wholesale customers............... 304 2,550 8,905 -- -- 11,759
---------- ---------- ---------- --------- -------- ----------
Total deposits.............. 427,309 1,253,165 830,428 4,800 1,289 2,516,991
---------- ---------- ---------- --------- -------- ----------
Borrowings:
FHLB advances (3)................... 192,826 74,325 20,000 100,000 -- 387,151
Other............................... 140,000 -- -- -- -- 140,000
---------- ---------- ---------- --------- -------- ----------
Total borrowings................... 332,826 74,325 20,000 100,000 -- 527,151
---------- ---------- ---------- --------- -------- ----------
Total....................... 760,135 1,327,490 850,428 104,800 1,289 $3,044,142
---------- ---------- ---------- --------- -------- ==========
IMPACT OF HEDGING...................... 5,000 -- (5,000) -- --
---------- ---------- ---------- --------- --------
REPRICING GAP.......................... $1,465,730 $ (840,202) $ (642,394) $ (78,897) $273,112
========== =========== =========== ========== ========
GAP TO TOTAL ASSETS.................... 44.49% (25.50)% (19.50)% (2.39)% 8.29%
CUMULATIVE GAP TO TOTAL ASSETS......... 44.49% 18.99 % (0.51)% (2.90)% 5.39%
</TABLE>
______________
(1) Repricings shown are based on the contractual maturity or repricing
frequency of the instrument.
(2) Investment securities include FHLB stock of $53.2 million.
(3) ARMs and variable rate borrowings from the FHLB system ("FHLB advances") are
primarily in the shorter categories as they are subject to interest rate
adjustments.
(4) These liabilities are subject to daily adjustments and are therefore
included in the "Within 3 Months" category.
Analysis of the Gap provides only a static view of the Company's interest rate
sensitivity at a specific point in time. The actual impact of interest rate
movements on the Company's net interest income may differ from that implied by
any Gap measurement. The actual impact on net interest income may depend on the
direction and magnitude of the interest rate movement, as well as competitive
and market pressures.
12
<PAGE>
ASSET QUALITY
General
The Company's loan portfolio is primarily secured by assets located in
Southern California and is comprised principally of single family and
multifamily (2 units or more) residential loans. At March 31, 1997 and 1996, 19%
of Fidelity's real estate loan portfolio consisted of California single family
residences, while another 11% and 62% consisted of California multifamily
dwellings of 2 to 4 units and 5 or more units, respectively.
The performance of the Company's loans secured by multifamily and commercial
properties has been adversely affected by Southern California economic
conditions. These portfolios are particularly susceptible to the potential for
further declines in the Southern California economy, such as increasing vacancy
rates, declining rents, increasing interest rates, declining debt coverage
ratios, and declining market values for multifamily and commercial properties.
In addition, the possibility that investors may abandon properties or seek
bankruptcy protection with respect to properties experiencing negative cash
flow, particularly where such properties are not cross-collateralized by other
performing assets, can also adversely affect the multifamily loan portfolio.
There can be no assurances that current improved economic indicators will have a
material impact on the Bank's portfolio in the near future as many factors key
to recovery may be impacted adversely by the Federal Reserve Board's interest
rate policy as well as other factors.
The Bank's internal asset review process reviews the quality and
recoverability of each of those assets which exhibit credit risk to the Bank
based on delinquency and other criteria in order to establish adequate general
valuation allowance ("GVA") and specific valuation allowance ("SVA").
Accelerated Asset Resolution Plan
An important component of the Company's business strategy is the reduction of
risk in the Bank's loan and REO portfolios. In the fourth quarter of 1995, the
Bank adopted the Plan, which was designed to aggressively dispose of, resolve or
otherwise manage a pool (the "AARP Pool") of primarily multifamily loans and
REO that at that time were considered by the Bank to have higher risk of future
nonperformance or impairment relative to the remainder of the Bank's multifamily
loan portfolio. The Plan reflected both an acceleration in estimated timing of
asset resolution, as well as a potential change in recovery method from the
normal course of business.
The AARP Pool originally consisted of 411 assets with an aggregate gross book
balance of approximately $213.3 million, comprised of $137.0 million in gross
book balance of loans and $76.3 million in gross book balance of REO. In an
effort to maximize recovery on loans and REO included in the AARP Pool, the Plan
allowed for a range of possible methods of resolution including, but not limited
to, (i) individual loan restructuring, potentially including additional
extensions of credit or write-offs of existing principal, (ii) foreclosure and
sale of collateral properties, (iii) securitization of loans, (iv) the bulk sale
of loans and (v) bulk sale or accelerated disposition of REO properties.
As a consequence of the adoption of the Plan, the Bank recorded a $45.0
million loan portfolio charge in the fourth quarter of 1995, which was reflected
as a credit to the Bank's allowance for estimated loan and REO losses. This
amount represented the estimated additional losses, net of SVAs, anticipated to
be incurred by the Bank in executing the Plan. Such additional losses
represented, among other things, estimated reduced recoveries from restructuring
loans and the acceptance of lower proceeds from the sale of individual REO and
the estimated incremental losses associated with recovery through possible bulk
sales of performing and nonperforming loans and REO.
Through March 31, 1997, (i) $32.7 million in gross book balances of AARP Pool
loans had been resolved through either a negotiated sale or discounted payoff,
(ii) $7.9 million in gross book balances of AARP Pool loans were collected
through normal principal amortization or paid off through the normal course
without loss, (iii) $22.5 million in gross book balances of AARP Pool loans had
been modified or restructured and retained in the Bank's mortgage portfolio,
(iv) $8.0 million in gross book balances of AARP Pool loans were removed from
the AARP Pool upon management's determination that such assets no longer met the
risk profile for inclusion in
13
<PAGE>
the AARP Pool or that accelerated resolution of such assets was no longer
appropriate and (v) $103.4 million in gross book balances of REO were sold
($40.9 million in gross book balances of AARP Pool loans were taken through
foreclosure and acquired as REO since the inception of the AARP). As of March
31, 1997, the AARP Pool consisted of 87 assets with an aggregate gross book
balance of $38.9 million, comprised primarily of accruing and nonaccruing
multifamily real estate loans totaling approximately $25.0 million and REO
properties totaling approximately $13.9 million, which are reported as real
estate owned on the statement of financial condition. Through March 31, 1997, of
the $45.0 million of reserves established in connection with the Plan, $24.4
million had been charged off and $14.1 million had been allocated to SVAs or REO
writedowns in connection with the Bank's estimate of recovery for AARP Pool
assets. The Bank anticipates that the remaining pool of AARP assets will be
resolved by year-end 1997.
Notwithstanding the actions taken by the Bank in implementing the Plan, there
can be no assurance that the AARP Pool assets retained by the Bank will not
result in additional losses. The Bank's allowance for loan and REO losses and
the SVAs established in connection with such assets are ultimately subjective
and inherently uncertain. There can be no assurance that further additions to
the Bank's allowance for loan and REO losses will not be required in the future
in connection with such assets, which could have an adverse effect on the Bank's
financial condition, results of operations and levels of regulatory capital.
Classified Assets
Total classified assets decreased $29.2 million or 16.8% from December 31,
1996, to $144.9 million at March 31, 1997. This decrease was primarily due to a
decrease in performing classified loans and the large volume of REO sales during
the first quarter of 1997. While classified assets decreased from December 31,
1996 to March 31, 1997, the ratio of nonperforming assets ("NPAs") to total
assets increased from 1.83% at December 31, 1996, to 1.92% at March 31, 1997.
This increase is primarily due to an increased level of NPLs at March 31, 1997,
compared to December 31, 1996.
