<PAGE>
United States Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 0-22193
LIFE FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0743196
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4110 TIGRIS WAY, RIVERSIDE, CALIFORNIA 92503
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(909) 280-4100
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(Registrant's telephone number, including area code)
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
requirements for the past 90 days. (_) Yes (X) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 6,546,716 shares of common
stock, par value $0.01 per share, were outstanding as of August 7, 1997.
<PAGE>
LIFE FINANCIAL CORP. AND SUBSIDIARY
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1 Consolidated Statements of Financial Condition:
June 30, 1997 (unaudited) and December 31, 1996..................... 1
Consolidated Statements of Operations:
For the Six months ended June 30, 1997 and 1996 and for the
Three months ended June 30, 1997 (unaudited) and 1996............... 2
Consolidated Statements of Cash Flows:
For the Six months ended June 30, 1997 (unaudited) and 1996......... 3
Notes to (unaudited) Consolidated Financial Statements.............. 4
Item 2 Management's Discussion and Analysis of
Results of Operations and Financial Condition....................... 7
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................... 18
Item 2 Changes in Securities............................................... 18
Item 3 Defaults Upon Senior Securities..................................... 18
Item 4 Submission of Matters to a Vote of Security Holders................. 18
Item 5 Other Information................................................... 18
Item 6 Exhibits and Reports on Form 8-K.................................... 19
</TABLE>
<PAGE>
LIFE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................... $ 19,151 $ 13,265
Restricted cash .................................................................... 9,524 1,636
Securities held to maturity, estimated fair value of
$8,019 and $7,981 at June 30, 1997 and
December 31, 1996.............................................................. 8,018 8,023
Residual assets, at fair value...................................................... 13,719 5,700
Loans held for sale................................................................. 99,440 31,018
Loans held for investment - net of allowance for
estimated loan losses of $1,605 and $1,625
at June 30, 1997 and December 31, 1996......................................... 33,581 36,895
Mortgage servicing rights........................................................... 4,156 2,645
Accrued interest receivable......................................................... 1,076 537
Foreclosed real estate - net........................................................ 1,088 561
Premises and equipment - net........................................................ 2,683 1,579
Federal Home Loan Bank stock........................................................ 1,035 814
Deferred income taxes............................................................... 377 397
Other assets........................................................................ 1,442 940
--------- ---------
TOTAL ASSETS................................................................... $ 195,290 $ 104,010
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposit accounts.................................................................... $ 136,519 $ 85,711
Other borrowings.................................................................... - 3,278
Subordinated debentures............................................................. 10,000 -
Accounts payable and other liabilities.............................................. 7,026 5,748
--------- ---------
Total liabilities.............................................................. 153,545 94,737
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 25,000,000 shares authorized; 6,111,716 (1997) and
3,211,716 (1996) shares issued and outstanding...................................... 61 32
Additional paid-in capital.......................................................... 38,037 9,358
Retained earnings (deficit), partially restricted................................... 3,647 (117)
--------- ---------
Total stockholders' equity..................................................... 41,745 9,273
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $ 195,290 $ 104,010
========= =========
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
LIFE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 3,348 $ 1,615 $ 5,220 $ 3,213
Securities held to maturity 113 24 219 49
Other interest-earning assets 691 52 1,017 91
---------- ---------- ---------- ----------
Total interest income 4,152 1,691 6,456 3,353
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposit accounts 1,864 838 3,181 1,664
Federal Home Loan Bank
advances and other borrowings 247 88 420 191
Subordinated Debentures 349 0 420 0
---------- ---------- ---------- ----------
Total interest expense 2,460 926 4,021 1,855
