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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 June 30, 2000
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) 549-3116
___________________
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 August 10, 2000, Registrant had outstanding 19,411,043 shares of
Common Stock, par value $.01 per share.
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BANK PLUS CORPORATION
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30,
2000 and December 31, 1999..................................... 1
Consolidated Statements of Operations for the quarters and six
months ended June 30, 2000 and 1999............................ 2
Consolidated Statements of Comprehensive Income for the quarters
and six months ended June 30, 2000 and 1999.................... 4
Consolidated Statements of Cash Flows for the quarters and six
months ended June 30, 2000 and 1999............................. 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 30
Item 4. Submission of Matters to a Vote of Security Holders............... 35
Item 6. Exhibits and Reports on Form 8-K.................................. 35
a. Exhibits.................................................... 35
b. Reports on Form 8-K......................................... 36
i
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<TABLE>
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)
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents...................................................... $ 175,489 $ 89,527
Mortgage-backed securities ("MBS") available for sale, at fair value........... 254,587 320,233
Loans held for sale, at the lower of cost or estimated sales value............. 13,878 --
Loans receivable, net of allowances for estimated loan losses of $12,010
and $14,599 at June 30, 2000 and December 31, 1999, respectively............. 1,665,570 2,007,880
Investment in Federal Home Loan Bank ("FHLB") stock............................ 24,729 31,142
Premises and equipment......................................................... 28,404 30,141
Net assets of discontinued operations, at estimated sales value at June 30, 2000 41,210 164,820
Other assets................................................................... 39,555 39,677
-------------- --------------
Total Assets................................................................. $ 2,243,422 $ 2,683,420
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits..................................................................... $ 2,116,507 $ 2,501,246
FHLB advances................................................................ -- 20,000
Senior notes................................................................. 51,478 51,478
Other liabilities............................................................ 19,543 14,248
-------------- --------------
Total Liabilities......................................................... 2,187,528 2,586,972
-------------- --------------
Commitments and contingencies
Minority interest................................................................. 272 272
Stockholders' equity:
Common stock:
Common stock, par value $.01 per share; 78,500,000 shares authorized;
19,470,400 and 19,463,343 shares outstanding
at June 30, 2000 and December 31, 1999, respectively.................... 195 195
Paid-in capital.............................................................. 275,305 275,285
Accumulated other comprehensive loss......................................... (8,822) (9,272)
Accumulated deficit.......................................................... (211,056) (170,032)
-------------- --------------
Total Stockholders' Equity................................................ 55,622 96,176
-------------- --------------
Total Liabilities and Stockholders' Equity........................................ $ 2,243,422 $ 2,683,420
============== ==============
</TABLE>
See notes to consolidated financial statements.
1
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<TABLE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans................................................. $ 32,335 $ 43,150 $ 68,596 $ 87,756
MBS................................................... 4,703 5,139 9,921 10,911
Investment securities and other....................... 2,763 5,712 4,817 10,383
-------------- -------------- -------------- --------------
Total interest income............................... 39,801 54,001 83,334 109,050
-------------- -------------- -------------- --------------
INTEREST EXPENSE:
Deposits.............................................. 25,032 28,765 52,311 59,888
FHLB advances......................................... 2 7,899 182 16,144
Other borrowings...................................... 1,571 1,573 3,143 3,149
Interest allocated to discontinued operations......... (1,333) (2,763) (3,223) (5,989)
-------------- -------------- -------------- --------------
Total interest expense.............................. 25,272 35,474 52,413 73,192
-------------- -------------- -------------- --------------
Net interest income...................................... 14,529 18,527 30,921 35,858
Provision for estimated loan losses...................... (1,500) (5,787) (958) (8,024)
-------------- -------------- -------------- --------------
Net interest income after provision for estimated loan
losses................................................ 16,029 24,314 31,879 43,882
-------------- -------------- -------------- --------------
NONINTEREST INCOME (EXPENSE):
Loan fee income....................................... 716 845 1,531 1,574
Fee income from the sale of uninsured investment
products........................................... 1,731 1,666 3,737 3,221
Fee income from deposits and other fee income......... 733 913 1,655 1,783
Gain on sale of branches, net......................... 4,737 -- 24,314 --
Other income (expense)................................ -- (464) -- 852
Real estate operations, net........................... 193 52 62 (378)
-------------- -------------- -------------- --------------
Total noninterest income............................ 8,110 3,012 31,299 7,052
-------------- -------------- -------------- --------------
OPERATING EXPENSE:
Personnel and benefits................................ 9,736 8,212 19,534 16,801
Occupancy............................................. 3,437 3,214 6,944 6,408
Federal Deposit Insurance Corporation ("FDIC") insurance 1,389 1,126 2,987 3,381
Professional services................................. 2,189 3,236 4,864 6,305
Office-related expenses............................... 1,048 910 2,146 1,975
Other................................................. 290 (174) 26 (21)
-------------- -------------- -------------- --------------
Total operating expense............................. 18,089 16,524 36,501 34,849
-------------- -------------- -------------- --------------
Earnings from continuing operations before income
taxes and minority interest.......................... 6,050 10,802 26,677 16,085
Income tax expense....................................... -- -- -- --
-------------- -------------- -------------- --------------
Earnings from continuing operations before minority
interest............................................. 6,050 10,802 26,677 16,085
Minority interest in subsidiary.......................... 7 7 14 14
-------------- -------------- -------------- --------------
Earnings from continuing operations...................... 6,043 10,795 26,663 16,071
DISCONTINUED OPERATIONS:
Income (loss) from operations......................... 66 (26,429) (7,344) (29,708)
Loss on disposal...................................... (27,944) -- (60,344) --
-------------- -------------- -------------- --------------
Net loss................................................. $ (21,835) $ (15,634) $ (41,025) $ (13,637)
============== ============== ============== ==============
(CONTINUED)
2
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BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
EARNINGS PER SHARE:
Continuing operations:
Basic............................................... $ 0.31 $ 0.55 $ 1.37 $ 0.83
Diluted............................................. 0.31 0.54 1.37 0.81
Discontinued operations:
Basic .............................................. -- (1.35) (0.38) (1.53)
Diluted............................................. -- (1.35) (0.38) (1.53)
Loss on disposal of discontinued operations:
Basic............................................... (1.43) -- (3.10) --
Diluted............................................. (1.43) -- (3.10) --
Total:
Basic............................................... (1.12) (0.80) (2.11) (0.70)
Diluted............................................. (1.12) (0.80) (2.11) (0.70)
Weighted average common shares outstanding:
Basic............................................... 19,470,400 19,461,082 19,470,400 19,458,499
Diluted............................................. 19,488,210 19,827,507 19,483,079 19,764,141
See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net loss.................................................. $ (21,835) $ (15,634) $ (41,025) $ (13,637)
-------------- -------------- -------------- --------------
Other comprehensive earnings:
Investment and MBS AFS:
Unrealized holding gains (losses) arising
during the period, net............................. 113 (3,568) 450 (3,012)
-------------- -------------- -------------- --------------
Other comprehensive earnings (loss).................... 113 (3,568) 450 (3,012)
-------------- -------------- -------------- --------------
Comprehensive loss........................................ $ (21,722) $ (19,202) $ (40,575) $ (16,649)
============== ============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
4
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<TABLE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (21,835) $ (15,634) $ (41,025) $ (13,637)
Add back discontinued operations; net loss from
operations and disposal............................ 27,878 26,429 67,688 29,708
-------------- -------------- -------------- --------------
Earnings from contining operations...................... 6,043 10,795 26,663 16,071
Adjustments to reconcile net earnings from continuing
operations to net cash provided by operating activities
of continuing operations:
Provisions for estimated loan and real estate losses (1,511) (5,662) (958) (7,885)
Net gains on sale of loans and securities.......... -- (52) (1) (54)
FHLB stock dividends............................... (582) (544) (1,015) (1,351)
Depreciation and amortization...................... 1,760 1,724 3,450 3,479
Accretion of premiums, net deferred loan fees and
credit card fees and amortization of discounts... 784 (1,162) 1,186 173
Deferred income tax benefit........................ -- -- -- (56)
Proceeds from redemption of FHLB stock.................. 7,491 32,614 7,491 32,614
Interest receivable (increase) decrease................. (451) 1,198 799 2,830
Other assets decrease (increase)........................ 648 5,444 (2,275) 8,659
Interest payable decrease............................... (248) (945) (122) (2,604)
Other liabilities (decrease) increase................... 5,209 (468) 17,023 (2,934)
-------------- -------------- -------------- --------------
Net cash provided by operating activities of
continuing operations.............................. 19,143 42,942 52,241 48,942
-------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of investment securities AFS................. -- -- -- 28,831
Purchases of MBS AFS.................................... -- (110,577) -- (110,577)
Proceeds from sale and principal repayments of MBS AFS.. 30,544 52,332 65,353 177,657
Loans receivable, net decrease.......................... 28,949 64,094 314,286 135,010
Proceeds from sale of real estate....................... 644 4,932 1,927 9,899
Dispositions (purchases) of premises and equipment...... 5,569 (185) 5,227 (690)
-------------- -------------- -------------- --------------
Net cash provided by investing activities of
continuing operations.............................. 65,706 10,596 386,793 240,130
-------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand deposits and passbook savings, net decrease...... (27,136) (9,546) (88,016) (9,817)
Certificate accounts, net decrease...................... (69,569) (132,191) (296,723) (294,453)
Proceeds from FHLB advances............................. -- -- 6,000 --
Repayments of FHLB advances............................. (6,000) (90,000) (26,000) (90,000)
Proceeds from exercise of stock options................. -- 13 -- 13
-------------- -------------- -------------- --------------
Net cash used in financing activities of
continuing operations.............................. (102,705) (231,724) (404,739) (394,257)
Net cash provided by discontinued operations............... 36,894 42,222 51,667 47,509
Net increase (decrease) in cash and cash equivalents....... 19,038 (135,964) 85,962 (57,676)
Cash and cash equivalents at beginning of period........... 156,451 456,453 89,527 378,165
-------------- -------------- -------------- --------------
Cash and cash equivalents at end of period................. $ 175,489 $ 320,489 $ 175,489 $ 320,489
============== ============== ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on deposits, advances and other borrowings. $ (26,474) $ (38,812) $ (54,997) $ (81,048)
Income tax (payments) refunds........................... (23) 1,657 1 1,502
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Real estate acquired through foreclosure................ 1,848 4,283 2,391 9,298
Loans originated to finance sale of real estate owned... -- 796 -- 796
Stock awards and restricted stock issued................ -- 8 20 142
See notes to consolidated financial statements.