14
<PAGE>
The following table presents net classified assets by property type at the
dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1997 1996 1996 1996 1996
---------- ------------- -------------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Performing classified loans:
Single family........................ $ 2,757 $ 4,555 $ 10,054 $ 8,098 $ 6,638
Multifamily:
2 to 4 units..................... 5,527 6,030 9,374 10,227 11,173
5 to 36 units.................... 50,306 60,785 146,050 148,073 115,857
37 units and over................ 12,196 10,375 42,861 43,564 48,656
-------- -------- -------- -------- --------
Total multifamily properties.. 68,029 77,190 198,285 201,864 175,686
Commercial and other................. 9,342 29,503(1) 40,628(1) 41,885(1) 39,955(1)
-------- -------- -------- -------- --------
Total performing classified loans 80,128 111,248 248,967 251,847 222,279
-------- -------- -------- -------- --------
Nonperforming classified loans:
Single family........................ 7,001 8,019 7,478 6,306 5,897
Multifamily:
2 to 4 units..................... 5,527 5,959 4,897 4,453 4,950
5 to 36 units.................... 21,041 18,071 19,200 24,989 20,699
37 units and over................ 4,162 2,671 1,665 4,019 4,720
-------- -------- -------- -------- --------
Total multifamily properties.. 30,730 26,701 25,762 33,461 30,369
Commercial and other................. 1,982 1,405 3,240 3,525 3,845
-------- -------- -------- -------- --------
Total nonperforming classified 39,713 36,125 36,480 43,292 40,111
loans........................... -------- -------- -------- -------- --------
Total classified loans........ 119,841 147,373 285,447 295,139 262,390
-------- -------- -------- -------- --------
REO:
Single family........................ 5,211 3,185 3,548 2,802 3,564
Multifamily:
2 to 4 units..................... 2,766 3,410 4,018 3,297 5,246
5 to 36 units.................... 11,218 13,574 12,331 7,457 7,345
37 units and over................ 2,812 1,844 1,844 1,265 1,439
-------- -------- -------- -------- --------
Total multifamily properties.. 16,796 18,828 18,193 12,019 14,030
Commercial and other................. 2,933 3,950 4,475 6,398 6,339
-------- -------- -------- -------- --------
Net REO before REO GVA........... 24,940 25,963 26,216 21,219 23,933
REO GVA.............................. (1,300) (1,300) (1,000) (700) (400)
-------- -------- -------- -------- --------
Total REO........................ 23,640 24,663 25,216 20,519 23,533
-------- -------- -------- -------- --------
Other classified assets................. 1,382 2,060 2,503 3,100 2,979
-------- -------- -------- -------- --------
Total classified assets.......... $144,863 $174,096 $313,166 $318,758 $288,902
======== ======== ======== ======== ========
</TABLE>
________________
(1) Includes a hotel property loan with a balance of $18.4 million at December
31, 1996.
15
<PAGE>
Delinquent Loans
During the first quarter of 1997, total delinquent loans decreased $3.9
million, or 5.9%, from March 31, 1996. The following table presents loan
delinquencies by number of days delinquent and by property type as of the dates
indicated. All assets are reported net of specific reserves and writedowns.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
---------- ------------- ----------
<S> <C> <C> <C>
(Dollars in thousands)
Delinquencies by number of days:
30 to 59 days......................................... 0.63% 0.55% 0.59%
60 to 89 days......................................... 0.24 0.43 0.33
90 days and over...................................... 1.48 1.31 1.37
------- ------- -------
Loan delinquencies to net loan portfolio................ 2.35% 2.29% 2.29%
======= ======= =======
Delinquencies by property type:
Single family:
30 to 59 days......................................... $ 4,933 $ 4,986 $ 4,285
60 to 89 days......................................... 1,947 3,479 1,704
90 days and over...................................... 6,770 7,747 5,897
------- ------- -------
13,650 16,212 11,886
------- ------- -------
Percent to applicable loan portfolio................ 2.72% 3.15% 2.09%
Multifamily (2 to 4 units):
30 to 59 days......................................... 1,856 1,023 1,914
60 to 89 days......................................... 958 1,790 1,735
90 days and over...................................... 5,527 5,959 4,951
------- ------- -------
8,341 8,772 8,600
------- ------- -------
Percent to applicable loan portfolio................ 2.70% 2.79% 2.60%
Multifamily (5 to 36 units):
30 to 59 days......................................... 5,100 5,617 8,427
60 to 89 days......................................... 3,545 6,130 5,128
90 days and over...................................... 21,041 18,071 20,698
------- ------- -------
29,686 29,818 34,253
------- ------- -------
Percent to applicable loan portfolio................ 2.18% 2.15% 2.33%
Multifamily (37 units and over):
30 to 59 days......................................... 1,755 2,460 698
60 to 89 days......................................... -- -- --
90 days and over...................................... 4,162 2,671 4,720
------- ------- -------
5,917 5,131 5,418
------- ------- -------
Percent to applicable loan portfolio................ 1.94% 1.68% 1.67%
Commercial and Industrial:
30 to 59 days......................................... 3,184 873 1,811
60 to 89 days......................................... 115 269 985
90 days and over...................................... 1,982 1,405 3,845
------- ------- -------
5,281 2,547 6,641
------- ------- -------
Percent to applicable loan portfolio.............. 2.70% 1.26% 2.94%
Total loan delinquencies, net........................... $62,875 $62,480 $66,798
======= ======= =======
Loan delinquencies to net loan portfolio................ 2.35% 2.29% 2.29%
======= ======= =======
</TABLE>
16
<PAGE>
The following table presents net delinquent loans at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1997 1996 1996 1996 1996
--------- ----------- ------------ -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Number of days delinquent:
30 to 59 days........................ $ 16,828 $ 14,959 $ 22,748 $ 23,467 $ 17,135
60 to 89 days........................ 6,565 11,668 8,260 8,026 9,552
90 days and over..................... 39,482 35,853 36,249 43,292 40,111
------- ------- ------- ------- -------
Total delinquencies............. $ 62,875 $ 62,480 $ 67,257 $ 74,785 $ 66,798
======== ======== ======== ======== ========
</TABLE>
Nonperforming Assets
All assets and ratios are reported net of specific reserves and writedowns
unless otherwise stated. The following table presents asset quality details at
the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1997 1996 1996 1996 1996
---------- ------------- -------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
NPAs by Type:
NPLs.................................... $ 39,713 $ 36,125 $ 36,480 $ 43,292 $ 40,111
REO, net of REO GVA..................... 23,640 24,663 25,216 20,519 23,533
-------- -------- -------- -------- --------
Total NPAs............................. $ 63,353 $ 60,788 $ 61,696 $ 63,811 $ 63,644
======== ========= ======== ======== ========
NPAs by Composition:
Single family residences............. $ 12,212 $ 11,204 $ 10,968 $ 9,108 $ 9,461
Multifamily 2 to 4 units............. 8,293 9,369 8,974 7,750 10,197
Multifamily 5 units and over......... 39,233 36,160 35,040 37,730 34,202
Commercial and other................. 4,915 5,355 7,714 9,923 10,184
REO GVA.............................. (1,300) (1,300) (1,000) (700) (400)
-------- -------- -------- -------- -------
Total NPAs........................... 63,353 60,788 61,696 63,811 63,644
Total troubled debt restructuring
("TDR")............................. 42,696 45,196 49,575 57,079 53,745
-------- -------- -------- -------- -------
Total TDRs and NPAs.................. $106,049 $105,984 $111,271 $120,890 $117,389
======== ======== ======== ======== ========
Classified Assets:
NPAs................................. $ 63,353 $ 60,788 $ 61,696 $ 63,811 $ 63,644
Performing classified loans.......... 80,128 111,248(1) 248,967(1) 251,847(1) 222,279(1)
Other classified assets.............. 1,382 2,060 2,503 3,100 2,979
-------- -------- -------- -------- -------
Total classified assets.............. $144,863 $174,096 $313,166 $318,758 $288,902
======== ======== ======== ======== ========
Classified Asset Ratios:
NPLs to total assets................... 1.21% 1.08% 1.10% 1.31% 1.22%
NPAs to total assets................... 1.92% 1.83% 1.86% 1.94% 1.94%
TDRs to total assets................... 1.30% 1.36% 1.49% 1.73% 1.64%
NPAs and TDRs to total assets.......... 3.22% 3.18% 3.35% 3.67% 3.58%
Classified assets to total assets...... 4.40% 5.23% 9.42% 9.67% 8.81%
REO to NPAs............................ 37.31% 40.57% 40.87% 32.16% 36.98%
NPLs to NPAs........................... 62.69% 59.43% 59.13% 67.84% 63.02%
</TABLE>
- --------------
(1) Includes a hotel property loan with a balance of $18.4 million.