---------- ---------- ---------- ----------
NET INTEREST INCOME BEFORE
PROVISION FOR ESTIMATED LOAN LOSSES 1,692 765 2,435 1,498
PROVISION FOR ESTIMATED LOAN LOSSES 0 40 500 108
NET INTEREST INCOME AFTER PROVISION
FOR ESTIMATED LOAN LOSSES 1,692 725 1,935 1,390
NONINTEREST INCOME:
Loan servicing and other fees 75 107 195 208
Service charges on deposit accounts 31 31 61 64
Net gains from mortgage financing operations 3,192 1,273 9,069 2,160
Other income 100 21 158 40
---------- ---------- ---------- ----------
Total noninterest income 3,398 1,432 9,483 2,472
NONINTEREST EXPENSE
Compensation and benefits 1,475 1,337 3,057 2,151
Premises and occupancy 250 188 473 354
Data processing 160 96 295 183
Net loss on foreclosed real estate 6 9 69 100
FDIC insurance premiums 21 45 39 89
Marketing 54 53 122 92
Telephone 132 53 217 93
Professional services 74 46 132 73
Other expense 307 223 567 436
---------- ---------- ---------- ----------
Total noninterest expense 2,479 2,050 4,971 3,571
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAX PROVISION 2,611 107 6,447 291
INCOME TAX PROVISION 1,088 46 2,682 125
---------- ---------- ---------- ----------
NET INCOME $ 1,523 $ 61 $ 3,765 $ 166
========== ========== ========== ===========
Earnings per share $ 0.47 $ 0.03 $ 1.17 $ 0.09
========== ========== ========== ===========
Weighted average shares outstanding 3,243,584 1,866,216 3,227,738 1,866,216
========== ========== ========== ===========
</TABLE>
See notes to unaudited consolidated financial statements
2
<PAGE>
LIFE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,765 $ 166
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 213 138
Provision for estimated loan losses 500 108
Accretion of deferred fees (158) (25)
Provision for estimated losses of foreclosed real estate 38 97
Gain on sale of foreclosed real estate, net (27) (21)
Gain on sale and securitization of loans held for sale (7,205) (1,612)
Unrealized gain on residual asset (692) 0
Net accretion of residual asset (1,354) 0
Valuation allowance on mortgage servicing rights 17 (11)
Amortization of mortgage servicing rights 433 91
Purchase and origination of loans held for sale, net of loan fees (158,429) (51,929)
Proceeds from sales and securitization of loans held for sale 83,163 39,323
Increase in restricted cash (7,888) 0
Decrease (increase) in accrued interest receivable (539) 41
Deferred income taxes 20 (142)
Increase (decrease) in accounts payable and other liabilities 1,278 (37)
Federal Home Loan Bank stock dividend (26) (18)
Decrease (increase) in other assets (146) 160
-------- --------
Net cash used in operating activities (87,037) (13,671)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in loans 6,569 8,245
Proceeds from sale of foreclosed real estate 385 892
Purchase of securities held to maturity (1,000) (996)
Proceeds from maturities of securities held to maturity 1,000 1,976
Additions to premises and equipment, net (1,312) (207)
Purchase of Federal Home Loan Bank stock (195) (57)
Cash received on residual assets 1,594 0
-------- --------
Net cash provided by investing activities 7,041 9,853
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts 50,808 3,793
Proceeds from (repayments of) other borrowings (3,278) 900
Net proceeds from issuance of common stock 28,708 0
Net proceeds from issuance of subordinated debentures 9,644 0
-------- --------
Net cash provided by (used in) financing activities 85,882 4,693
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,886 875
CASH AND CASH EQUIVALENTS, beginning of period 13,265 3,932
CASH AND CASH EQUIVALENTS, end of period $ 19,151 $ 4,807
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 3,113 $ 1,681
======== ========
Income taxes paid (refunded) $ 3,523 $ 289
======== ========
NONCASH INVESTING ACTIVITIES DURING THE PERIOD:
Transfers from loans to foreclosed real estate $ 1,089 $ 1,934
======== ========
Loans to facilitate sales of foreclosed real estate $ 166 $ 438
======== ========
NONCASH FINANCING ACTIVITIES DURING THE PERIOD
Stock dividends paid $ 0 $ 2,488
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
LIFE FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(UNAUDITED)
1. Basis of Presentation:
----------------------
Life Financial Corp. (the Company) is a savings and loan holding company
incorporated in the State of Delaware that was organized for the purpose of
acquiring all of the capital stock of Life Savings Bank, Federal Savings Bank,
(the Bank) through the holding company reorganization of the Bank, which was
consummated on June 27, 1997. Pursuant to the Reorganization, the Company issued
3,211,716 shares of common stock in exchange for the 1,070,572 shares of the
Bank's outstanding common stock. Such business combination was accounted for at
historical cost in a manner similar to a pooling of interest. On June 30, 1997
the Company completed its sale of 2,900,000 shares of its common stock through
an initial public offering. Subsequent to June 30, 1997, the Company also issued
435,000 shares of common stock to the public through the exercise of the
underwriter's overallotment option, bringing the total shares outstanding to
6,546,716.