</TABLE>
5
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BANK PLUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bank Plus
Corporation ("Bank Plus") and its subsidiaries. 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") a
National Association of Securities Dealers, Inc. ("NASD") registered
broker/dealer (collectively, the "Company"). The Company offers a broad range of
consumer financial services, including demand and term deposits, uninsured
investment products, including mutual funds and annuities and loans. Fidelity
operates through 30 full-service branches, 29 of which are located in the
Southern California counties of Los Angeles and Orange, and one of which is
located in Bloomington, Minnesota. The Bloomington, Minnesota branch is subject
to a contract of sale.
In the opinion of 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 June 30, 2000 and
December 31, 1999, and the results of operations, statements of comprehensive
income and statements of cash flows for the three and six months ended June 30,
2000 and 1999. All significant intercompany transactions and balances have been
eliminated. Certain reclassifications have been made to prior years'
consolidated financial statements to conform to the 2000 presentation.
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, 1999,
together with the MD&A as of such date.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
6
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BANK PLUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
2. DISCONTINUED OPERATIONS
In July 2000, the Board of Directors adopted a plan to dispose of its
remaining credit card operations. As a result, the carrying values of the
remaining credit card portfolios and other assets at June 30, 2000 have been
reduced to their estimated sales values and the credit card operations are now
reported as discontinued operations in the Company's financial statements. The
remaining assets are expected to be disposed of through sale over the next 12
months. Summarized balance sheet data for the discontinued operations is as
follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Credit card balances and other receivables, net........... $ 46,332 $ 161,501
Other assets.............................................. 575 3,351
Other liabilities......................................... (5,697) (32)
-------------- --------------
Net assets.............................................. $ 41,210 $ 164,820
============== ==============
</TABLE>
Interest costs have been allocated to the discontinued operations based on
a rolling 12 month average of one-year fixed rate Federal Home Loan Bank
("FHLB") advances. Indirect general and administrative expenses not specifically
identifiable with either the continuing operations or discontinued operations
are allocated on the basis of direct operating expenses. Expenses allocated to
discontinued operations for the quarter and six months ended June 30, 2000 were
$0.9 million and $2.0 million, respectively.
The net assets and results of operations of the credit card operations have
been reclassified in the consolidated financial statements for prior periods as
discontinued operations. In future periods, discontinued operations are not
expected to have a material impact on consolidated results of operations.
7
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BANK PLUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
3. EARNINGS PER SHARE
The reconciliation of the numerators and denominators used in basic and
diluted (loss) earnings per share ("EPS") follows for the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Earnings from continuing operations....................... $ 6,043 $ 10,795 $ 26,663 $ 16,071
============== ============== ============== ==============
Earings per share:
Basic................................................. $ 0.31 $ 0.55 $ 1.37 $ 0.83
Effect of dilutive securities-- stock options......... -- (0.01) -- (0.02)
Effect of dilutive securities-- deferred stock awards. -- -- -- --
-------------- -------------- -------------- --------------
Diluted............................................... $ 0.31 $ 0.54 $ 1.37 $ 0.81
============== ============== ============== ==============
Income (loss) from discontinued operations................ $ 66 $ (26,429) $ (7,344) $ (29,708)
============== ============== ============== ==============
Loss per share:
Basic................................................. $ -- $ (1.35) $ (0.38) $ (1.53)
Effect of dilutive securities-- stock options......... -- -- -- --
Effect of dilutive securities-- deferred stock awards. -- -- -- --
-------------- -------------- -------------- --------------
Diluted............................................... $ -- $ (1.35) $ (0.38) $ (1.53)
============== ============== ============== ==============
Loss on disposal of discontinued operations............... $ (27,944) $ -- $ (60,344) $ --
============== ============== ============== ==============
Loss per share:
Basic................................................. $ (1.43) $ -- $ (3.10) $ --
Effect of dilutive securities-- stock options......... -- -- -- --
Effect of dilutive securities-- deferred stock awards. -- -- -- --
-------------- -------------- -------------- --------------
Diluted............................................... $ (1.43) $ -- $ (3.10) $ --
============== ============== ============== ==============
Net loss.................................................. $ (21,835) $ (15,634) $ (41,025) $ (13,637)
============== ============== ============== ==============
Loss per share:
Basic................................................. $ (1.12) $ (0.80) $ (2.11) $ (0.70)
Effect of dilutive securities-- stock options......... -- -- -- --
Effect of dilutive securities-- deferred stock awards. -- -- -- --
-------------- -------------- -------------- --------------
Diluted............................................... $ (1.12) $ (0.80) $ (2.11) $ (0.70)
============== ============== ============== ==============
Weighted average common shares outstanding:
Basic................................................. 19,470,400 19,461,082 19,470,400 19,458,499
Effect of dilutive securities-- stock options......... 367 349,132 367 289,556
Effect of dilutive securities-- deferred stock awards. 17,443 17,293 12,312 16,086
-------------- -------------- -------------- --------------
Diluted............................................... 19,488,210 19,827,507 19,483,079 19,764,141
============== ============== ============== ==============
</TABLE>
8
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BANK PLUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," effective for financial statements for annual
periods beginning after June 15, 2000. This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires the Company to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement allows derivatives to be designated as hedges only
if certain criteria are met, with the resulting gain or loss on the derivative
either charged to income or reported as a part of other comprehensive income. At
this time, the Company has not determined whether the adoption of SFAS No. 133
will have a material impact on its operations and financial position.
In 2000, the FASB issued an interpretation, ACCOUNTING FOR CERTAIN
TRANSACTIONS INVOLVING STOCK Compensation, related to the application of
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES. Among other things the interpretation addressed the accounting for
changes to the exercise price or the number of shares to be issued under a stock
option grant that originally qualified as a fixed award. The FASB concluded if
the terms of a stock option, which was originally accounted for as a fixed
award, are modified during the option term to change the exercise price or the
number of shares to be issued, that option shall be accounted for as a variable
award, thereby, requiring the measurement of compensation cost from the date of
modification to the date of exercise. With the exceptions identified below, the
final Interpretation is effective on and after July 1, 2000, and the effects of
applying the Interpretation shall be recognized on a prospective basis. With
respect to the guidance regarding direct and indirect repricings and new grants
or awards for purposes of determining whether the grantee meets the definition
of an employee under Opinion No. 25 the effective date will be December 15,
1998, however the effects of application can only be recognized after June 30,
2000. Because the Company has in the past modified the exercise price on certain
options there may be a negative impact on future operations depending on the
future movement of the Company's stock price.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements included in this Quarterly Report on Form 10-Q,
including without limitation statements containing the words "believes",
"anticipates", "intends", "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of Bank Plus and Fidelity to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors are referred to in Bank Plus' most
recent Annual Report on Form 10-K as of December 31, 1999. A number of other
factors may have a material adverse effect on the Company's financial
performance. These factors include a national or regional economic slowdown or
recession which increases the risk of defaults and credit losses; movements in
market interest rates that reduce our margins or the fair value of the financial
instruments we hold; restrictions imposed on the Bank's operations by regulators
such as a prohibition on the payment of dividends to Bank Plus; failure of the
Bank and third parties to enter into written definitive agreements on
significant transactions and to close such transactions; failure of regulatory
authorities to issue approvals or non-objection to material transactions
involving the Bank; actions by the Bank's regulators that could adversely affect
the Bank's capital levels; an increase in the number of customers seeking
protection under the bankruptcy laws which increases the amount of charge-offs;
the effects of fraud or other contract breaches by third parties or customers;
the effectiveness of the Company's collection efforts and the outcome of pending
and future litigation. Given these uncertainties, undue reliance should not be
placed on such forward-looking statements. Bank Plus disclaims any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements included herein to reflect future events
or developments.
RECENT DEVELOPMENTS
The following is a summary of significant events which occurred during the
first six months of 2000:
In June, the Bank completed the sales of the MMG Direct, Inc. ("MMG")
credit card portfolio and the Bank's credit card servicing center located in
Beaverton, Oregon. In conjunction with this sale, the buyer of the credit card
servicing center is now servicing the Bank's ADC credit card portfolio and has
an option to purchase the ADC portfolio.
The Board of Directors adopted a plan to dispose of the Company's remaining
credit card operations. As a result, the carrying values of the ADC and First
Alliance Mortgage Company ("FAMCO") credit card portfolios have been reduced to
their estimated sales values and the credit card operations are now reported as
discontinued operations in the Company's financial statements. Until the
disposal of the credit card portfolios has been completed, the Company's overall
results of operations will continue to include the results of these discontinued
operations and any changes in the anticipated proceeds from the disposal of the
credit card portfolios.
In June 2000, the Bank completed the sale of one of its retail branches
with $82 million of deposits. This sale was funded with $77 million of available
cash. In March 2000, the Bank completed the sale of five of its retail branches
with $333 million of deposits in two separate transactions. These sales were
funded with $250 million of multifamily loans, $59 million of cash and $4
million of other assets. The $24.3 million net gain recorded for the six month
period includes the expenses of the transactions and losses incurred in the
disposition of mortgage loans delivered in the transactions. Improvements in the
results of the credit card operations during the first six months of 2000
allowed the Company to achieve its 2000 business strategy objectives through
10
<PAGE>
these sales of $415 million of deposits as compared to the $600 million of
deposits the Company had originally contemplated the need to sell.
The Company has settled substantially all of the various individual
lawsuits filed in Alabama relating to the ADC credit card portfolio. The Company
has negotiated agreements in principle to settle all of the lawsuits filed in
Mississippi and is in the process of executing these agreements. In addition, a
definitive settlement agreement has been executed and approved by the court for
the class action lawsuit filed in Alabama. On August 15, the court dismissed the
class action on its merits, with prejudice. This order is subject to appeal for
a period of 42 days after the order. The settlements for cases filed in
Mississippi are subject to the execution of definitive settlement agreements by
the parties involved and confirmation by the various courts having jurisdiction
over these cases. The Company recorded a $4 million charge in the first quarter
of 2000 which represents the estimated settlement costs. There can be no
assurance that (i) settlement agreements acceptable to the Company will be
executed, (ii) the settlements not yet confirmed by the courts will be confirmed
and (iii) new lawsuits of a similar nature will not be filed in the future.
In February 24, 2000 the term of the FAMCO program expired and the Bank
notified FAMCO that it would not be extending the term of the agreements. Under
the terms of the agreements, upon termination FAMCO or its designee was required
to purchase the outstanding accounts and receivables. FAMCO has contended that
it has no obligation to purchase, or cause a designee to purchase, all of the
outstanding accounts and receivables under the FAMCO program. On March 23, 2000,
First Alliance Corporation and its subsidiaries (collectively "FACO") including
FAMCO announced that they had filed voluntary petitions under Chapter 11 of the
United States Bankruptcy Code. It is uncertain what effect the filing of the
petitions for bankruptcy will have on FAMCO's obligations under the program
agreements. Fidelity is one of FACO's 20 largest unsecured creditors and is
represented on FACO's creditors committee. The Bank has obtained relief from
stay pursuant to an order of the bankruptcy court to pursue its claim in
arbitration seeking to enforce the demand that FAMCO repurchase or cause the
repurchase of the outstanding accounts and receivables. The Bank is pursuing the
arbitration claim which, if successful, may result in the establishment of
damages due to the Bank which would be subject to collection through the
bankruptcy proceeding.