17
<PAGE>
Direct costs of foreclosed real estate operations totaled $1.6 million and
$1.8 million for the three months ended March 31, 1997 and 1996. The following
table provides information about the change in the book value and the number of
properties owned and obtained through foreclosure for the periods indicated:
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REO net book value................................................ $23,640 $23,533
Net (decrease) increase in REO book value for the period.......... (1,024) $ 4,012
Number of real estate properties owned............................ 135 131
Increase in number of properties owned for the period............. 4 22
Number of properties foreclosed for the period.................... 73 69
Gross book value of properties foreclosed......................... $21,130 $20,563
Average gross book value of properties foreclosed................. $ 289 $ 298
</TABLE>
18
<PAGE>
Allowance for Estimated Loan and REO Losses
The following table summarizes the Bank's reserves, writedowns and certain
coverage ratios at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
-------- ------------ ---------
Loans: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
GVA........................................................ $22,550 $25,308 $38,202
SVA........................................................ 30,332 32,200 43,228
------- ------- -------
Total allowance for estimated losses (1).................. $52,882 $57,508 $81,430
======= ======= =======
Writedowns (2)............................................. $ 146 $ 146 $ 316
======= ======= =======
Total allowance and loan writedowns to gross loans (3)..... 1.96% 2.09% 2.74%
Total loan allowance to gross loans (3).................... 1.95% 2.08% 2.73%
Loan GVA to loans (3)...................................... 0.85% 0.93% 1.31%
Loan GVA to NPLs........................................... 56.78% 70.06% 95.24%
NPLs to total loans........................................ 1.50% 1.34% 1.39%
REO:
REO GVA.................................................... $ 1,300 $ 1,300 $ 400
SVA........................................................ 886 781 2,693
------- ------- -------
Total allowance for estimated losses...................... $ 2,186 $ 2,081 $ 3,093
======= ======= =======
Writedowns (2)............................................. $13,281 $14,819 $18,157
======= ======= =======
Total REO allowance and REO writedowns to
gross REO.................................................. 39.55% 40.66% 47.45%
Total REO allowance to gross REO (4)....................... 8.4% 7.78% 11.62%
REO GVA to REO (3)......................................... 5.21% 5.01% 1.67%
Total Loans and REO:
GVA........................................................ $23,850 $26,608 $38,602
SVA........................................................ 31,218 32,981 45,921
------- ------- -------
Total allowance for estimated losses (1).................. $55,068 $59,589 $84,523
======= ======= =======
Writedowns (2)............................................. $13,427 $14,965 $18,473
======= ======= =======
Total allowance and writedowns to gross loans and
REO........................................................ 2.49% 2.66% 3.41%
Total allowance to gross loans and REO (3)................. 2.01% 2.14% 2.81%
Total GVA to loans and REO (3)............................. 0.89% 0.97% 1.31%
Total GVA to NPAs.......................................... 36.89% 42.86% 60.27%
</TABLE>
___________
(1) At March 31, 1997, December 31, 1996 and March 31, 1996, the allowance for
estimated loan losses includes $14.1 million, $16.7 million and $31.8
million, respectively, of remaining loan GVA and SVA for the Plan. See
"--Asset Quality--Accelerated Asset Resolution Plan."
(2) Writedowns include cumulative charge-offs on outstanding loans and REO as of
the dates indicated.
(3) Loans and REO, as applicable, in these ratios are calculated prior to their
reduction for loan and REO GVA, respectively, but are net of specific
reserves and writedowns.
(4) Net of writedowns.
19
<PAGE>
The following schedule summarizes the activity in the Bank's allowances for
estimated loan and real estate losses:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------
1997 1996
------------------------------------- --------------------------------------
REAL ESTATE REAL ESTATE
LOANS (1) OWNED TOTAL LOANS (1) OWNED TOTAL
---------- ------------ ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Balance on January 1,........... $ 57,508 $2,081 $ 59,589 $ 89,435 $ 3,492 $ 92,927
Provision for losses......... 4,251 742 4,993 3,905 668 4,573
Charge-offs.................. (10,063) (797) (10,860) (12,127) (1,391) (13,518)
Allocation from GVA to REO... -- -- -- (324) 324 --
Recoveries and other......... 1,186 160 1,346 541 -- 541
--------- ------ --------- --------- -------- ---------
Balance on March 31,............ $ 52,882 $2,186 $ 55,068 $ 81,430 $ 3,093 $ 84,523
========= ====== ========= ========= ======== =========
</TABLE>
- -----------------
(1) All allowances for loan losses are for the Bank's portfolio of mortgage
loans.
The following table details the activity affecting specific loss reserves for
the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
-------------------------------------
REAL ESTATE
LOANS OWNED TOTAL
---------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance on January 1,............... $ 32,200 $ 781 $ 32,981
Allocations from GVA to specific
Reserves....................... 8,195 902 9,097
Charge-offs..................... (10,063) (797) (10,860)
--------- ------ ---------
Balance at end of period indicated... $ 30,332 $ 886 $ 31,218
========= ====== =========
</TABLE>
NONINTEREST INCOME (EXPENSE)
Noninterest income has three major components: (a) noninterest income from
ongoing operations, which includes loan fee income, gains or losses on loans
held for sale, fees earned on the sale of uninsured investment products and
retail banking fees, (b) income/expenses associated with REO, which includes
both the provision for real estate losses as well as income/expenses incurred by
the Bank associated with the operation of its REO properties and (c) gains and
losses on the sales of loan servicing, investment securities and MBS. Items (b)
and (c) can fluctuate widely, and could therefore mask the underlying fee
generating performance of the Company on an ongoing basis.
Net noninterest income increased by $1.4 million from $0.3 million in the
first quarter 1996 to $1.7 million in the first quarter 1997. The major
components of this increase are: (a) net gains from MBS activities in the first
quarter of 1997 increased by $1.2 million primarily as a result of increased
sales and (b) fee income from uninsured investment product increased by $0.3
million primarily as a result of increased sales.
OPERATING EXPENSES
Operating expenses decreased by $2.3 million to $14.3 million for the first
quarter 1997 compared to $16.6 million for the first quarter 1996. The change
was primarily due to (a) a $0.3 million decrease in personnel and benefit
expense due to a decline of 65 or 12.2% in the three month average number of
FTEs, (b) a decrease of $1.5 million of FDIC insurance costs due to the
recapitalization of the SAIF in 1996 and an upgrade in the Bank's assessment
classification and (c) a decrease of $0.5 million in occupancy and other office
related costs which was largely tied to the overall reduction in personnel and
overhead costs.
20
<PAGE>
Decreased operating expenses resulted in a decrease in the annualized
operating expense ratio to 1.72% for the first quarter 1997 from 2.04% for the
first quarter 1996, based on the total average asset size of the Company of
approximately $3.3 billion for the quarters ended March 31, 1997 and 1996.
Due to the sensitivity of the operating expense ratio to changes in the size
of the balance sheet, management also looks at trends in the efficiency ratio to
assess the changing relationship between operating expenses and income. The
efficiency ratio measures the amount of cost expended by the Company to generate
a given level of revenues in the normal course of business. It is computed by
dividing total operating expense by net interest income and noninterest income,
excluding infrequent items. A decrease in the efficiency ratio is favorable in
that it indicates less expenses were incurred to generate a given level of
revenue.
The efficiency ratio decreased to 61.97% for the first quarter 1997 from
67.71% for the first quarter 1996. This decrease was due to increased
noninterest income and decreased operating expense.
INCOME TAXES
The Company's combined federal and state statutory tax rate is approximately
42.0% of earnings before income taxes. The effective tax benefit rate of 66.3%
on income before income taxes for the quarter ended March 31, 1997, reflects the
federal and state tax benefit attributable to the utilization of net operating
loss carryforwards, and the partial recognition of the deferred tax asset
through a $2.4 million reduction of the related valuation allowance, offset by a
$0.l million current tax expense.
As of December 31, 1996 a valuation allowance was provided for the total net
deferred tax asset. Under Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes, the reduction in valuation
allowance is dependent upon a "more likely than not" expectation of realization
of the deferred tax asset, based upon the weight of available evidence. The
Company has realized book earnings, before unusual items, for each of the five
consecutive quarters ended March 31, 1997. The loss reflected for the quarter
ended September 30, 1996, was attributable to a one-time $18 million SAIF
assessment which is considered a nonrecurring item. After consideration of the
Company's recent earnings history and other available evidence, management of
the Company determined that under the criteria of SFAS No. 109 it was
appropriate to record a $2.3 million net tax benefit for the quarter ended March
31, 1997.
The analysis of available evidence is performed each quarter utilizing the
"more likely than not" criteria required by SFAS 109 to determine the amount, if
any, of the deferred tax asset to be realized. Accordingly, there can be no
assurance that the Company will recognize additional portions of its deferred
tax asset in future periods. Moreover, the criteria of SFAS No. 109 could
require the partial or complete recapture of the $2.4 million deferred tax
benefit into expense in future periods.