The Company has purchased residual assets and restricted cash from the Bank
as part of the Reorganization. Due to the actual net cash proceeds being
received on June 30, 1997, all of the net earnings and performance figures
herein reflect the results of the Bank.
The Bank is a federally chartered stock savings bank whose primary business
is the origination and sale of sub-prime one-to four-family residential mortgage
loans and, to a much lesser extent, multi-family residential and commercial
loans. The Bank's revenues are derived from gains from mortgage financing
operations and net interest on its loans and residual assets. The primary
sources of funds for the Bank have been from deposits, Federal Home Loan Bank
advances, a $50 million line of credit from a major investment bank, as well as
from loan sales and securitizations. As of June 30, 1997, the Bank had one
depository branch office in San Bernardino, California, and three regional loan
centers located in Riverside, California, Jacksonville, Florida and the Denver,
Colorado metropolitan area.
<PAGE>
The consolidated financial statements include the accounts of Life
Financial Corp. and its wholly-owned subsidiary, Life Savings Bank, Federal
Savings Bank. All material intercompany balances and transactions have been
eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all necessary adjustments, consisting
only of normal recurring adjustments necessary for a fair presentation, have
been included. The results of operations for the six-month period ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the entire fiscal year.
These consolidated financial statements and the information under the
heading "Management's Discussion and Analysis of Results of Operations and
Financial Condition" should be read in conjunction with the audited consolidated
financial statements and notes thereto of Life Savings Bank, Federal Savings
Bank for the year ended December 31, 1996 included in the Bank's Registration
Statement on Form S-1, filed on May 29, 1997, amended and declared effective on
June 24, 1997.
2. Earnings Per Share
------------------
Earnings per share for the three months ended June 30, 1997 and June 30,
1996 are based upon the weighted average shares outstanding during the period,
adjusted for a 100% stock dividend which occurred during 1996 and then adjusted
for the exchange of three shares of Company Common Stock for one share of Bank
common stock in the Reorganization.
3. Accounting Principles
---------------------
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS No. 128") which is effective for financial
statements issued for periods ending after December 15, 1997. It replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It also requires the presentation of diluted earnings per share for
entities with complex capital structures. Diluted earnings per share takes into
account the potential dilution that could occur if securities or other contracts
to issue common stock, such as options, were exercised or converted into common
stock. The Company does not believe that SFAS No. 128 will have a material
impact on its financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which is effective for fiscal years beginning after December 31, 1997.
SFAS No. 130 established standards for reporting and display of comprehensive
income and its components. This
<PAGE>
statement requires that all items that are required to be recognized under
accounting standards as comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. As SFAS No. 130 is specifically disclosure related, the Company does
not anticipate the adoption of this statement will have a material impact on its
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which is effective for fiscal years
beginning after December 31, 1997. SFAS No. 131 establishes standards of
reporting by public entities and disclosure of information about operating
segments in annual financial statements and disclosure of selected information
about operating segments in interim financial reports issued to shareholders. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. As SFAS No. 131 is specifically
disclosure related, the Company does not anticipate the adoption of this
statement will have a material impact on its financial statements.
4. Approved Stock Compensation Plans
---------------------------------
On November 21, 1996, the Board of Directors of the Bank adopted the Life
Savings Bank 1996 Stock Option Plan (the Bank Option Plan), which was approved
by the stockholders of the Bank at the Annual Meeting of Stockholders of the
Bank, held on May 21, 1997. The Bank Option Plan authorizes the granting of
options equal to 321,600 (adjusted for the three for one exchange) shares of
common stock for issuance to executives, key employees, officers and directors.
The Bank Option Plan will be in effect for a period of ten years from the
adoption by the Board of Directors. Options granted under the Bank Option Plan
will be made at an exercise price equal to the fair market value on the date of
grant. Awards granted to officers and employees may include incentive stock
options, non-statutory stock options and limited rights which are exercisable
only upon change in control of the Bank. Awards granted to non-employee
directors are non-statutory options. All 1996 options were granted at an
exercise price of $3.33 per share (adjusted for the three for one exchange).