As a result of the termination of the agreement, the Company recognizes all
revenues and expenses of the FAMCO credit card portfolio in its financial
statements. Fidelity currently holds $2.7 million in cash deposits securing
FAMCO's obligation to purchase charged-off accounts under the agreements. The
ability of the Company to offset these cash deposits against prior or future
charge-offs or any deficiency that may arise upon the sale of the portfolio is
subject to bankruptcy court approval. As of June 30, 2000 outstanding balances
and the percentage of accounts over 30 days delinquent under the FAMCO program
were $13.0 million and 20.3%, respectively.
In the course of the Bank's annual safety and soundness examination the OTS
advised the Bank that its accounting and regulatory capital treatment of
allowances for loan and lease losses related to credit card receivables held for
disposal is not consistent with regulatory policy. The OTS maintains that when a
loan is held for disposal, any existing allowance for loan and lease losses
("ALLL") should be reversed and any difference between the outstanding balance
of the loans and their market value should be recorded as a valuation
adjustment. The Bank strongly disagrees with this position and believes there is
no support for the OTS position in regulations or Generally Accepted Accounting
Principles ("GAAP"). The Company believes that its accounting treatment is in
accordance with GAAP and applicable capital regulations and continues to
maintain ALLL for its credit card portfolio.
While the OTS has not concluded as to the accounting and regulatory capital
treatment, it may require the Company to eliminate the ALLL related to the
credit card portfolio and increase its valuation adjustment by an equal amount.
If the OTS' position prevails it would result in a reduction in supplementary
capital related to the ALLL for purposes of computing risk based capital. The
Company's risk based capital ratio would decrease to 8.63% at June 30, 2000 with
an excess over adequately capitalized levels of approximately $8.0 million.
There would be no impact on the Company's core capital ratios, financial
position or results of operations.
11
<PAGE>
While the Company strongly believes in the merits of its position, there
can be no assurance that the Company will prevail on its position.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Net income from continuing operations was $6.0 million and $26.7 million
for the quarter and six months ended June 30, 2000, respectively, as compared to
$10.8 million and $16.1 million for the quarter and six months ended June 30,
1999, respectively. Excluding the gains on sales of branches in the second
quarter and six months ended June 30, 2000, net income from continuing
operations was $1.3 million and $2.4 million, respectively. The decrease in the
2000 second quarter as compared to the corresponding period in 1999 was due to
lower net recoveries of loan loss reserves, lower net interest income and higher
operating expenses offset by higher noninterest income. The decrease for the six
months ended June 30, 2000 as compared to the corresponding period in 1999 was
due to lower net recoveries of loan loss reserves, lower net interest income and
higher operating expenses.
Primarily as a result of deposit sales, repayments of borrowings and
correspondingly lower levels of interest earning assets, net interest income
decreased to $14.5 million and $30.9 million for the quarter and six months
ended June 30, 2000, respectively, as compared to $18.5 million and $35.9
million in the corresponding periods in 1999. The impact of the reduction in
interest earnings assets was partially offset by improvements in the interest
margin. For the second quarter of 2000, net yield on interest earning assets
increased to 2.71% while average interest earning assets decreased to $2.1
billion as compared to a net yield of 2.38% and average interest earning assets
of $3.1 billion in the second quarter of 1999. For the six months ended June 30,
2000, net yield on interest earning assets increased to 2.69% while average
interest earning assets decreased to $2.3 billion as compared to a net yield of
2.28% and average interest earning assets of $3.1 billion in the corresponding
period in 1999. While increases in market interest rates have caused the Bank's
deposit costs to increase since the 1999 second quarter, increases in the yield
on assets and decreases in borrowings, which have higher costs than deposits,
have resulted in an increase in the net yield on interest earning assets. The
increased yield on assets was the result of the repricing of the Bank's
primarily adjustable rate mortgage portfolio and improvements in the yield on
its investment portfolio due to lower prepayments.
Despite increasing deposit costs, the Company's overall costs of funds have
risen more slowly than the Federal Home Loan Bank ("FHLB") Eleventh District
Cost of Funds Index ("COFI") to which the majority of the Company's mortgage
loan portfolio is indexed. The Bank's overall cost of funds was 4.84% for the
month of June 2000 and 4.58% for the month of June 1999, while COFI was 5.36%
and 4.50% for the corresponding periods.
Net recoveries of loan loss reserves and reduced estimates of future loan
losses in 1999 and 2000 reflect the continuing improvement in the asset quality
of the Bank's mortgage loan portfolio. For the twelve months ended June 30,
recoveries of previously established specific valuation allowances ("SVAs") for
the mortgage loan and real estate owned ("REO") portfolios, net of new SVAs
established, totaled $2.0 million.
Excluding net gains on sales of branches, net noninterest income increased
$0.4 million to $3.4 million for the second quarter of 2000 as compared to the
second quarter of 1999 while noninterest income for the six months ended June
30, 2000 was relatively unchanged from the corresponding period in the prior
year. The increase in noninterest income for the quarter is primarily attributed
to fees paid in 1999 for the prepayment of FHLB advances, with no corresponding
activity in 2000 and increases in investment product fee income. These increases
in noninterest income were partially offset by lower deposit fee income related
to the reduction in the number of branches and customers. Increased sales of
higher margin products resulted in a 4% increase in fee income from the sale of
investment products in the second quarter of 2000 as compared to the second
quarter of 1999 in spite of an 18% decrease in the number of branches. On a per
branch basis, fee income from the sale of investment products increased 27% in
the second quarter of 2000 as compared to the second quarter of 1999. The first
quarter of 1999 net noninterest income included $1.3 million of automated teller
machines cash service fees from the Americash program which was discontinued in
that quarter.
12
<PAGE>
Operating expenses for the second quarter of 2000 were $1.6 million or 9.5%
higher than the second quarter of 1999 and for the six months ended June 30,
2000 operating expenses were $1.7 million or 4.7% higher than the corresponding
period in the prior year. These increases were due primarily to increased
compensation costs, costs of the new commercial and multifamily lending
operations initiated in the fourth quarter of 1999 and higher Federal Deposit
Insurance Corporation ("FDIC") insurance costs offset by lower information
systems expenses. Increased compensation costs are primarily due to compensation
increases and other incentives to retain quality personnel in a highly
competitive employment market. The Company's core information systems were
converted to a new service bureau based system in the second quarter resulting
in a significant decrease in data processing costs.
DISCONTINUED OPERATIONS
-----------------------
Income from discontinued operations was $0.1 million in the second quarter
of 2000 and loss from discontinued operations was $7.3 million for first six
months of 2000, as compared to losses of $26.4 million and $29.7 million for the
corresponding periods in the prior year. The losses from discontinued operations
in the first quarter of 2000 and in the first two quarters of 1999 were
primarily due to high provisions for estimated loan losses. Loss on disposal of
discontinued operations was $27.9 million for the second quarter of 2000 and
$60.3 million for the six months ended June 30, 2000.
The income realized during the second quarter of 2000 and the lower levels
of losses for the six months ended June 30, 2000 as compared to the
corresponding period in the prior year reflects improvements in the Company's
delinquency and charge-off experience as compared to the prior year periods,
lower outstanding balances and the benefits of reducing the carrying value of
the MMG portfolio to its estimated sales value at the end of the first quarter
of 2000. As a result of reducing the carrying value of the MMG portfolio to its
estimated sales value, this portfolio generated earnings during the quarter.
The loss on disposal of discontinued operations represents the valuation
loss recorded by the Company to reduce the carrying values of the MMG, ADC and
FAMCO portfolios to their estimated sales values and $3.0 million of charges
related to the future termination of a third party servicing contract and the
completed sale of the Company's credit card servicing center in Beaverton,
Oregon. The valuation loss related to the MMG portfolio was recorded in the
first quarter of 2000 while the valuation losses related to the ADC and FAMCO
portfolios were recorded in the second quarter of 2000.
13
<PAGE>
COMBINED RESULTS OF OPERATIONS
The Company reported overall losses of $21.8 million or $1.12 per diluted
share for the second quarter of 2000 and $41.0 million, or $2.11 per diluted
share, for the six months ended June 30, 2000.
NET INTEREST INCOME -- CONTINUING OPERATIONS
The following tables present the primary determinants of net interest
income for the periods indicated. For the purpose of this analysis, nonaccruing
mortgage loans are included in the average balances, and delinquent interest on
such loans has been deducted from interest income.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
---------------------------------------------------------------------------
2000 1999
------------------------------------ ------------------------------------
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 .............................. $1,706,990 $ 32,335 7.58% $2,289,135 $ 43,150 7.54%
Mortgage Backed Securities ("MBS").. 275,297 4,703 6.83 347,992 5,139 5.91
Investment securities .............. 120,983 2,181 7.25 408,869 5,168 5.07
Investment in FHLB stock ........... 26,956 582 8.68 45,102 544 4.84
----------- ---------- ----------- ----------
Total interest-earning assets.... $2,130,226 39,801 7.48 $3,091,098 54,001 6.99
=========== ---------- =========== ----------
Interest-bearing liabilities:
Deposits:
Demand deposits.................... $ 333,929 1,183 1.42 $ 377,946 1,166 1.24
Savings deposits................... 92,050 671 2.93 119,711 852 2.85
Time deposits...................... 1,765,214 23,178 5.20 2,196,694 26,747 4.82
----------- ---------- ----------- ----------
Total deposits .................. 2,191,193 25,032 4.59 2,694,351 28,765 4.28
Borrowings ........................... 51,611 1,573 12.19 608,478 9,472 6.24
----------- ---------- ----------- ----------
Sub-total interest-bearing
liabilities.................... 2,242,804 26,605 4.77 3,302,829 38,237 4.64
Interest allocated to discontinued
operations......................... (85,262) (1,333) 6.29 (213,577) (2,763) 5.19
----------- ---------- ----------- ----------
Total adjusted interest-bearing
liabilities......................... $2,157,542 25,272 4.71 $3,089,252 35,474 4.61
=========== ---------- =========== ----------
Net interest income; interest rate
spread.............................. $ 14,529 2.77% $ 18,527 2.38%
========== ========= ========== =========
Net yield on interest-earning assets.. 2.71% 2.38%
========= =========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------------------
2000 1999
------------------------------------ ------------------------------------
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 .............................. $1,843,289 $ 68,596 7.44% $2,342,490 $ 87,756 7.49%
MBS................................. 291,341 9,921 6.81 379,422 10,911 5.75
Investment securities .............. 108,496 3,801 7.01 353,598 9,032 5.12
Investment in FHLB stock ........... 29,194 1,016 6.96 55,543 1,351 4.88
----------- ---------- ----------- ----------
Total interest-earning assets.... $2,272,320 83,334 7.33 $3,131,053 109,050 6.97
=========== ---------- =========== ----------
Interest-bearing liabilities:
Deposits:
Demand deposits.................... $ 355,359 2,456 1.39 $ 375,838 2,298 1.23
Savings deposits................... 96,674 1,389 2.89 119,037 1,683 2.84
Time deposits...................... 1,899,266 48,466 5.06 2,262,456 55,907 4.89
----------- ---------- ----------- ----------
Total deposits .................. 2,351,299 52,311 4.47 2,757,331 59,888 4.36
Borrowings ........................... 55,715 3,325 12.00 622,478 19,293 6.22
----------- ---------- ----------- ----------
Sub-total interest-bearing
liabilities.................... 2,407,014 55,636 4.65 $3,379,809 79,181 4.70
Interest allocated to discontinued
operations......................... (108,231) (3,223) 6.09 (229,914) (5,989) 5.25
----------- ---------- ----------- ----------
Total adjusted interest-bearing
liabilities......................... $2,298,783 52,413 4.59 $3,149,895 73,192 4.66
=========== ---------- =========== ----------
Net interest income; interest rate
spread.............................. $ 30,920 2.74% $ 35,858 2.31%
========== ========= ========== =========
Net yield on interest-earning assets.. 2.69% 2.28%
========= =========
</TABLE>
Net interest income is primarily 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 nonperforming loans ("NPLs") and (d) the interest rate
spread between the yields earned and the rates paid.