21
<PAGE>
REGULATORY CAPITAL COMPLIANCE
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required the Office of Thrift Supervision (the "OTS") to implement a system
providing for regulatory sanctions against institutions that are not adequately
capitalized. The severity of these sanctions increases to the extent that an
institution's capital continues to decline. Under FDICIA, the OTS issued the
Prompt Corrective Action ("PCA") regulations which established specific
capital ratios for five separate capital categories as set forth below:
<TABLE>
<CAPTION>
CORE CAPITAL TO CORE CAPITAL
ADJUSTED TO TOTAL CAPITAL
TOTAL ASSETS RISK-WEIGHTED TO
(LEVERAGE RATIO) ASSETS RISK-WEIGHTED ASSETS
-------------------- ----------------- -----------------------
<S> <C> <C> <C>
Well capitalized................. 5% or above 6% or above 10% or above
Adequately capitalized........... 4% or above 4% or above 8% or above
Undercapitalized................. Under 4% Under 4% Under 8%
Significantly undercapitalized... Under 3% Under 3% Under 6%
Critically undercapitalized...... Ratio of tangible equity to adjusted total assets of 2% or less
</TABLE>
The following table summarizes the capital ratios required by FDICIA for an
institution to be considered well capitalized and Fidelity's regulatory capital
at March 31, 1997 as compared to such ratios.
<TABLE>
<CAPTION>
CORE CAPITAL TO CORE CAPITAL TO TOTAL CAPITAL TO
ADJUSTED RISK-WEIGHTED RISK-WEIGHTED
TOTAL ASSETS ASSETS ASSETS
--------------------- ---------------------- ----------------------
BALANCE % BALANCE % BALANCE %
----------- ----- ----------- ------ ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fidelity's regulatory capital $ 213,200 6.47% $ 213,200 11.12% $ 235,800 12.29%
Well capitalized requirement 164,700 5.00 115,100 6.00 191,800 10.00%
----------- ----- ----------- ------ ----------- -----
Excess capital $ 48,500 1.47% $ 98,100 5.12% $ 44,000 2.29%
=========== ===== =========== ====== =========== =====
Adjusted assets (1) $ 3,293,800 $ 1,918,100 $ 1,918,100
=========== =========== ===========
</TABLE>
____________
(1) The term "adjusted assets" refers to the term "adjusted total assets" as
defined in 12 C.F.R. section 567.1(a) for purposes of core capital
requirements, and refers to the term "risk-weighted assets" as defined in 12
C.F.R. section 567.1(bb) for purposes of risk-based capital requirements.
FDICIA also required the OTS and the federal bank regulatory agencies to
revise their risk-based capital standards to ensure that those standards take
adequate account of interest rate risk, concentration of credit risk, and risks
of nontraditional activities. On January 1, 1994, the OTS proposed an interest
rate risk component for its regulatory capital rule. Under the proposed rule,
savings institutions with "above-normal" interest rate risk exposure would be
subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. No interest rate risk component would have
been required to be added to the Bank's risk-based capital requirement at March
31, 1997 had the rule been in effect.
The Bank is also subject to OTS capital regulations under the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). These
regulations require Fidelity to maintain: (a) tangible capital of at least 1.5%
of adjusted total assets (as defined in the regulations), (b) core capital of at
least 3% of adjusted total assets (as defined in the regulations) and (c) total
capital of at least 8.0% of risk-weighted assets (as defined in the
regulations).
22
<PAGE>
The following table summarizes the regulatory capital requirements under
FIRREA for Fidelity at March 31, 1997. As indicated in the table, Fidelity's
capital levels at March 31, 1997 exceeded all three of the currently applicable
minimum FIRREA capital requirements.
<TABLE>
<CAPTION>
RISK-BASED
TANGIBLE CAPITAL CORE CAPITAL CAPITAL
------------------------------- ---------------------------------------- -----------
BALANCE % BALANCE % BALANCE %
------------ ----------------- ------------ ----------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity (1).............. $ 210,500 $ 210,500 $ 210,500
Unrealized losses on securities....... 2,800 2,800 2,800
Adjustments
Intangible assets.................. (300) -- --
Nonqualifying mortgage servicing
rights......................... (100) (100) (100)
Nonincludable subsidiaries......... -- -- --
GVA................................ -- -- 22,600
---------- ---------- ----------
Regulatory capital (2)................ 212,900 6.46% 213,200 6.47% 235,800 12.29%
Required minimum...................... 49,400 1.50 98,800 3.00 153,400 8.00
---------- ----- ---------- ----- ---------- -----
Excess capital........................ $ 163,500 4.96% $ 114,400 3.47% $ 82,400 4.29%
========== ===== ========== ===== ========== =====
Adjusted assets (3)................... $3,293,500 $3,293,800 $1,918,100
========== ========== ==========
</TABLE>
- ------------
(1) Fidelity's total stockholders' equity, in accordance with generally accepted
accounting principles, was 6.40% of its total assets at March 31, 1997.
(2) Both the OTS and the FDIC may examine the Bank as part of their legally
prescribed oversight of the industry. Based on their examinations, the
regulators can direct that the Bank's financial statements be adjusted in
accordance with their findings.
(3) The term "adjusted assets" refers to the term "adjusted total assets" as
defined in 12 C.F.R. section 567.1(a) for purposes of tangible and core
capital requirements, and refers to the term "risk-weighted assets" as
defined in 12 C.F.R. section 567.1(bb) for purposes of risk-based capital
requirements.
CAPITAL RESOURCES AND LIQUIDITY
The Bank derives funds from deposits, FHLB advances, securities sold under
agreements to repurchase, and other short-term and long-term borrowings. In
addition, funds are generated from loan payments and payoffs as well as from the
sale of loans and investments.
FHLB Advances
The Bank had net repayments of FHLB advances of $62.7 million for the three
months ended March 31, 1997. This compares to net repayments of $60.0 million
for the three months ended March 31, 1996.
Commercial paper
Commercial paper outstanding remained at the same level during the three
months ended March 31, 1997 compared to an increase of $50.0 million for the
three months ended March 31, 1996.
Loan payments and payoffs
Loan principal payments, including prepayments and payoffs, provided $53.9
million for the three months ended March 31, 1997 compared to $56.1 million for
the same period in 1996. The Bank expects that loan payments and prepayments
will remain a significant funding source.
23
<PAGE>
Sales of securities
The sale of investment securities and MBS provided $56.8 million for the
quarter ended March 31, 1997. There were no such sales for the three months
ended March 31, 1996. The Bank held $349.9 million and $190.5 million of
investment securities and MBS in its available for sale portfolio as of March
31, 1997 and 1996, respectively.
Undrawn sources
Fidelity maintains other sources of liquidity to draw upon, which at March 31,
1997 included (a) a line of credit with the FHLB with $507.2 million available
(assuming all of the $150.0 million commercial paper capacity is used); (b)
unused commercial paper facility capacity of $110.0 million; (c) $196.4 million
in unpledged securities available to be placed in reverse repurchase agreements
or sold; and (d) $618.8 million of unpledged loans, some of which would be
available to collateralize additional FHLB or private borrowings, or be
securitized.
Deposits
At March 31, 1997, Fidelity had deposits of $2.5 billion. The following table
presents the distribution of the Bank's deposit accounts:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
---------------------- ----------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
----------- --------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Money market savings accounts........... $ 63,015 2.5% $ 65,605 2.6%
Checking accounts....................... 297,220 11.8 287,711 11.5
Passbook accounts....................... 53,082 2.1 53,665 2.2
---------- ------ ---------- ------
Total transaction accounts........... 413,317 16.4 406,981 16.3
---------- ------ ---------- ------
Certificates of deposit $100,000 and 562,813 22.4 543,336 21.8
over...................................
Certificates of deposit less than 1,540,861 61.2 1,545,616 61.9
$100,000............................... ---------- ------ ---------- ------
Total certificates of deposit........ 2,103,674 83.6 2,088,952 83.7
---------- ------ ---------- ------
Total deposits.................... $2,516,991 100.0% $2,495,933 100.0%
========== ====== ========== ======
</TABLE>
The Company is currently eligible to accept brokered deposits; however, there
were no brokered deposits outstanding at March 31, 1997 and 1996.