Stock options will become vested and exercisable in the manner specified by the
Bank. The options granted by the Bank will vest at a rate of 33.3% per year,
beginning on November 21, 1999. No options were exercisable at June 30, 1997 and
at December 31, 1996.
The Board of Directors of the Company has adopted the Life Financial Corp.
1997 Stock Option Plan (the "Company Option Plan"), which became effective upon
the completion of the Public Offering (the Bank Option Plan and the Company
Option Plan will sometimes hereinafter be referred to as the "Option Plans").
The Board of Directors of the Company has reserved shares equal to 10% of the
issued and outstanding shares of the Company giving effect to the Reorganization
and the Public Offering, including Company options to be exchanged for Bank
options pursuant to the Bank Option Plan for issuance under the Option Plans.
Stock options with respect to shares of the Bank's Common Stock granted under
the Bank Option Plan and outstanding prior to completion of the Reorganization
automatically became options to purchase three shares of the Company's Common
Stock upon identical terms and conditions. The Company assumed all of the
Bank's obligations with respect to the Bank Option Plan. After the
Reorganization, the Option Plans became available to directors, officers and
employees of the Company and to directors, officers and employees of its direct
or indirect subsidiaries, including
<PAGE>
the Bank, as selected pursuant to the Option Plans and all references to the
Bank's Common Stock under the Bank Option Plan are now deemed references to the
Company's Common Stock. On June 30, 1997, 190,000 shares of the Company Option
Plan were granted at an exercise price of $11.00 per share. The options granted
be the Bank will vest at a rate of 33.3% per year, beginning on June 30, 2000.
No options were exercisable at June 30, 1997.
5. Thrift Rechartering Legislation
-------------------------------
The Deposit Insurance Funds Act of 1996 provides that the Bank Insurance
Fund ("BIF") and Savings Association Insurance Fund ("SAIF") will merge on
January 1, 1999 if there are no more savings associations as of that date.
Various proposals to eliminate the federal thrift charter, create a uniform
financial institutions charter and abolish the Office of Thrift Supervision
("OTS") have been introduced in Congress. The House Banking Committee reported
a bill in July 1997 that would require federal savings institutions to convert
to a national or state bank charter within two years of enactment. The bill
would allow banks resulting from the conversion of a savings association to
continue to engage in activities (and hold assets) in which it was lawfully
engaged on the day before enactment. Holding companies for savings institutions
would become subject to the same regulation as holding companies that control
commercial banks, with a limited grandfather provision for unitary savings and
loan holding company activities. The OTS would be merged with the Office of the
Comptroller of the Currency, the agency that regulates national banks. The
Company is unable to predict whether such legislation will be enacted, the
extent to which the legislation would restrict or disrupt its operations or
whether BIF and SAIF funds will eventually merge.
Item 2. Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
-------------------
This Management's Discussion and Analysis should be read in conjunction
with the Management's Discussion and Analysis contained in the Company's
Registration Statement on Form S-1, which focuses upon relevant matters
occurring during the year ended December 31, 1996. Accordingly, the ensuing
discussion focuses upon the material matters at and for the three months and six
months ended June 30, 1997.
GENERAL
- -------
The Company is involved in the origination, purchase, sale and servicing of
non-conventional mortgage loans principally secured by first and second mortgage
loans on one- to four-family residences. The Company has focused on Liberator
Series loans which are for the purchase or refinance of residential real
property by borrowers who may have had prior credit problems or who do not have
an adequate credit history, and are considered "sub-prime borrowers," or loans
which have other non-conforming features. In addition, the Company has
originated a substantial number of Portfolio Series loans which are debt
consolidation loans for borrowers whose credit history qualify for Federal
National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") loans ("Agency Qualified Borrowers"). The Company
purchases and originates mortgage loans and other real estate secured loans
through a network of approved correspondents and independent mortgage brokers
<PAGE>
("Originators") throughout the country. The Company funds substantially all of
the loans which originates or purchases through deposits, internally generated
funds, FHLB advances and a warehouse line of credit. In the immediate and
foreseeable future, the Company will also fund loans from the cash proceeds, if
any, received from securitizations. Deposit flows and cost of funds are
influenced by prevailing market rates of interest primarily on competing
investments, account maturities and the levels of savings in the Company's
market area. The Company's ability to purchase or sell loans is influenced by
the general level of product available from its correspondent relationships and
the willingness of investors to purchase the loans at an acceptable price to the
Company. Due to substantial activity in the purchase and sale of loans in recent
years, the net gains from mortgage financing operations have been significant.