15
<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 current period. Any change that remains unallocated after such calculations
is allocated proportionately to changes in volume and changes in rates.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 2000 SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO JUNE 30, 1999 COMPARED TO JUNE 30, 1999
FAVORABLE (UNFAVORABLE) FAVORABLE (UNFAVORABLE)
--------------------------------- ---------------------------------
VOLUME RATE NET VOLUME RATE NET
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans ............................. $(11,043) $ 228 $(10,815) $(18,578) $ (582) $(19,160)
MBS ............................... (1,167) 731 (436) (2,793) 1,803 (990)
Investment securities ............. (4,621) 1,634 (2,987) (7,774) 2,543 (5,231)
Investment in FHLB stock .......... (279) 317 38 (785) 450 (335)
--------- --------- --------- --------- --------- ---------
Total interest income ........... (17,110) 2,910 (14,200) (29,930) 4,214 (25,716)
--------- --------- --------- --------- --------- ---------
Interest expense:
Deposits:
Demand deposits ................. 143 (160) (17) 130 (288) (158)
Savings deposits ................ 204 (23) 181 323 (29) 294
Time deposits ................... 5,509 (1,940) 3,569 9,261 (1,820) 7,441
--------- --------- --------- --------- --------- ---------
Total deposits .................. 5,856 (2,123) 3,733 9,714 (2,137) 7,577
Borrowings ........................ 6,655 1,244 7,899 7,292 8,676 15,968
Interest allocated to discontinued
operations ...................... (1,925) 495 (1,430) (3,607) 841 (2,766)
--------- --------- --------- --------- --------- ---------
Total interest expense ............... 10,586 (384) 10,202 13,399 7,380 20,779
--------- --------- --------- --------- --------- ---------
Decrease in net interest income ...... $ (6,524) $ 2,526 $ (3,998) $(16,531) $ 11,594 $ (4,937)
========= ========= ========= ========= ========= =========
</TABLE>
INCOME TAXES
The Company's expected combined federal and state statutory tax rate is
approximately 42.0% of earnings before income taxes. As of June 30, 2000 and
December 31, 1999, the Company's significant deferred tax assets, which
primarily consisted of net operating loss carryforwards and bad debt timing
differences, were reduced by a valuation allowance as required under Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As the
Company does not anticipate a significant change in the determination of the
valuation allowance during 2000, the Company does not expect to record any tax
expense or benefit in 2000.
16
<PAGE>
FINANCIAL CONDITION
ASSET QUALITY
CONTINUING OPERATIONS
The Company's mortgage loan portfolio is primarily secured by assets
located in Southern California and is comprised principally of single family and
multifamily residential loans. At June 30, 2000, 26.6% of Fidelity's real estate
loan portfolio consisted of California single family residences (1 to 4 units),
while 61.6% consisted of California multifamily dwellings of 5 or more units.
Because 88.5% of the Company's mortgage loan portfolio is secured by
properties located in Southern California, the performance of the Company's
loans are particularly susceptible to the potential for 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 single family, multifamily and commercial properties. In addition,
the possibility that borrowers may abandon properties or seek bankruptcy
protection with respect to income properties experiencing negative cash flow,
particularly where such properties are not cross-collateralized by other
performing assets, can also adversely affect portfolio performance.
DELINQUENT LOANS
The following tables present net delinquent loans at the dates indicated:
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
2000 2000 1999 1999 1999
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgage loan delinquencies by number of days:
30 to 59 days......................... $ 3,306 $ 1,987 $ 5,210 $ 6,641 $ 6,087
60 to 89 days......................... 1,416 1,964 3,871 2,633 2,264
90 days and over...................... 2,308 5,462 4,989 6,128 5,905
------------ ------------ ------------ ------------ ------------
Total............................... $ 7,030 $ 9,413 $ 14,070 $ 15,402 $ 14,256
============ ============ ============ ============ ============
As a percentage of outstanding balances:
30 to 59 days....................... 0.20% 0.12% 0.26% 0.31% 0.27%
60 to 89 days....................... 0.08 0.11 0.19 0.13 0.10
90 days and over.................... 0.14 0.32 0.25 0.30 0.26
------------ ------------ ------------ ------------ ------------
Total............................ 0.42% 0.55% 0.70% 0.74% 0.63%
============ ============ ============ ============ ============
Other loan delinquencies by number of days:
30 to 59 days......................... $ 359 $ 336 $ 735 $ 745 $ 742
60 to 89 days......................... 90 73 234 379 364
90 days and over...................... 111 91 148 123 160
------------ ------------ ------------ ------------ ------------
Total............................... $ 560 $ 500 $ 1,117 $ 1,247 $ 1,266
============ ============ ============ ============ ============
As a percentage of outstanding balances:
30 to 59 days....................... 4.53% 3.95% 7.49% 6.99% 6.07%
60 to 89 days....................... 1.13 0.86 2.38 3.56 2.98
90 days and over.................... 1.40 1.07 1.51 1.16 1.31
------------ ------------ ------------ ------------ ------------
Total............................ 7.06% 5.88% 11.38% 11.71% 10.36%
============ ============ ============ ============ ============
</TABLE>
Asset quality in the mortgage loan portfolio continues to be favorable with
delinquencies at June 30, 2000 of 0.42% for the overall portfolio and 0.10% for
the multifamily portfolio, compared to levels of 0.70% and 0.34%, respectively,
as of December 31, 1999.
17
<PAGE>
NONPERFORMING AND CLASSIFIED ASSETS
All assets and ratios are reported net of specific reserves unless
otherwise stated. The following table presents asset quality details at the
dates indicated:
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
2000 2000 1999 1999 1999
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonperforming Assets ("NPAs") by Type:
NPLs.................................. $ 2,377 $ 5,513 $ 6,945 $ 7,108 $ 6,412
Real Estate Owned ("REO")............. 2,886 1,671 2,422 5,685 6,861
Other repossessed assets.............. -- -- 29 72 139
------------ ------------ ------------ ------------ ------------
Total NPAs.......................... $ 5,263 $ 7,184 $ 9,396 $ 12,865 $ 13,412
============ ============ ============ ============ ============
Number of REO properties................. 27 30 37 41 42
============ ============ ============ ============ ============
NPAs by Composition:
Single family (1 to 4 units).......... $ 3,210 $ 5,036 $ 5,799 $ 6,474 $ 7,100
Multifamily 5 units and over.......... 1,470 1,598 2,147 3,893 4,504
Commercial and other.................. 1,136 1,136 1,963 2,965 2,449
Consumer.............................. 69 51 145 153 427
REO valuation allowances.............. (622) (637) (658) (620) (1,068)
------------ ------------ ------------ ------------ ------------
Total NPAs.......................... 5,263 7,184 9,396 12,865 13,412
Total troubled debt restructurings
("TDRs")............................ 24,855 28,259 30,851 25,022 31,255
------------ ------------ ------------ ------------ ------------
Total TDRs and NPAs................. $ 30,118 $ 35,443 $ 40,247 $ 37,887 $ 44,667
============ ============ ============ ============ ============
Classified Assets:
NPAs.................................. $ 5,263 $ 7,184 $ 9,396 $ 12,865 $ 13,412
Performing classified loans .......... 41,881 43,429 51,359 50,631 55,925
Other classified assets............... 500 842 840 781 889
------------ ------------ ------------ ------------ ------------
Total classified assets............. $ 47,644 $ 51,455 $ 61,595 $ 64,277 $ 70,226
============ ============ ============ ============ ============
Classified Asset Ratios:
NPLs to total assets.................. 0.11% 0.24% 0.28% 0.26% 0.21%
NPLs to total loans................... 0.14% 0.32% 0.35% 0.34% 0.29%
NPAs to total assets.................. 0.24% 0.32% 0.37% 0.47% 0.44%
TDRs to total assets.................. 1.13% 1.27% 1.22% 0.91% 1.02%
NPAs and TDRs to total assets......... 1.37% 1.59% 1.60% 1.37% 1.45%
Classified assets to total assets..... 2.16% 2.28% 2.45% 2.33% 2.28%
NPLs to NPAs.......................... 45.16% 76.74% 73.91% 55.25% 47.81%
</TABLE>
Total classified assets of continuing operations decreased 14.0 million
from December 31, 1999, to $47.6 million at June 30, 2000, primarily due to a
$9.5 million decrease in performing classified loans. This decrease reflects the
continuing improvement in the performance of the Bank's mortgage loan portfolio,
including improvements in the underlying income properties of the multifamily
portfolio.