Repurchase Agreements
From time to time the Company enters into reverse repurchase agreements by
which it sells securities with an agreement to repurchase the same securities at
a specific future date (overnight to one year). The Company deals only with
dealers who are recognized as primary dealers in U.S. Treasury securities by the
Federal Reserve Board or perceived by management to be financially strong. There
were no reverse repurchase agreements outstanding at March 31, 1997 compared to
repurchase agreements outstanding of $9.9 million at March 31, 1996. In the
three months ended March 31, 1997, the Company borrowed and repaid funds from
reverse repurchase agreements of $25.5 million compared to $9.9 million of funds
borrowed and repaid during the three months ended March 31, 1996.
Loan Fundings
Fidelity originated and purchased $6.5 million of gross loans (excluding
Fidelity's refinancings) in the three months ended March 31, 1997 compared to
$0.3 million in the same period of 1996.
24
<PAGE>
Contingent or potential uses of funds
The Bank had no unfunded loans at March 31, 1997 and 1996.
Liquidity
The OTS regulations require the maintenance of an average daily balance of
liquid assets of at least 5% of the average daily balance of the net
withdrawable accounts and short term borrowings (the "regulatory liquidity
ratio"). The Bank's average regulatory liquidity ratio was 5.61% and 5.50% for
the quarters ended March 31, 1997 and 1996, respectively.
Holding Company Liquidity
At March 31, 1997, Bank Plus had cash and cash equivalents of $0.5 million and
no material potential cash producing operations or assets other than its
investments in Fidelity and Gateway. Accordingly, Bank Plus is substantially
dependent on dividends from Fidelity and Gateway in order to fund its cash
needs, including any payment obligations with respect to the potential exchange
offer of Bank Plus Senior Notes for Fidelity's Preferred Stock. In connection
therewith, Fidelity's Board of Directors has approved the payment of a cash
dividend to Bank Plus in the approximate amount of $1.6 million, to assist in
funding Bank Plus' future payment obligations with respect to the Senior Notes.
Such dividend will be paid, if at all, only upon consummation of the
aforementioned exchange offer. See "--Recent Developments". Both Gateway's and
Fidelity's ability to pay dividends or otherwise provide funds to Bank Plus are
subject to significant regulatory restrictions.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank was named as a defendant in a purported class action lawsuit alleging
violations of federal securities laws in connection with the offering of common
stock by the Bank in 1994 as part of the Bank's previously reported 1994
Restructuring and Recapitalization. The suit was filed by Harbor Finance
Partners ("Harbor") in an alleged class action complaint in the United States
District Court-Central District of California on July 28, 1995 and originally
named as defendants the Bank, Citadel Holding Corporation ("Citadel"), Richard
M. Greenwood (the Bank's chief executive officer and Citadel's former chief
executive officer), J. P. Morgan Securities, Inc., and Deloitte & Touche LLP.
The suit alleged that false or misleading information was provided by the
defendants in connection with the Bank's 1994 Restructuring and Recapitalization
and stock offering and that the defendants knew and failed to disclose negative
information concerning the Bank. A motion to dismiss the original complaint was
filed by the Bank, and was granted without opposition. Thereafter, Harbor filed
an amended complaint which did not include J. P. Morgan Securities, Inc. and
Deloitte & Touche LLP as defendants and which contained some factual and legal
contentions which were different from those set forth originally. On May 21,
1996, the court granted the Bank's and Greenwood's motion to dismiss the first
amended complaint, but granted leave to amend. Following the filing of a second
amended complaint, the Bank and Greenwood filed a motion to dismiss. At a
hearing on July 22, 1996, the court ruled that the case should be dismissed with
prejudice and a formal order to that effect was submitted to the court for
execution. Harbor lodged certain objections to the proposed order, including
objections that the state law claims in the second amended complaint should not
be dismissed with prejudice. The court's order of dismissal was entered on
August 5, 1996 and provided that all claims asserted in the second amended
complaint under federal law were dismissed with prejudice and those under state
law were dismissed without prejudice to their renewal in state court pursuant to
28 U.S.C. (S)1367(b)(3). Harbor has filed a notice of appeal to the order of
dismissal. Briefing in the appeal is now concluded and the appeal awaits hearing
and disposition. On August 30, 1996, Harbor filed an alleged class action
complaint in state court containing allegations similar to those raised in the
federal court action as well as claims for unfair business practices to which
the Bank and Greenwood filed demurrers seeking to have the case dismissed for
failure to state a legally sufficient claim. These demurrers were sustained
without leave to amend on March 13, 1997 and it is expected that a judgment of
dismissal will be entered in the trial court. The plaintiff will have 60 days
from notice of the entry of judgment to file an appeal.
In addition, the Bank is a defendant in several individual and purported class
actions brought by several borrowers which raise claims with respect to the
manner in which the Bank serviced certain adjustable rate mortgages which were
originated during the period 1983 through 1988. The actions have been filed
between July
25
<PAGE>
1, 1992 and February of 1995. In one case the Bank won a summary judgment in
Federal District Court. This judgment was appealed. On July 25, 1996, the Ninth
Circuit Court of Appeals filed its opinion which affirmed in part, reversed in
part and remanded back to the Federal District Court for further hearing. In
three Los Angeles Superior Court cases, judgment in favor of the Bank was
recently entered. Plaintiff has appealed in all three cases. Two other cases are
pending in the Los Angeles Superior Court. The plaintiffs' principal claim is
that the Bank selected an inappropriate review date to consult the index upon
which the rate adjustment is based that was one or two months earlier than what
was required under the terms of the notes. In a declining interest rate
environment, the lag effect of an earlier review period defers the benefit to
the borrower of such decline, and the reverse would be true in a rising interest
rate environment. The Bank strongly disputes these contentions and is vigorously
defending these suits. The legal responsibility and financial exposure of these
claims presently cannot be reasonably ascertained and, accordingly, there is a
risk that the final outcome of one or more of these claims could result in the
payment of monetary damages which could be material in relation to the financial
condition or results of operations of the Bank. The Bank does not believe the
likelihood of such a result is probable and has not established any specific
litigation reserves with respect to such lawsuits.
In the normal course of business, the Company and certain of its subsidiaries
have a number of other lawsuits and claims pending. Although there can be no
assurance, the Company's management and its counsel believe that none of the
foregoing lawsuits or claims will have a material adverse effect on the
financial condition or business of the Company.