The Company's results of operations are also affected by the Company's provision
for loan losses and the level of operating expenses. The Company's operating
expenses primarily consist of employee compensation and benefits, premises and
occupancy expenses, and other general expenses. The Company's results of
operations are also affected by prevailing economic conditions, competition,
government policies and actions of regulatory agencies.
RESULTS OF OPERATIONS
- ---------------------
Net income was $1.5 million for the three months ended June 30, 1997
compared to $61,000 for the three months ended June 30, 1996, an increase of
$1,462,000. For the six months ended June 30, 1997 the Company recorded net
income of $3.8 million compared to $166,000 for the six months ended June 30,
1996. For the three months ended June 30, 1997 and June 30, 1996, the net
earnings per share were $0.47 and $0.03, respectively. The net earnings per
share for the six months ended June 30, 1997 were $1.17 compared to $0.09 for
the six months ended June 30, 1996. The increase in net income was due to the
expansion of the mortgage financing operations and the increase in gains with
respect to such operations, combined with increases in net interest income.
Interest Income
- ---------------
Interest income was $4.2 million for the three months ended June 30, 1997
compared to $1.7 million for the three months ended June 30, 1996 due primarily
to an increase in the average balance of interest earning assets combined with
an increase in the yield on those assets. Average interest earnings assets
increased to $166.0 million for the three months ended June 30, 1997 compared to
$79.2 million for the three months ended June 30, 1996. The yield on interest
earning assets increased to 10.00% for the three months ended June 30, 1997
compared to 8.54% for the three months ended June 30, 1996. The largest single
component of interest earning assets was loans receivable, net, which were
$126.9 million with a yield of 10.55% for the three months ended June 30, 1997
compared to $72.7 million with a yield of 8.89% for the three months ended June
30, 1996. The increase in average loans receivable, net was due to an increase
in loans held for sale. Loans held for sale were $99.4 million as of June 30,
1997 compared to $31.0 million as of June 30, 1996.
<PAGE>
Interest income for the six months ended June 30, 1997 was $6.5 million,
compared to $3.4 million for the six months ended June 30, 1996, due to an
increase in the average balance of interest earning assets, combined with an
increase in the yield on those assets. Average interest earning assets increased
to $143.9 million for the six months ended June 30, 1997 compared to $79.1
million for the six months ended June 30, 1996. The yield on interest earning
assets increased to 8.97% for the six months ended June 30, 1997 compared to
8.48% for the six months ended June 30, 1996. The largest single component of
interest earning assets was loans receivable, net, which were $113.0 million
with a yield of 9.24% for the six months ended June 30, 1997, compared to $72.8
million with a yield of 8.83% for the six months ended June 30, 1996.
Interest Expense
- ----------------
Interest expense increased to $2.5 million for the three months ended June
30, 1997 compared to $926,000 for the three months ended June 30, 1996 due to an
increase in the average interest bearing liabilities combined with an increase
in the yield on those liabilities. At the end of the quarter ended March 31,
1997, the Company issued $10 million in subordinated debentures which bear
interest at a rate of 13.5% per annum, payable semi-annually. This issuance of
debentures, combined with an increased reliance on certificate accounts,
resulted in an increase in the average cost of interest bearing liabilities to
6.03% for the quarter ended June 30, 1997 compared to 4.80% for the quarter
ended June 30, 1996. Average interest bearing liabilities were $163.1 million
for the quarter ended June 30, 1997 compared to $77.1 million for the quarter
ended June 30, 1996. The largest component of average interest bearing
liabilities was certificate accounts, which averaged $118.6 million with a cost
of 5.90% for the three months ended June 30, 1997, compared to $55.7 million
with a cost of 5.45% for the three months ended June 30, 1996.
The second largest component of average interest bearing liabilities is
borrowings, which increased to an average balance of $26.6 million with a yield
of 8.95% for the three months ended June 30, 1997 compared to $6.0 million with
a yield of 5.85% for the three months ended June 30, 1997. In addition to the
subordinated debentures, the Company began utilizing its warehouse line of
credit during the quarter ended June 30, 1997. The Company did not have any
subordinated debentures or warehouse lines outstanding during the quarter ended
June 30, 1996.