18
<PAGE>
ALLOWANCE FOR ESTIMATED LOAN AND REO LOSSES
The following schedule summarizes the activity in the allowances for
estimated loan and REO losses:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period.................... $ 14,294 $ 28,922 $ 15,257 $ 34,647
------------ ------------ ------------ ------------
Charge-offs.................................... (376) (2,082) (1,463) (5,926)
Allocation of reserves to loans sold........... -- -- (501) --
Recoveries..................................... 203 1,180 275 1,522
------------ ------------ ------------ ------------
Net charge-offs.............................. (173) (902) (1,689) (4,404)
Provision:
Recovery of estimated loan losses............ (1,500) (5,787) (958) (8,024)
REO.......................................... 11 125 22 139
------------ ------------ ------------ ------------
Balance at end of period.......................... $ 12,632 $ 22,358 $ 12,632 $ 22,358
============ ============ ============ ============
Ratio of net charge-offs during the period to
average loans outstanding, annualized.......... 0.04% 0.16% 0.18% 0.38%
</TABLE>
The following table presents loan and REO charge-offs and recoveries for
the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Charge-offs:
Single family (1 to 4 units)................. $ 78 $ 376 $ 314 $ 835
Multifamily loans:
5 to 36 units.............................. 135 589 171 1,107
37 units and over.......................... -- 285 -- 285
------------ ------------ ------------ ------------
Total multifamily....................... 135 874 171 1,392
------------ ------------ ------------ ------------
Commercial and industrial.................... -- 33 55 1,187
Auto and other loans......................... 163 799 923 2,512
------------ ------------ ------------ ------------
Total charge-offs............................... $ 376 $ 2,082 $ 1,463 $ 5,926
============ ============ ============ ============
Recoveries:
Single family (1 to 4 units)................. $ 203 $ 468 $ 217 $ 690
Multifamily loans:
5 to 36 units.............................. -- 146 29 266
37 units and over.......................... -- 168 -- 168
------------ ------------ ------------ ------------
Total multifamily....................... -- 314 29 434
------------ ------------ ------------ ------------
Commercial and industrial.................... -- 398 29 398
------------ ------------ ------------ ------------
Total recoveries................................ $ 203 $ 1,180 $ 275 $ 1,522
============ ============ ============ ============
</TABLE>
Charge-offs declined $0.8 million and $1.7 million for the quarter and six
months ended June 30, 2000 as compared to the corresponding periods in 1999. The
decline in charge-offs is due to improvements in the performance of the mortgage
portfolio and the sale of $10.5 million of auto loans at the end of the first
quarter of 1999. At June 30, 2000, only $2.0 million of auto loans were
outstanding.
19
<PAGE>
The following table sets forth the allowance for estimated loan and REO
losses at the dates indicated:
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
2000 2000 1999 1999 1999
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans:
Allowance for Loan and Lease Loss
("ALLL")............................. $ 9,574 $ 10,895 $ 10,697 $ 12,534 $ 15,609
Specific Valuation Allowance ("SVA")... 2,436 2,762 3,902 5,040 5,681
------------ ------------ ------------ ------------ ------------
Total ALLL and SVA................... 12,010 13,657 14,599 17,574 21,290
REO valuation allowances.................. 622 637 658 620 1,068
------------ ------------ ------------ ------------ ------------
Total allowances.......................... $ 12,632 $ 14,294 $ 15,257 $ 18,194 $ 22,358
============ ============ ============ ============ ============
Selected ratios:
Total allowances to net loans and REO.. 0.75% 0.83% 0.75% 0.87% 0.99%
Total ALLL to:
Net loans............................ 0.57% 0.63% 0.53% 0.60% 0.69%
Net NPLs............................. 402.78% 197.62% 154.02% 176.34% 243.43%
Net NPAs............................. 181.91% 151.66% 113.85% 97.43% 116.38%
Classified assets.................... 20.09% 21.17% 17.37% 19.50% 22.23%
Total assets......................... 0.43% 0.48% 0.42% 0.45% 0.51%
</TABLE>
Credit losses are inherent in the business of originating and retaining
loans. The Company maintains an allowance for credit losses to absorb losses
inherent in the loan portfolio. These allowances consist of SVAs and an
Allowance for Loan and Lease Loss ("ALLL") which are based on ongoing, quarterly
assessments of the probable estimated losses inherent in the loan portfolio.
The allowance for credit losses does not represent the amount of losses
that could be incurred under adverse conditions that management does not
consider to be the most likely to arise. In addition, management's
classification of assets and evaluation of the adequacy of the allowance for
credit losses is an ongoing process. Consequently, there can be no assurance
that material additions to the Bank's allowance for credit losses will not be
required in the future, thereby adversely affecting earnings and the Bank's
ability to maintain or build capital.
20
<PAGE>
DISCONTINUED OPERATIONS
The performance of the Bank's credit card portfolio may be adversely
affected by a number of factors, including a national or regional economic
slowdown or recession, an increase in the number of customers seeking protection
under the bankruptcy laws, the effectiveness of the collection efforts, and
fraud or breaches of contracts by third parties or customers. In addition,
because the portfolio is primarily sub-prime, the Bank has and is expected to
continue to experience significantly higher delinquencies and charge-offs in its
credit card portfolio than those experienced by other credit card issuers whose
portfolio's are not sub-prime.
DELINQUENT LOANS
The following table presents the credit card loan portfolio at the dates
indicated:
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
2000 2000 1999 1999 1999
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current.............................. $ 73,065 $ 156,326 $ 170,533 $ 199,331 $ 222,805
Delinquencies:
30 to 59 days...................... 4,717 6,907 11,157 13,397 15,666
60 to 89 days...................... 3,663 5,413 8,438 10,040 13,940
90 to 119 days..................... 2,815 5,108 7,596 9,877 12,075
120 to 149 days.................... 1,649 4,915 7,213 9,443 8,460
150 days and over.................. 1,522 4,376 5,706 8,734 6,963
------------ ------------ ------------ ------------ ------------
Total delinquencies............. 14,366 26,719 40,110 51,491 57,104
------------ ------------ ------------ ------------ ------------
Total................................ $ 87,431 $ 183,045 $ 210,643 $ 250,822 $ 279,909
============ ============ ============ ============ ============
As a percentage of outstanding balances:
30 to 59 days...................... 5.40% 3.77% 5.30% 5.34% 5.60%
60 to 89 days...................... 4.19 2.96 4.00 4.00 4.98
90 to 119 days..................... 3.22 2.79 3.61 3.94 4.31
120 to 149 days.................... 1.89 2.69 3.42 3.76 3.02
150 days and over.................. 1.74 2.39 2.71 3.48 2.49
------------ ------------ ------------ ------------ ------------
Total........................... 16.44% 14.60% 19.04% 20.52% 20.40%
============ ============ ============ ============ ============
</TABLE>
The recent decreases in total balances outstanding and delinquent balances
are primarily the result of the sale of the MMG portfolio in June 2000. At the
time of the sale the MMG portfolio had $75.8 million outstanding with $10.3
million in delinquent balances. In addition to the sale of the MMG portfolio the
decrease in outstanding balances for the second quarter was the result of $15.5
million of charge-offs and $4.3 million of collections in excess of purchases,
interest and fees charged to the accounts.
21
<PAGE>
ALLOWANCE FOR ESTIMATED LOAN AND LOSSES
The following schedule summarizes the activity in the discontinued
operations allowances for estimated loan losses: (See related discussion of ALLL
and regulatory capital in the Regulatory Capital Compliance section below.)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period.................... $ 38,036 $ 51,889 $ 48,351 $ 74,551
------------ ------------ ------------ ------------
Charge-offs.................................... (15,474) (28,391) (33,847) (67,775)
Allocation of reserves to loans sold........... (14,000) -- (14,000) --
Recoveries..................................... 3,511 635 4,100 980
------------ ------------ ------------ ------------
Net charge-offs.............................. (25,963) (27,756) (43,747) (66,795)
Provision:
Estimated loan losses........................ 7,800 37,587 15,258 52,824
Funds provided by affinity marketers......... 38 552 49 1,692
------------ ------------ ------------ ------------
Balance at end of period.......................... $ 19,911 $ 62,272 $ 19,911 $ 62,272
============ ============ ============ ============
</TABLE>
Charge-offs purchased by FAMCO during the first six months of 2000 and 1999
totaled $0.6 million and $1.2 million, respectively, and are not included as
charge-offs in the table above.
22
<PAGE>
REGULATORY CAPITAL COMPLIANCE
The Office of Thrift Supervision ("OTS") capital regulations, as required
by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
include three separate minimum capital requirements for the savings institution
industry--a "tangible capital requirement," a "leverage limit" and a "risk-based
capital requirement." These capital standards must be no less stringent than the
capital standards applicable to national banks.
The Bank's actual and required capital are as follows at the dates
indicated:
<TABLE>
<CAPTION>
TO BE CATEGORIZED
AS ADEQUATELY TO BE CATEGORIZED
ACTUAL CAPITALIZED AS WELL CAPITALIZED
--------------------- --------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 2000:
Total capital (to risk-weighted
assets)(1)........................ $115,525 9.09% $101,618 8.00% $127,022 10.00%
Core capital (to adjusted tangible
assets)........................... 99,737 4.45 67,231 3.00 112,051 5.00
Tangible capital (to tangible
assets)........................... 99,737 4.45 33,615 1.50 N/A
Core capital (to risk-weighted
assets)........................... 99,737 4.45 N/A 76,213 6.00
AS OF DECEMBER 31, 1999:
Total capital (to risk-weighted
assets)........................... $159,952 10.09% $126,796 8.00% $158,495 10.00%
Core capital (to adjusted tangible
assets)........................... 139,689 5.22 80,306 3.00 133,843 5.00
Tangible capital (to tangible
assets)........................... 139,689 5.22 40,153 1.50 N/A
Core capital (to risk-weighted
assets)........................... 139,689 8.81 N/A 95,097 6.00
</TABLE>
(1) In the course of the Bank's annual safety and soundness examination the
OTS advised the Bank that its accounting and regulatory capital treatment of
allowances for loan and lease losses related to credit card receivables held for
disposal is not consistent with regulatory policy. The OTS maintains that when a
loan is held for disposal, any existing allowance for loan and lease losses
("ALLL") should be reversed and any difference between the outstanding balance
of the loans and their market value should be recorded as a valuation
adjustment. The Bank strongly disagrees with this position and believes there is
no support for the OTS position in regulations or Generally Accepted Accounting
Principles ("GAAP"). The Company believes that its accounting treatment is in
accordance with GAAP and applicable capital regulations and continues to
maintain ALLL for its credit card portfolio.
While the OTS has not concluded as to the accounting and regulatory capital
treatment, it may require the Company to eliminate the ALLL related to the
credit card portfolio and increase its valuation adjustment by an equal amount.
If the OTS' position prevails it would result in a reduction in supplementary
capital related to the ALLL for purposes of computing risk based capital. The
Company's risk based capital ratio would decrease to 8.63% at June 30, 2000 with
an excess over adequately capitalized levels of approximately $8.0 million.
There would be no impact on the Company's core capital ratios, financial
position or results of operations.
While the Company strongly believes in the merits of its position, there
can be no assurance that the Company will prevail on its position.