26
<PAGE>
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on April 30, 1997, the shareholders
elected Waldo H. Burnside, Lilly V. Lee and Mark Sullivan III to the Board of
Directors of Bank Plus to serve for three year terms, approved certain
amendments to and a restatement of the Company's 1996 Stock Option Plan, and
ratified the appointment of Deloitte & Touche LLP as the Company's independent
public accountants for 1997. Of the 18,245,265 shares of Common Stock
outstanding as of the record date, March 26, 1997, the following indicates the
number of votes cast for and against, as well as the number of votes abstaining
and broker non-votes, with respect to each of the three directors, the
amendments and restatement of the Company's 1996 Stock Option Plan and the
ratification of Deloitte & Touche LLP:
<TABLE>
<CAPTION>
NUMBER OF VOTES
-----------------------------------------------
BROKER
FOR AGAINST ABSTAIN NON-VOTES
----------- ------- ------- ---------
<S> <C> <C> <C> <C>
Proposal 1 - Election of Directors:
Waldo H. Burnside.......................................... 15,746,911 2,225 -- N/A
Lilly V. Lee............................................... 15,746,911 2,225 -- N/A
Mark Sullivan III.......................................... 15,746,911 2,225 -- N/A
Proposal 2 - Amendments to, and a restatement of, the 1996
Stock Option Plan.......................................... 12,016,047 3,722,079 11,010 --
Proposal 3 - Ratification of Independent Public Accountants.. 15,733,646 7,150 8,340 N/A
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable
27
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------------------------- ----------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of March 27, 1996, among Fidelity, Bank Plus
Corporation and Fidelity Interim Bank. (incorporated by reference to Exhibit 2.1 to the Form 8-B of
Bank Plus filed with the SEC on April 22, 1996 (the ''Form 8-B'')).*
3.1 Certificate of Incorporation of Bank Plus Corporation (incorporated by reference to Exhibit 3.1 to
the Form 8-B).*
3.2 Bylaws of Bank Plus Corporation (incorporated by reference to Exhibit 3.2 to the Form 8-B).*
4.1 Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Form 8-B).*
4.2 Form of Indenture relating to senior notes of Fidelity (incorporated by reference to Exhibit
4.2 of the Form 8-B).*
10.1 Settlement Agreement between Fidelity, Citadel and certain lenders, dated as of June 3, 1994
(the "Letter Agreement") (incorporated by reference to Exhibit 10.1 to the Form 8-B).*
10.2 Amendment No. 1 to Letter Agreement, dated as of June 20, 1994 (incorporated by reference to
Exhibit 10.2 to the Form 8-B).*
10.3 Amendment No. 2 to Letter Agreement, dated as of July 28, 1994 (incorporated by reference to
Exhibit 10.3 to the Form 8-B).*
10.4 Amendment No. 3 to Letter Agreement, dated as of August 3, 1994 (incorporated by reference to
Exhibit 10.4 to the Form 8-B).*
10.5 Mutual Release, dated as of August 4, 1994, between Fidelity, Citadel and certain lenders
(incorporated by reference to Exhibit 10.5 to the Form 8-B).*
10.6 Mutual Release between Fidelity, Citadel and The Chase Manhattan Bank, NA, dated June 17,
1994 (incorporated by reference to Exhibit 10.6 to the Form 8-B).*
10.7 Loan and REO Purchase Agreement (Primary), dated as of July 13, 1994, between Fidelity and
Colony Capital, Inc. (incorporated by reference to Exhibit 10.7 to the Form 8-B).*
10.8 Real Estate Purchase Agreement, dated as of August 3, 1994, between Fidelity and CRI
(incorporated by reference to Exhibit 10.8 to the Form 8-B).*
10.9 Loan and REO Purchase Agreement (Secondary), dated as of July 12, 1994, between Fidelity and
EMC Mortgage Corporation (incorporated by reference to Exhibit 10.9 to the Form 8-B).*
10.10 Loan and REO Purchase Agreement (Secondary), dated as of July 21, 1994, between Fidelity and
International Nederlanden (US) Capital Corporation, Farallon Capital Partners, L.P.,
Tinicum Partners, L.P. and Essex Management Corporation (incorporated by reference to Exhibit 10.10
to the Form 8-B).*
10.11 Purchase of Assets and Liability Assumption Agreement by and between Home Savings of
America, FSB and Fidelity, dated as of July 19, 1994 (incorporated by reference to Exhibit 10.11
to the Form 8-B).*
10.12 Promissory Note, dated July 28, 1994, by CRI in favor of Fidelity and related loan documents
(3943 Veselich Avenue) (incorporated by reference to Exhibit 10.12 to the Form 8-B).*
10.13 Promissory Note, dated July 28, 1994, by CRI in favor of Fidelity and related loan documents
(23200 Western Avenue) (incorporated by reference to Exhibit 10.13 to the Form 8-B).*
10.14 Promissory Note, dated August 3, 1994, by CRI in favor of Fidelity and related loan documents
(1661 Camelback Road) (incorporated by reference to Exhibit 10.14 to the Form 8-B).*
10.15 Guaranty Agreement, dated August 3, 1994, by Citadel in favor of Fidelity (incorporated by
reference to Exhibit 10.15 to the Form 8-B).*
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------------------------- ----------------------------------------------------------------------------------------------------
<S> <C>
10.16 Tax Disaffiliation Agreement, dated as of August 4, 1994, by and between Citadel and Fidelity
(incorporated by reference to Exhibit 10.16 to the Form 8-B).*
10.17 Option Agreement, dated as of August 4, 1994, by and between Fidelity and Citadel (incorporated by
reference to Exhibit 10.17 to the Form 8-B).*
10.18 Executive Employment Agreement, dated as of June 2, 1995, between Richard M. Greenwood and Fidelity
(incorporated by reference to Exhibit 10.18 to the Form 8-B).*
10.19 Amended Service Agreement between Fidelity and Citadel dated as of August 1, 1994 (incorporated by
reference to Exhibit 10.19 to the Form 8-B).*
10.20 Side letter, dated August 3, 1994, between Fidelity and CRI (incorporated by reference to Exhibit
10.20 to the Form 8-B).*
10.21 Placement Agency Agreement, dated July 12, 1994, between Fidelity, Citadel and J.P. Morgan
Securities Inc. (incorporated by reference to Exhibit 10.21 to the Form 8-B).*
10.22 Stock Purchase Agreement, dated as of August 3, 1994, between Fidelity and Citadel (incorporated by
reference to Exhibit 10.22 to the Form 8-B).*
10.23 Litigation and Judgment Assignment and Assumption Agreement, dated as of August 3, 1994, between
Fidelity and Citadel (incorporated by reference to Exhibit 10.23 to the Form 8-B).*
10.24 Amended and Restated 1996 Stock Option Plan
10.25 Retirement Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.25 to the
Form 8-B).*
10.26 Form of Severance Agreement between the Bank and Mr. Sanders (incorporated by reference to Exhibit
10.26 to the Form 8-B).*
10.27 Form of Severance Agreement between the Bank and each of Messrs. Osborne and Greenwood (incorporated
by reference to Exhibit 10.27 to the Form 8-B).*
10.28 Form of Severance Agreement between the Bank and each of Messrs. Condon, Evans, Stutz & Taylor
(incorporated by reference to Exhibit 10.28 to the Form 8-B).*
10.29 Form of Severance Agreement between the Bank and Mr. Renstrom (incorporated by reference to Exhibit
10.29 to the Form 8-B).*
10.30 Form of Incentive Stock Option Agreement between the Bank and certain officers (incorporated by
reference to Exhibit 10.30 to the Form 8-B).*
10.31 Form of Amendment to incentive Stock Option Agreement between the Bank and certain officers
(incorporated by reference Exhibit 10.31 to the Form 8-B).*
10.32 Form of Non-Employee Director Stock Option Agreement between the Bank and certain directors
(incorporated by reference to Exhibit 10.32 to the Form 8-B).*
10.33 Form of Amendment to Non-Employee Director Stock Option Agreement between the Bank and certain
directors (incorporated by reference to Exhibit 10.33 to the Form 8-B).*
10.34 Loan and REO Purchase Agreement, dated as of December 15, 1994 between Fidelity and Berkeley Federal
Bank & Trust FSB (incorporated by reference to Exhibit 10.34 to the Form 8-B).*
10.35 Standard Office Lease-Net, dated July 15, 1994, between the Bank and 14455 Ventura Blvd., Inc.
(incorporated by reference to Exhibit 10.35 to the Form 8-B).*
10.36 Standard Office Lease--Modified Gross, dated July 15, 1994, between the Bank and Citadel Realty,
Inc. (incorporated by reference to Exhibit 10.36 to the Form 8-B).*
10.37 Loan Servicing Purchase and Sale Agreement dated March 31, 1995 between the Bank and Western
Financial Savings Bank, FSB (incorporated by reference to Exhibit 10.37 to the Form 8-B).*
10.38 Supervisory Agreement dated June 28, 1995, between Fidelity and the OTS (incorporated by reference
to Exhibit 10.38 to the Form 8-B).*
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------------------------- ----------------------------------------------------------------------------------------------------
<S> <C>
10.39 Form of Indemnity Agreement between the Bank and its directors and senior officers (incorporated by
reference to Exhibit 10.39 to the Form 8-B).*
10.40 Letter from the OTS to the Bank dated December 8, 1995, terminating the Supervisory Agreement as of
the date of the letter (incorporated by reference to Exhibit 10.40 to the Form 8-B).*
10.41 Loan Servicing Purchase and Sale Agreement dated May 15, 1996 between Fidelity and Western Financial
Savings Bank (incorporated by reference to Exhibit 10.37 to the quarterly report on Form 10-Q for
the quarterly period ended June 30, 1996).*
10.42 First Amendment to Standard Office Lease--Modified Gross, dated as of May 15, 1995 between the Bank
and Citadel Realty, Inc (incorporated by reference to Exhibit 10.42 to the quarterly report on Form
10-Q for the quarterly period ended September 30, 1996) .*
10.43 Second Amendment to Standard Office Lease--Modified Gross, dated as of October 1, 1996, between the
Bank and Citadel Realty, Inc (incorporated by reference to Exhibit 10.43 to the quarterly report on
Form 10-Q for the quarterly period ended September 30, 1996).*
10.44 Form of Indemnity Agreement between Bank Plus and its directors and senior officers (incorporated by
reference to Exhibit 10.44 to the quarterly report on Form 10-Q for the quarterly period ended
September 30, 1996).*
10.55 Promissory Note, dated July 31, 1996, from Richard M. Greenwood to Bank Plus (incorporated by
reference to Exhibit 10.55 to the 1996 Form 10-K).*
27. Financial Data Schedule.
- -----------------------------
</TABLE>
* Indicates previously filed documents.