23
<PAGE>
The following table reconciles the Company's stockholders' equity to the
Bank's tangible, core and risk-based capital at the dates indicated:
<TABLE>
<CAPTION>
TANGIBLE ORE CAPITAL RISK-BASED
CAPITAL CAPITAL CAPITAL
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
AS OF JUNE 30, 2000:
Consolidated stockholders' equity................. $ 55,622 $ 55,622 $ 55,622
Adjustments:
Fidelity's Preferred Stock...................... 51,750 51,750 51,750
Bank Plus equity excluding Fidelity............. (1,157) (1,157) (1,157)
------------ ------------ ------------
Fidelity's stockholders' equity................... 106,215 106,215 106,215
Accumulated other comprehensive loss.............. 8,822 8,822 8,822
Adjustments:
Intangible assets............................... (11,393) (11,393) (11,393)
Supplementary capital-- ALLL.................... -- -- 16,046
Net deferred tax assets......................... (3,907) (3,907) (3,907)
Assets required to be deducted.................. -- -- (258)
------------ ------------ ------------
Regulatory capital.................................. $ 99,737 $ 99,737 $ 115,525
============ ============ ============
AS OF DECEMBER 31, 1999:
Consolidated stockholders' equity................. $ 96,176 $ 96,176 $ 96,176
Adjustments:
Fidelity's Preferred Stock...................... 51,750 51,750 51,750
Bank Plus equity excluding Fidelity............. (1,250) (1,250) (1,250)
------------ ------------ ------------
Fidelity's stockholders' equity................... 146,676 146,676 146,676
Accumulated other comprehensive loss.............. 9,272 9,272 9,272
Adjustments:
Intangible assets............................... (12,352) (12,352) (12,352)
Nonincludable subsidiaries...................... (1) (1) (1)
Supplementary capital-- ALLL.................... -- -- 20,263
Net deferred tax assets......................... (3,906) (3,906) (3,906)
------------ ------------ ------------
Regulatory capital.................................. $ 139,689 $ 139,689 $ 159,952
============ ============ ============
</TABLE>
As of June 30, 2000, the Bank was "adequately capitalized" under the prompt
corrective action ("PCA") regulations adopted by the OTS pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991.
24
<PAGE>
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.
DEPOSITS
The largest source of funds for the Bank is deposits. Customer deposits are
insured by the FDIC to the maximum amount permitted by law. At June 30, 2000,
the Bank had deposits of $2.1 billion. The following table presents the
distribution of deposit accounts at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Checking accounts...................................... $ 317,108 $ 369,071 $ 366,459
Passbook accounts...................................... 45,086 49,973 58,397
Money market savings accounts.......................... 43,369 50,428 58,906
------------ ------------ ------------
Total transaction accounts.......................... 405,563 469,472 483,762
------------ ------------ ------------
Certificates of Deposit ("CDs"):
Less than $100,000.................................. $ 1,187,631 $ 1,422,303 1,539,946
Greater than $100,000............................... 523,313 609,471 594,553
------------ ------------ ------------
Total CDs......................................... $ 1,710,944 $ 2,031,774 2,134,499
------------ ------------ ------------
Total deposits......................................... $ 2,116,507 $ 2,501,246 $ 2,618,261
============ ============ ============
Weighted average interest rate on deposits............. 4.64% 4.21% 4.16%
============ ============ ============
</TABLE>
There were no brokered deposits outstanding at the dates indicated above.
The following table provides information with regards to the Bank's most
recent quarterly experience in the levels of and pricing of certificates of
deposit ("CDs") for the period indicated:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE RATE
--------------------------
NET NEW OR NET NEW OR
WITHDRAWALS RENEWED NET CHANGE WITHDRAWALS RENEWED
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CDs maturing in quarter ended:
June 30, 1999..................... $ 584,454 $ 452,263 $ (132,191) 5.08% 4.33%
September 30, 1999................ 577,716 561,375 (16,341) 4.90 4.79
December 31, 1999................. 482,455 494,889 12,434 4.55 4.96
March 31, 2000.................... 665,225 676,358 11,133 4.53 5.24
June 30, 2000..................... 523,313 453,744 (69,569) 4.88 5.56
</TABLE>
25
<PAGE>
The distribution of certificate accounts by date of maturity is an
important indicator of the relative stability of a major source of funds. Longer
term certificate accounts generally provide greater stability as a source of
funds, but currently entail greater interest costs than passbook accounts. The
following tables summarize certificate accounts by maturity and weighted average
rate at June 30, 2000:
WEIGHTED
AVERAGE
AMOUNT RATE
------------ ------------
MATURES IN QUARTER ENDED: (DOLLARS IN THOUSANDS)
-------------------------
September 30, 2000................................ $ 366,516 5.13%
December 31, 2000................................. 338,051 5.30
March 31, 2001.................................... 327,460 5.31
June 30, 2001..................................... 280,496 5.68
September 30, 20001............................... 91,361 5.00
December 31, 2001................................. 89,594 4.75
March 31, 2002.................................... 122,885 5.47
June 30, 2002 and after........................... 94,581 5.47
------------ ------------
Total CDs...................................... $ 1,710,944 5.30%
============ ============
BORROWINGS
The following table sets forth certain information as to the Company's FHLB
advances and other borrowings at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FHLB advances: fixed rate advances........................ $ -- $ 20,000 $ 495,000
Senior notes.............................................. 51,478 51,478 51,478
------------ ------------ ------------
Total borrowings.......................................... $ 51,478 $ 71,478 $ 546,478
============ ============ ============
Weighted average interest rate on all borrowings.......... 12.00% 11.05% 6.18%
Percent of total borrowings to total liabilities and
stockholders' equity...................................... 2.29% 2.66% 16.57%
</TABLE>
UNDRAWN SOURCES
The Company maintains other sources of liquidity to draw upon, which at
June, 2000 include (a) available credit faculties with the FHLB of $336.7
million, (b) $248.6 million in unpledged securities available to be placed in
reverse repurchase agreements or sold, (c) available credit facilities at the
Federal Reserve Bank of $100 million and the ability under Federal Regulations
to borrow $125 million through the use of brokered CDs.
CONTINGENT OR POTENTIAL USES OF FUNDS
The Bank had unfunded loans totaling $17.3 million and $3.4 million at June
30, 2000 and December 31, 1999, respectively. Additionally, unused lines of
credit related to credit card loans, deposit overdraft accounts and other credit
lines totaled $63.7 million and $83.8 million at June 30, 2000 and December 31,
1999, respectively.
26
<PAGE>
LIQUIDITY
The regulatory required average daily balance of liquid assets is 4.0% of
the liquidity base, which is based on a quarterly average. The Bank's quarterly
average regulatory liquidity ratio was 21.66% and 18.40% for the six months
ended June 30, 2000 and 1999, respectively.
HOLDING COMPANY LIQUIDITY
At June 30, 2000, Bank Plus had cash and cash equivalents of $0.7 million.
Bank Plus has 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 its payment obligations on its $51.5 million senior
notes.
During the quarter, the Company made its scheduled interest payment on its
Senior Notes. The funds for the remaining interest payments in 2000 is expected
to be provided by preferred stock dividends from the Bank and currently
projected liquidity at the holding company. The Bank has been authorized by the
OTS to make payments of dividends on the Bank's preferred stock so long as the
Bank remains at least adequately capitalized for regulatory purposes. The
authorization from the OTS does not constrain the OTS from restricting future
dividend payments based on safety and soundness considerations or future
examination findings, and no assurance can therefore be given that the OTS will
permit future dividend payments by Fidelity to Bank Plus. The Bank has received
no indication from the OTS that it will object to the continued payment of
preferred dividends.
ASSET/LIABILITY MANAGEMENT AND MARKET RISK
The objective of asset/liability management is to maximize the net 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.
27
<PAGE>
The following table sets out the maturity and rate sensitivity of the
interest-earning assets and interest-bearing liabilities as of June 30, 2000.
"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 based on certain assumptions, including those stated in
the notes to the table.
MATURITY AND RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
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 and cash equivalents.............. $ 175,489 $ -- $ -- $ -- -- $ 175,489
FHLB stock (1)......................... 24,729 -- -- -- -- 24,729
MBS (1)................................ 39,750 707 -- -- 214,130 254,587
Assets of discontinued operations...... 31,600 55,831 -- -- -- 87,431
Loans receivable:
Adjustable Rate Mortgages ("ARMs")... 1,197,100 314,470 39,184 5,399 864 1,557,017
Fixed rate loans..................... 3,168 1,056 3,123 11,091 111,608 130,046
------------ ------------ ------------ ------------ ------------ ------------
Total gross loans receivable....... 1,200,268 315,526 42,307 16,490 112,472 1,687,063
------------ ------------ ------------ ------------ ------------ ------------
Total interest-earning assets............ 1,471,836 372,064 42,307 16,490 326,602 $ 2,229,299
------------ ------------ ------------ ------------ ------------ ============
Interest-bearing liabilities:
Deposits:
Checking and savings accounts (3).... 362,194 -- -- -- -- $ 362,194
Money market accounts (3)............ 43,369 -- -- -- -- 43,369
Fixed maturity deposits:
Retail customers................... 373,045 939,476 397,800 363 260 1,710,944
Wholesale customers................ -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total deposits................... 778,608 939,476 397,800 363 260 2,116,507
Borrowings: Senior Notes............... -- -- -- 51,478 -- 51,478
------------ ------------ ------------ ------------ ------------ ------------
Total interest-bearing liabilities....... 778,608 939,476 397,800 51,841 260 $ 2,167,985
------------ ------------ ------------ ------------ ------------ ============
Repricing Gap............................ $ 693,228 $ (567,412) $ (355,493) $ (35,351) $ 326,342
============ ============ ============ ============ ============
Gap to total assets...................... 30.90% (25.29)% (15.85)% (1.58)% 14.55%
Cumulative Gap to Total Assets........... 30.90% 5.61% (10.24)% (11.82)% 2.73%
</TABLE>
(1) Repricings shown are based on the contractual maturity or repricing
frequency of the instrument.
(2) ARMs are primarily in the shorter categories as they are subject to
interest rate adjustments.
(3) These liabilities are subject to daily adjustments and are therefore
included in the "Within 3 Months" category.
The Company manages interest rate risk by, among other things, maintaining
a portfolio consisting primarily of Adjustable Rate Mortgages ("ARMs") loans.
Interest sensitive assets provide the Company with a degree of long-term
protection from rising interest rates. ARM loans comprised 87% of the total
mortgage loan portfolio at June 30, 2000 and 81% of ARMs in the mortgage loan
portfolio are indexed to the FHLB COFI. The Company's liabilities reprice
generally in line with the cost of funds of institutions which comprise 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, in a rising rate environment 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, net
interest income will be positively affected.
28
<PAGE>
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.
MARKET RISK
The Bank's Asset Liability Committee which is composed of senior management
representatives, monitors and considers methods of managing the rate and
sensitivity repricing characteristics of the balance sheet components consistent
with maintaining acceptable levels of changes in net portfolio value ("NPV") and
net interest income. A primary purpose of the Company's asset/liability
management is to manage interest rate risk to effectively invest the Company's
capital and to preserve the value created by its core business operations. As
such, certain management monitoring processes are designed to minimize the
impact of sudden and sustained changes in interest rates on NPV and net interest
income. There has been no significant change in interest rate sensitivity since
December 31, 1999.
29
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ADC CREDIT CARD LITIGATION
Over one hundred lawsuits, on behalf of more than two hundred individual
plaintiffs, and two purported class actions, were filed in state and federal
courts in the State of Alabama against Fidelity and, in most instances, ADC,
Bank Plus, and various manufacturers and distributors of consumer appliances. In
addition, the Bank and Bank Plus have been sued in four cases in state court in
the State of Mississippi on behalf of more than seventy individual plaintiffs
(the Mississippi cases were removed to Federal Court in that state). All of
these cases arise out of the affinity credit card program between the Bank and
ADC in which independent third-party direct marketers sold consumer appliances
and concurrently offered consumers an opportunity to apply for a credit card
arranged by ADC and issued by the Bank which was then used to pay for the
appliance. The Bank discontinued financing such consumer products under the ADC
program in early 1999.
The plaintiffs in the litigation were cardholders who alleged, generally,
that misrepresentations were made to them by the sales people in connection with
their purchases of the consumer appliances and applications for credit card
accounts, including misrepresentations with respect to the nature and cost of
financing such purchases through credit cards issued by the Bank. The Bank
believes that it had substantial legal and factual defenses to these claims in
that it did not control, direct, or otherwise have any dealings with the sales
people who allegedly made such misrepresentations, and the financing and other
terms of the credit cards were disclosed in writing to cardholders by the Bank.
The Bank also believes that the majority of the plaintiffs claims were subject
to adjudication under federal laws.
Notwithstanding the Company's defenses, the Company has executed settlement
agreements to settle the various individual and purported class action lawsuits
filed in Alabama relating to the ADC credit card portfolio and has settled or is
in the process of settling the lawsuits in Mississippi. The Company recorded a
$4.0 million charge in the first quarter of 2000 which represents the estimated
settlement costs for all of the then outstanding card consumer cases, threatened
but unfiled claims and the purported class actions. With respect to the
individual cases in Alabama, the Bank has made the settlement payments, and most
of the cases have been dismissed with the remaining dismissals expected shortly.
One of the class actions was settled as an individual suit. A definitive
settlement agreement has been executed and approved by the court for the class
action lawsuit filed in Alabama. On August 15, 2000 the court dismissed the
class action on its merits, with prejudice. This order is subject to appeal for
a period of 42 days after the order.
In June 2000, another individual Alabama cardholder filed suit against the
Bank and the Company raising similar allegations as in the settled cases. The
Company is pursuing settlement of this matter on terms similar to other settled
cases. In addition, the Bank and the Company may be faced with lawsuits from
cardholders who opt-out of the class action settlement. The opt-out period
expired on August 8, 2000 with twenty-four persons electing to opt-out of the
settling class.
The Bank is a third-party beneficiary of agreements in which ADC and the
distributors of the consumer products agreed to indemnify and defend the Bank
against potential claims relating to the program. The Bank believes that the
claims of the plaintiffs are within the scope of the indemnity and defense
covenants, and the Bank has demanded that ADC and the distributors indemnify the
Bank and provide a defense. Although ADC had been fulfilling its indemnification
obligations, early this year it ceased payment of the Bank's costs of defense
and indicated that it does not have the funds to continue to honor its indemnity
obligations. Thus far the distributors have either not responded to the Bank's
demands for indemnity and defense, denied such demands, or declined to respond
until such time as the distributors have had additional opportunity to
investigate the claims.
30
<PAGE>
NATIONWIDE CAPITAL COMPANY LLC CREDIT CARD LITIGATION
In November 1997, the Bank entered into a credit card marketing
relationship with MMG pursuant to which MMG was to solicit members of certain
agreed-upon affinity groups to become credit card holders. The Bank was to
contract for the provision of or provide credit card servicing and other related
functions. MMG and the Bank were to share equally in program profits and losses.
In late summer and fall of 1998, disputes arose between the parties. These
disputes were resolved in an arbitration proceeding in Los Angeles entitled IN
THE MATTER OF ARBITRATION BETWEEN FIDELITY FEDERAL BANK AND MMG DIRECT, INC.,
American Arbitration Association No. 72 147 01072 98.
As a part of the affinity credit card marketing program with MMG, the Bank
entered into an agreement with Nationwide Capital Company L.L.C. ("Nationwide"),
who purported to have arrangements with automobile dealers, including
arrangements to obtain lists of customers of the dealers, through which
dealer-branded credit cards would be marketed and issued to customers of the
dealers. The Nationwide contract expressly provided that it could be terminated
by the Bank upon termination of the Bank's contract with MMG and further
provided that any disputes arising in connection with the contract would be
arbitrated in Los Angeles, California.
Notwithstanding its commitment to arbitrate any disputes arising in
connection with the contract in Los Angeles, Nationwide instituted litigation
against the Bank in the Texas state court. The Bank sought to stay this
litigation in the Texas state court and also filed a petition against Nationwide
in the United States District Court for the Central District of California to
compel Nationwide to arbitrate and to stay the Texas proceedings. The Bank's
petition was granted by the District Court and, as a result, the Texas state
court litigation has been stayed and Nationwide has been ordered to arbitrate
its claim. After the District Court ruling became final, Nationwide filed an
arbitration proceeding against the Bank in Los Angeles.
In the arbitration Nationwide asserts claims for breach of contract against
the Bank and tort claims for interference with its contract rights with MMG and
with the automobile dealers in connection with the credit card program.
According to the claim in arbitration, the contract claims alone amount to $75
million. The Bank believes that Nationwide's claims are without merit. In
addition, the Bank intends to assert all available counterclaims against
Nationwide, which are currently being evaluated, including its counterclaim for
damages for failure to arbitrate.
PURPORTED CLASS ACTION LITIGATION
On October 19, 1998, a purported class action was filed against Bank Plus
and its current and immediately preceding chief executive officers. The case was
originally entitled Howard Gunty Profit Sharing Plan, both individually and on
behalf of all others similarly situated, Plaintiffs v. Richard M. Greenwood,
Mark K. Mason, Bank Plus Corporation, and Does I through 50, inclusive,
Defendants, Los Angeles Superior Court, Central Judicial District, Case No.
BC199336 ("Gunty I"). This action originally alleged that Bank Plus failed to
make adequate public disclosure concerning losses in the Bank's credit card
operations during the period from August 14, 1998 (when the Company filed its
quarterly report on Form l0-Q for the 1998 second quarter) through September 22,
1998 (when the Company issued a press release concerning its credit card
losses). An amended complaint was filed in the Los Angeles Superior Court,
Central Judicial District, Case No. BC199336, entitled Howard Gunty Profit
Sharing Plan and Robert E. Yelin, both individually and on behalf of the Yelin
Family Trust U/A, both individually and on behalf of all others similarly
situated, Plaintiffs, v. Richard M. Greenwood, Mark K. Mason, Bank Plus
Corporation, and Does 1 through 50, inclusive ("Gunty II"). The amended
complaint purports to expand the class period to extend from March 30, 1998
through September 22, 1998. The complaint includes claims for negligent
misrepresentation, common law fraud, statutory fraud and violations of the
California Corporations Code.
Plaintiffs filed a motion for class certification in the Gunty II case.
Bank Plus and the individual defendants filed an opposition challenging the
suitability of the proposed representative plaintiff to act as such and further
asserting that all claims aside from those on file in the original Gunty II
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complaint are preempted by Federal law under the Securities Litigation Uniform
Standards Act. On May 3, 2000, the Court ruled that the proposed representative
plaintiff, The Howard Gunty Profit Sharing Plan, was not typical of the
purported class and not adequate as a class representative and thus not suitable
to represent the purported class. The Court continued plaintiffs' motion to
certify a class in order to allow plaintiffs to propose a different class
representative. Thereafter, plaintiffs proposed a further class representative.
Defendants opposed on statute of limitation grounds and this opposition was
upheld. The Court has ordered that plaintiffs counsel should be accorded an
opportunity to solicit amongst the purported class for a new class
representative or class representatives. Proceedings are currently under way to
determine the exact format of that solicitation. It is unknown at this time
whether the solicitation will result in the emergence of a class representative
or class representatives willing to undertake the responsibilities of that role
and, if so, whether any such representative or representatives will be
ultimately deemed to be adequate to act as representatives of the purported
class and typical of the purported class. The Bank intends to continue to assert
all defenses to class certification and further intends to continue to assert
that any claims made on behalf of the expanded class asserted in Gunty II are
barred and preempted by the Securities Litigation Uniform Standards Act. In
addition, should any purported class of any scope be certified, the Bank intends
to vigorously defend on the merits. In this respect, the Bank believes, among
other things, that its communications to the public were timely and accurate and
that it did not engage in any market activity which would generate liability
under the California Corporations Code.
DURGA MA ARBITRATION
In April 1998, the Bank entered into two Private Label Credit Card
Agreements with Durga Ma, a New Jersey corporation, doing business as Diamond
Way International. One of those agreements contemplated issuing credit cards to
Durga Ma's jewelry customers; the other contemplated issuing cards to customers
of independent jewelry retailers selected by Durga Ma. According to the
agreements, the Bank would issue credit cards to customers whose applications
were approved by the Bank. The Bank would have the exclusive right to issue
credit cards bearing the name of Durga Ma or Diamond Way International to
qualified customers. The agreements provided that Bank would own the cards and
pay to Durga Ma 2.0% of finance charges collected. Durga Ma would be responsible
for developing, printing and distributing marketing materials. The agreements
call for binding arbitration in the event of disputes.
In October 1999, Durga Ma invoked binding arbitration subsequent to the
Bank's decision not to issue credit cards under the agreement. Durga Ma alleges
"breach of contract and fraud" and claims damages in the amount of $5.0 million.
The Bank believes many of the claims lack merit and the damages sought are
speculative.
INTERNET CASINO LITIGATION
The Bank and MasterCard International, Inc. have been named as defendants
in a purported class action filed July 27, 1999 in the United States District
Court for the Middle District of Alabama, entitled Evelyn L. Brown, on behalf of
herself and all others similarly situated vs. MasterCard International, Inc. and
Fidelity Federal Bank, Civil Action Case No. CV 99-A-788-N. The plaintiff
alleges that she placed bets through a gambling site on the internet. The
internet site instructed her to open an account by entering her credit card
number. By this means, the plaintiff's gambling expenses incurred on the
internet site were charged to a MasterCard issued to the plaintiff by the Bank.