(b) Reports on Form 8-K
None
30
<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, thereunto duly authorized.
<TABLE>
<CAPTION>
BANK PLUS CORPORATION
Registrant
<S> <C>
Date: May 7, 1997 /s/ Richard M. Greenwood
--------------------------------------
Richard M. Greenwood
President and Chief Executive Officer;
Vice Chairman of the Board
Date: May 7, 1997 /s/ William L. Sanders
--------------------------------------
William L. Sanders
Executive Vice President and
Chief Financial Officer
</TABLE>
31
<PAGE>
EXHIBIT 10.24
BANK PLUS CORPORATION
STOCK OPTION AND EQUITY INCENTIVE PLAN
1. PURPOSE
The Bank Plus Corporation Stock Option and Equity Incentive Plan (the
"Plan") is intended to promote the success of Bank Plus Corporation, a
Delaware corporation ("Bank Plus"), by providing its officers, employees and
non-employee directors with incentives to create excellent performance and to
continue their services with Bank Plus, its subsidiaries and affiliates. By
encouraging Plan participants to become stockholders of Bank Plus and by
providing actual ownership through Plan awards, it is also intended that
participants will view Bank Plus from an ownership perspective.
2. TERM
The Plan (originally known as the Fidelity Federal Bank 1996 Stock Option
Plan) became effective on February 9, 1996 and shall terminate at the close of
business on the tenth anniversary of such date unless terminated earlier by
the Board (as defined in Section 3). These amendments to and restatement of
the Plan are effective as of February 26, 1997. After termination of the Plan,
no future awards may be granted, but previously granted awards shall remain
outstanding in accordance with their applicable terms and conditions and the
terms and conditions of the Plan.
3. PLAN ADMINISTRATION
A committee (the "Committee") appointed by the Board of Directors of Bank
Plus (the "Board") shall be responsible for administering the Plan. The
Committee shall be comprised of two or more non-employee members of the Board
who shall be "outside directors" as contemplated by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and "non-employee
directors" as contemplated by Rule 16b-3 under the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"). The Committee shall have full and
exclusive power to interpret the Plan and to adopt such rules, regulations and
guidelines for carrying out the Plan as it may deem necessary or proper, all
of which power shall be executed in the best interests of Bank Plus and in
keeping with the objectives of the Plan. This power includes but is not
limited to selecting award recipients, establishing all award terms and
conditions and adopting modifications, amendments and procedures, as well as
rules and regulations governing awards under the Plan, and to making all other
determinations necessary or advisable for the administration of the Plan. The
interpretation and construction of any provision of the Plan or any award
granted hereunder and all determinations by the Committee in each case shall
be final, binding and conclusive with respect to all interested parties.
4. ELIGIBILITY
Employees and non-employee directors of Bank Plus, or any subsidiary or
affiliate of Bank Plus or any entity in which Bank Plus has a significant
equity interest, as determined by the Committee, shall be eligible to receive
awards under the Plan; provided, however, that non-employee directors shall
not be eligible for awards of restricted stock or deferred stock units.
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 6 of the Plan, the aggregate number of
shares of Common Stock ($.01 par value) of Bank Plus ("Shares") which may be
transferred to participants pursuant to awards under the Plan shall be
2,125,000. In no event may any employee receive stock options with respect to
more than 100,000 Shares in any calendar year.
1
<PAGE>
Shares subject to awards under the Plan, which expire, terminate or are
canceled prior to exercise shall thereafter be available for the granting of
other awards. Any Shares tendered by a person as full or partial payment made
to Bank Plus, in connection with any exercise of a stock option or receipt of
Shares under the Plan, shall again be available for grants under the Plan. Any
Shares that are issued by Bank Plus, and any awards that are granted through
the assumption of, or in substitution for, outstanding awards previously
granted by an acquired entity shall not be counted against the Shares
available for issuance under the Plan.
Any Shares issued under the Plan may consist in whole or in part of
authorized and unissued Shares or of treasury Shares, and no fractional Shares
shall be issued under the Plan. Cash may be paid in lieu of any fractional
Shares in settlements of awards under the Plan.
6. ADJUSTMENTS AND REORGANIZATION
In the event of any stock dividend, stock split, reverse stock split,
combination or exchange of Shares, merger, consolidation, spin-off,
recapitalization or other distribution (other than normal cash dividends) of
the assets of Bank Plus to its stockholders, or any other change affecting
Shares or Share price, such proportionate adjustments, if any, as the
Committee in its discretion may deem appropriate to reflect such change shall
be made with respect to (a) the aggregate number of Shares that may be issued
under the Plan, (b) each outstanding award made under the Plan, and (c) the
exercise price per Share for any outstanding stock options under the Plan.
7. AWARDS
Awards under the Plan may consist of stock options, restricted stock,
deferred stock units and deferred stock grants. Set forth below are the terms
and conditions of awards, which may include such other terms and conditions
established by the Committee:
(a) Stock Options. A stock option is a grant of a right to purchase a
specified number of Shares during a specified period as determined by the
Committee. A stock option may be in the form of an incentive stock option
which, in addition to being subject to applicable terms, conditions and
limitations established by the Committee, complies with Section 422 of the
Code. The price at which Shares may be purchased under a stock option shall
be paid in full by the optionee at the time of the exercise in cash or such
other method permitted by the Committee, including (i) tendering Shares,
(ii) authorizing a third party to sell the Shares (or a sufficient portion
thereof) acquired upon exercise of a stock option and assigning the
delivery to Bank Plus of a sufficient amount of the sale proceeds to pay
for all the Shares acquired through such exercise, (iii) delivering an
interest-bearing full recourse promissory note (subject to any limitations
of applicable law), or (iv) any combination of the above.
Notwithstanding anything contained herein to the contrary, the only awards
of stock options to non-employee directors shall be options granted on the
first business day after the date of each annual meeting of the
stockholders of Bank Plus, commencing with the 1997 annual meeting, to
purchase 2,500 Shares at an exercise price equal to the Fair Market Value
of such Shares on such date. Each such award shall be fully vested and
exercisable on the date of the award. For purposes of the Plan, "Fair
Market Value" shall be the closing price of one Share as reported daily in
The Wall Street Journal or similar readily available source for the data in
question. If no sales of Shares were made on such day, the closing price of
a Share as reported for the preceding day on which a sale of Shares
occurred shall be used. In the event that Shares are not listed on a public
market, then the Share price representing the most recent sale shall be
used.
(b) Restricted Stock. An award of restricted stock is made or denominated
in Shares and shall be subject to vesting conditions established by the
Committee which may be based on service with Bank Plus and its subsidiaries
and affiliates (or any entity in which Bank Plus has a significant equity
interest), the achievement of performance criteria or a combination
thereof. Any stock certificate issued in respect of an award of restricted
stock shall be held by Bank Plus until the end of the restricted period.
2
<PAGE>
(c) Deferred Stock Units. An award of deferred stock units shall have a
value equal to an identical number of shares. The Committee shall establish
vesting conditions for awards of deferred stock units which may be based on
service with Bank Plus and its subsidiaries and affiliates (or any entity
in which Bank Plus has a significant equity interest), the achievement of
performance criteria, or a combination thereof.
(d) Deferred Stock Grants. Each non-employee director who was elected to
the Board or to the board of directors of a subsidiary of Bank Plus on or
after January 1, 1996 shall receive the retainer and fees payable to the
director in the form of deferred stock grants. Each other non-employee
director may elect to receive the retainer and fees payable to the director
prior to the annual meeting of shareholders of Bank Plus in the year 2000
in the form of deferred stock grants; thereafter, the retainer and fee
payments to all directors shall be made in the form of awards of deferred
stock grants. On the date on which the non-employee director would
otherwise receive a cash payment of retainer or fees, there shall be
credited to an account established for such director a number of Shares
equal to the result of dividing (i) the applicable payment of retainer or
fees by (ii) the Fair Market Value of one Share on the applicable payment
date. On each dividend payment date, an additional number of Shares shall
be credited to the account of each non-employee director equal to the
result of dividing (x) the dividends that would have been payable to the
director if the shares credited to the account had been issued and
outstanding by (y) the Fair Market Value of one Share on the dividend
payment date. The Shares credited to the account of a non-employee director
shall be issued to the director upon the director's retirement from service
on the board (or to the beneficiary designated by the non-employee director
in the event of the director's death).