The plaintiff alleges that, in allowing its credit card to be used for illegal
gambling, the Bank violated a variety of Federal and State statutes, including
the Wire Act (18 U.S.C. Section 1084(a)), the Travel Act (18 U.S.C. Section
1952), a Federal statute that specifically prohibits conducing an illegal
gambling business (18 U.S.C. Section 1955), the Racketeer Influenced and Corrupt
Organizations Act ("RICO")(18 U.S.C. Section 1962(c) and 1964(a)), and a number
of Alabama statutes. The plaintiff seeks certification of a class, declaratory
relief voiding her credit card charges, unspecified compensatory damages, triple
exemplary damages under RICO, punitive damages, and attorneys fees and costs.
The Bank and MasterCard have filed motions to dismiss the case. The Bank
believes that it should not have liability and has substantial legal defenses to
the lawsuit and the Bank intends to defend itself vigorously.
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This lawsuit is substantially similar to a number of lawsuits filed around
the country against credit card issuers, MasterCard, and Visa. The plaintiff
sought to have the lawsuit consolidated with similar lawsuits in a Federal court
in New York. On March 1, 2000, the Judicial Panel on Multidistrict Litigation
consolidated the case with several others and ordered that these cases be
transferred to the U.S. District Court for the Eastern District of Louisiana.
The Bank's motion to dismiss currently is pending as part of the multidistrict
litigation.
FIRST ALLIANCE MORTGAGE COMPANY
In 1997, Fidelity entered into a series of agreements with FAMCO and its
affiliates to establish a secured credit card program (the "Program"). Under the
agreements, Fidelity serves as issuer and owner of the Program accounts and is
responsible for the risk management associated with the extension of credit.
FAMCO is responsible for marketing and processing applications and servicing the
accounts originated under the Program. FAMCO also provides credit enhancements
to guarantee full repayment of the Program receivables in the event of
cardholder defaults and, in exchange, has the right to purchase the outstanding
receivables at par and receives all revenues, net of expenses and funding costs
paid to Fidelity, from the Program. FAMCO is required to fund a cash collateral
account as part of the credit enhancement. As of June 30, 2000, total
receivables outstanding under the Program were $13.0 million, of which 20.3%
were delinquent, and the balance of the cash collateral account was $2.7
million.
On February 25, 2000, Fidelity delivered to FAMCO formal notice that the
agreements pertaining to the Program have expired, and a demand that FAMCO
fulfill all of its obligations under the agreements upon and after termination,
including an obligation to purchase, or cause a designee to purchase, from
Fidelity, at par, all of the outstanding accounts and related receivables
generated under the Program.
Also on February 25, 2000, Fidelity filed with the American Arbitration
Association in Los Angeles, California a formal demand for arbitration. The
arbitration proceeding is designated Fidelity Federal Bank, FSB v. First
Alliance Acceptance Corp. and First Alliance Mortgage Corp., File No. 72 148 226
00. The arbitration demand alleges that a dispute exists between the parties
because FAMCO contends that it has no obligation to comply with Fidelity's
demand that FAMCO purchase, or cause a designee to purchase, from Fidelity, at
par, all of the outstanding accounts and related receivables generated under the
Program.
On March 23, 2000, FAMCO and its affiliates filed a voluntary petition
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court,
Central District of California, Case No. SA 00-12370 LR. The bankruptcy
proceeding had the effect of staying the arbitration and any other action by
Fidelity to enforce FAMCO's obligations. It also had the effect of suspending
the monthly settlements with FAMCO pursuant to which FAMCO had previously been
performing its credit enhancement obligations. Fidelity has filed a proof of
claim in the bankruptcy proceeding relating to Fidelity's claims against FAMCO.
The Bank has obtained relief from stay pursuant to an order of the
Bankruptcy Court to pursue its claim in arbitration seeking to enforce the
demand that FAMCO repurchase or cause the repurchase of the outstanding accounts
and receivables. FAMCO has filed a counter demand for arbitration asserting a
conflict of interest on the part of the Bank's Chief Executive Officer based on
his alleged involvement in the negotiations of the agreements and seeking
damages because, as FAMCO alleges, the Bank's termination of the program
prevented FAMCO from securitizing the card portfolio.
FAMCO has listed Fidelity as one of its 20 largest unsecured creditors, and
Fidelity is represented on FAMCO's unsecured creditors' committee.
Subject to the constraints of applicable bankruptcy law, Fidelity intends
to mitigate its damages, pursue vigorously its rights and remedies to recover
amounts owed by FAMCO, and seek recourse to the cash collateral to recover any
shortfall. Among other strategies, Fidelity is currently exploring the potential
sale of the portfolio to mitigate its damages. To the extent that the carrying
value of the portfolio may exceed the potential sale proceeds, Fidelity would
assert a claim against FAMCO's bankruptcy estate for the deficiency. However,
there is substantial uncertainty as to Fidelity's success in mitigating damages,
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the ability of FAMCO to pay the claims of its creditors and the timing and
amount of distributions that may be made by FAMCO to its creditors. The ability
of the Company to offset the cash collateral account against prior or future
charge-offs or any deficiency that may arise upon the sale of the portfolio is
subject to bankruptcy court approval.
OTHER MATTERS
In the course of its current compliance examination of the Bank, the OTS
has raised concerns regarding the Bank's credit card operations, principally
with respect to the credit card origination, servicing and collection activities
of third parties under contracts that have been terminated or are in the process
of winding down. While these third parties were required to satisfy regulatory
requirements applicable to their respective functions, it is possible that the
Bank may be held responsible for violations by these third parties. The Bank has
responded to preliminary issues raised by the OTS, but the OTS has not issued
its final report. The Bank is therefore, uncertain as to the OTS' ultimate
determinations on these issues, and possible resulting regulatory actions or
sanctions may have a material adverse effect on the financial condition or
results of operations of the Company.
The legal responsibility and financial exposure with respect to some of the
foregoing claims and other matters presently cannot be reasonably ascertained
and, accordingly, there is a risk that the outcome of one or more of these
outstanding claims or matters could result in a material adverse effect on the
financial condition or results of operations of the Company.
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 believes that none of these other lawsuits or
claims will have a material adverse effect on the financial condition or
business of the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on April 26, 2000, the
stockholders elected Irving R. Beimler, Steven M. Ellis and Jeffrey E. Susskind
to the Board of Directors of Bank Plus to serve for three year terms and Thomas
E. King was elected to the Board of Directors of Bank Plus to serve a two year
term. The seating of Messrs. Ellis, King and Susskind on the Board was subject
to approval or non-objection by the OTS. Of the 19,441,866 share of Common Stock
outstanding as of the record date, March 23, 2000, the following indicates the
number of votes cast for and withheld:
NUMBER OF VOTES
-------------------------
FOR WITHHELD
------------ ------------
Election of Directors:
Irving R. Beimler......................... 17,823,531 577,398
Steven M. Ellis........................... 17,886,281 514,648
Thomas E. King............................ 17,886,233 514,696
Jeffrey E. Susskind....................... 17,886,233 514,696
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
EXHIBIT
NO. DESCRIPTION
-------- -----------------------------------------------------------------
3.1 Certificate of Incorporation of Bank Plus Corporation
(Incorporated by reference to Exhibit 3.1 to the Form 8-B).*
3.2 Amended and Restated Bylaws of Bank Plus Corporation
(incorporated by reference to Exhibit 5 to the current report on
Form 8-K filed with the SEC on March 30, 1999).*
3.3 Certificate of Designations of Series C Junior Participating
Cumulative Preferred Stock (Par Value $.01 per share) of Bank
Plus Corporation.*
4.1 Specimen of Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to the Form 8-B).*
4.2 Indenture dated as of July 18, 1997, between Bank Plus
Corporation and The Bank of New York, as trustee relating to the
12% Senior Notes due July 18, 2007, of Bank Plus Corporation
(incorporated by reference to Exhibit 4.4 of the Registration
Statement on Form S-8 of Bank Plus filed on September 4, 1997).*
4.3 Form of Amended and Restated Rights Agreement, dated as of March
26, 1999, between Bank Plus and American Stock Transfer & Trust
Company, as Rights Agent (incorporated by reference to Exhibit 4
to the current report on Form 8-K filed with the SEC on March 30,
1999).*
10.1 Limited Liability Company Agreement of American General Gateway
Services, L.L.C. dated as of January 1, 1999 between VALIC and
Gateway (incorporated by reference to Exhibit 10.45 to the
annual report on Form 10-k for the year ended December
31, 1998).*
10.2 Form of 1999 Nonemployee Director Stock Option Agreement between
the Company and certain nonemployee directors.*
10.3 Stock Option Agreement between the Company and James E. Stutz
dated July 28, 1999.*
10.4 Service Agreement dated as of October 14, 1999 between Fidelity
and First Data Resources Inc.*
10.5 Agreement for Information Technology Services dated as of
December 3, 1999 between Fidelity and Electronic Data Systems
Corporation and Electronic Data Systems Corporation Information
Services L.L.C.*
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10.6 Agreement to Purchase Assets and Assume Liabilities dated as of
February 7, 2000 by and between Fidelity and First Federal Bank
of California.*
10.7 Mortgage Loan Purchase Agreement dated as of February 7, 2000 by
and between Fidelity and First Federal Bank of California.*
10.8 Agreement to Purchase Assets and Assume Liabilities dated as of
February 3, 2000 by and between Fidelity and Jackson
Federal Bank.*
10.9 Purchase and Assumption Agreement dated as of June 2, 2000 by and
between Fidelity and Household Bank (SB), N.A.
10.10 Agreement to Purchase Assets and Assume Liabilities dated as of
May 22, 2000 by and between Fidelity and First Bank of
Beverly Hills.
27. Financial Data Schedule.
---------------
* Indicates previously filed documents.
REPORTS ON FORM 8-K
A current report on Form 8-K was filed with the SEC on April 6, 2000
reporting on Item 5 "Other Events" reporting the execution of standstill
agreements with two groups of stockholders.
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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.
BANK PLUS CORPORATION
Registrant
/s/ Mark K. Mason
--------------------------------------------------
Mark K. Mason
PRESIDENT AND CHIEF EXECUTIVE OFFICER;
VICE CHAIRMAN OF THE BOARD
Date: August 21, 2000 (PRINCIPAL EXECUTIVE OFFICER)
/s/ John M. Michel
--------------------------------------------------
John M. Michel
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: August 21, 2000 (PRINCIPAL FINANCIAL OFFICER)
37