8. DIVIDENDS AND DIVIDEND EQUIVALENTS
Solely with respect to employees, the Committee may provide that any awards
under the Plan earn dividends or dividend equivalents. Such dividends or
dividend equivalents may be paid currently or may be credited to a
participant's account. Any crediting of dividends or dividend equivalents may
be subject to such restrictions and conditions as the Committee may establish,
including reinvestment in additional Shares or Share equivalents.
9. DEFERRALS AND SETTLEMENTS
Payment of awards may be in the form of cash, stock, other awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee also may require or permit
participants to elect to defer the issuance of Shares of the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan. It also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
dividend equivalents where the deferral amounts are denominated in Shares.
10. TRANSFERABILITY AND EXERCISABILITY
Awards granted under the Plan shall not be transferable or assignable other
than by will or the laws of descent and distribution, except that the
Committee may provide for the transferability of particular awards: (a) by
gift or other transfer of an award to (i) any trust or estate in which the
original award recipient or such participant's spouse or other immediate
relative has a substantial beneficial interest or (ii) a spouse or other
immediate relative; and (b) pursuant to a domestic relations order (as defined
by the Code). However, any award so transferred shall continue to be subject
to all the terms and conditions contained in the instrument evidencing such
award.
In the event that a participant terminates his or her position with Bank
Plus or its subsidiary to assume a position with a governmental, charitable,
educational or other non-profit institution, the Committee may subsequently
authorize a third party, including but not limited to a "blind" trust, to act
on behalf of and for the benefit of such participant regarding any outstanding
awards held by the participant subsequent to such termination of employment.
If so permitted by the Committee, a participant may designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive any
distribution under the Plan upon the death of the participant.
3
<PAGE>
11. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by agreements that set forth the
terms, conditions and limitations for each award which may include the term of
an award (except that in no event shall the term of any incentive stock option
exceed a period of ten years from the date of its grant), the provisions
applicable in the event the participant's service terminates, and the
authority of the Committee to unilaterally or bilaterally amend, modify,
suspend, cancel or rescind any award. The Committee need not require the
execution of any such agreement, in which case acceptance of the award by the
participant shall constitute agreement to the terms of the award.
12. ACCELERATION AND SETTLEMENT OF AWARDS
The Committee shall have the discretion, exercisable at any time before a
sale, merger, consolidation, reorganization, liquidation or change of control
(as defined below) of Bank Plus, to provide for the acceleration of vesting
and for settlement, including cash payment, of an award granted under the Plan
upon or immediately before such event is effective. However, the granting of
awards under the Plan shall in no way affect the right of Bank Plus to adjust,
reclassify, reorganize, or otherwise change its capital or business structure,
or to merge, consolidate, dissolve, liquidate, sell or transfer all or any
portion of its businesses or assets.
For purposes of this Plan, a "change in control" of Bank Plus shall be
deemed to occur if (a) any "person" (as such term is defined in Section 3(a)
and as used in Sections 13(d) and 14(d) of the Exchange Act), excluding Bank
Plus or any of its subsidiaries, a trustee or any fiduciary holding securities
under an employee benefit plan of Bank Plus or any of its subsidiaries, an
underwriter temporarily holding securities pursuant to an offering of such
securities or a corporation owned, directly or indirectly, by stockholders of
Bank Plus in substantially the same proportion as their ownership of Bank
Plus, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities Bank Plus representing
25% or more of the combined voting power of Bank Plus' then outstanding
securities ("Voting Securities"); (b) during any period of not more than two
years, individuals who constitute the Board as of the beginning of the period
and any new director (other than a director designated by a person who has
entered into an agreement with Bank Plus to effect a transaction described in
clause (a) or (b) of this sentence) whose election by the Board or nomination
for election by Bank Plus' stockholders was approved by a vote of at least
two-thirds ( 2/3) of the directors then still in office who either were
directors at such time or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
(c) the stockholders of Bank Plus approve a merger or consolidation of Bank
Plus with any other corporation, other than a merger or consolidation which
would result in the Voting Securities of Bank Plus outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 60%
of the combined voting power of the Voting Securities of Bank Plus or such
surviving entity outstanding immediately after such merger or consolidation;
(d) the stockholders of Bank Plus approve a plan of complete liquidation of
Bank Plus; or (e) Bank Plus enters into one or more agreements to sell or
transfer to one or more third parties, in one transaction or a series of
related transactions, assets and/or liabilities representing fifty percent
(50%) or more of the book value of its assets and/or liabilities.
13. PLAN AMENDMENT
The Plan may be amended by the Board at any time and from time to time as it
deems necessary or appropriate to better achieve the purposes of the Plan.
14. TAX WITHHOLDING
Bank Plus shall have the right to deduct from any settlement of an award to
employees made under the Plan, including the delivery or vesting of Shares, a
sufficient amount to cover withholding of any federal, state or local taxes
required by law, or to take such other action as may be necessary to satisfy
any such withholding obligations. The Committee may, in its discretion and
subject to such rules as it may adopt, permit participants to use Shares to
satisfy required tax withholding and such Shares shall be valued at the Fair
Market Value as of the settlement date of the applicable award.
4
<PAGE>
15. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements of
awards received by participants under the Plan shall not be deemed a part of a
participant's regular, recurring compensation for purposes of calculating
payments or benefits from any benefit plan or severance program of Bank Plus
or any subsidiary of Bank Plus, or any severance pay law. Further, Bank Plus
may adopt other compensation programs, plans or arrangements as it deems
appropriate or necessary.
16. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between Bank
Plus and any participant or other person. To the extent any person holds any
rights by virtue of an award granted under the Plan, such rights (unless
otherwise determined by the Committee) shall be no greater than the rights or
an unsecured general creditor of Bank Plus.
17. REGULATORY APPROVALS
The implementation of the Plan, the granting of any award under the Plan,
and the issuance of Shares upon the exercise or settlement of any award shall
be subject to Bank Plus' procurement of all approvals required by regulatory
authorities having jurisdiction over the Plan, the awards granted under it or
the Shares issued pursuant to it.
18. FUTURE RIGHTS
No person shall have any claim or rights to be granted an award under the
Plan, and no participant shall have any rights under the Plan to be retained
as a director or as an employee of Bank Plus or its subsidiaries or affiliates
(or any entity in which Bank Plus has a significant equity interest).
19. GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
State of California and applicable federal law.
20. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the
executor, administrator or trustee of such estate, or any receiver or trustee
in bankruptcy or representative of the participant's creditors.
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 95,871
<INT-BEARING-DEPOSITS> 8,000
<FED-FUNDS-SOLD> 61,000
<TRADING-ASSETS> 10,866
<INVESTMENTS-HELD-FOR-SALE> 349,912
<INVESTMENTS-CARRYING> 34,510
<INVESTMENTS-MARKET> 30,342
<LOANS> 2,695,099
<ALLOWANCE> 52,882
<TOTAL-ASSETS> 3,294,647
<DEPOSITS> 2,516,991
<SHORT-TERM> 407,151
<LIABILITIES-OTHER> 36,762
<LONG-TERM> 120,000
0
0
<COMMON> 182
<OTHER-SE> 213,561<F1>
<TOTAL-LIABILITIES-AND-EQUITY> 3,294,647
<INTEREST-LOAN> 49,840
<INTEREST-INVEST> 7,976
<INTEREST-OTHER> 891
<INTEREST-TOTAL> 58,707
<INTEREST-DEPOSIT> 29,140
<INTEREST-EXPENSE> 38,350
<INTEREST-INCOME-NET> 20,357
<LOAN-LOSSES> 4,251
<SECURITIES-GAINS> 1,221
<EXPENSE-OTHER> 18,190
<INCOME-PRETAX> 3,468<F2>
<INCOME-PRE-EXTRAORDINARY> 3,468
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,215
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<YIELD-ACTUAL> 2.44
<LOANS-NON> 39,713
<LOANS-PAST> 0
<LOANS-TROUBLED> 42,696
<LOANS-PROBLEM> 80,128
<ALLOWANCE-OPEN> 57,508
<CHARGE-OFFS> 10,063
<RECOVERIES> 1,186
<ALLOWANCE-CLOSE> 52,882
<ALLOWANCE-DOMESTIC> 52,882
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 22,550
<FN>
<F1>INCLUDES $51,750 MINORITY INTEREST: PREFERRED STOCK OF CONSOLIDATED
SUBSIDIARY.
<F2>EARNINGS BEFORE INCOME TAXES AND $1,553 MINORITY INTEREST IN
SUBSIDIARY WHICH IS INCLUDED IN (EXPENSE-OTHER).
</FN>
</TABLE>