For the six months ended June 30, 1997, interest expense was $4.0 million
compared to $1.9 million for the six months ended June 30, 1996 due to an
increase in the average interest bearing liabilities combined with an increase
in the yield on those liabilities. At the end of the quarter ended March 31,
1997, the Company issued subordinated debentures with an interest rate of 13.5%.
This issuance of debentures, combined with an increased use of borrowed funds as
well as a heavier reliance on certificate accounts, resulted in an increase in
the average cost of interest bearing liabilities to 5.70% for the six months
ended June 30, 1997 compared to 4.85% for the six months ended June 30, 1996.
Average interest bearing liabilities were $141.0 million for the six months
ended June 30, 1997 compared to $76.4 million for the six months ended June 30,
1996.
<PAGE>
The largest component of average interest bearing liabilities was
certificate accounts, which averaged $102.6 million with a yield of 5.78% for
the six months ended June 30, 1997 compared to $54.5 million with a yield of
5.53% for the six months ended June 30, 1996. The second largest component of
average interest bearing liabilities is borrowings, which increased to an
average balance of $21.0 million with a yield of 7.99% for the six months ended
June 30, 1997 compared to $6.5 million with a yield of 5.92% for the six months
ended June 30, 1997.
Net Interest Income Before Provision for Estimated Loan Losses
- --------------------------------------------------------------
Net interest income before provision for estimated loan losses for the
three months ended June 30, 1997 was $1.7 million compared to $765,000 for the
three months ended June 30, 1996. This increase is the net effect of an increase
in average interest earning assets and average interest bearing liabilities as
well as an increase in the net interest margin, partially offset by a decrease
in the ratio of interest earning assets to interest bearing liabilities.
Average interest earning assets increased to $166.0 million with a yield of
10.00% for the three months ended June 30, 1997 compared to $79.2 million with a
yield of 8.54% for the three months ended June 30, 1996. Average interest
bearing liabilities increased to $163.1 million with a cost of 6.03% for the
three months ended June 30, 1997 compared to $77.1 million with a cost of 5.85%
for the three months ended June 30, 1996. The net interest margin increased to
4.08% for the three months ended June 30, 1997 compared to 3.86% for the three
months ended June 30, 1996. The ratio of interest earning assets to interest
bearing liabilities was 101.78% for the quarter ended June 30, 1997 compared to
102.63% for the quarter ended June 30, 1996.
Net interest income before provision for estimated loan losses for the six
months ended June 30, 1997 was $2.4 million compared to $1.5 million for the six
months ended June 30, 1996. This increase is the net effect of an increase in
average interest earning assets and average interest bearing liabilities,
partially offset by a decrease in the net interest margin and the ratio of
interest earning assets to interest bearing liabilities. Average interest
earning assets increased to $143.9 million for the six months ended June 30,
1997 compared to $79.1 million for the six months ended June 30, 1996. Average
interest bearing liabilities increased to $141.0 million with a cost of 5.70%
for the six months ended June 30, 1997 compared to $76.4 million with a cost of
4.85% for the six months ended June 30, 1996. The net interest margin was 3.38%
for the six months ended June 30, 1997 compared to 3.79% for the six months
ended June 30, 1996. The ratio of interest earning assets to interest bearing
liabilities was 102.0% for the six months ended June 30, 1997 compared to 103.4%
for the six months ended June 30, 1996.
<PAGE>
The following table sets forth average interest rates on the Company's interest-
earning assets and interest-bearing liabilities for the three month and six
month periods ended June 30, 1997 and June 30, 1996. The yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Unless otherwise noted,
average balances are measured on a daily basis. The yields and costs include
fees which are considered adjustments to yields.
<TABLE>
<CAPTION>
Three months ended Three months ended Six months ended Six months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------------------------------------------------------------------------------------------
(Dollars in thousands)
Average Average Average Average
Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Interest Cst Balance Interest Cst Balance Interest Cst Balance Interest Cst
-------- -------- --- ------- -------- --- ------- -------- --- ------- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-earning deposits and
short-term investments $ 17,501 $ 290 6.63% $ 3,792 $ 42 4.43% $ 13,231 $ 429 6.48% $ 3,555 $ 76 4.28%
Investment Securities 9,026 126 5.58 2,717 34 5.01 8,828 245 5.55 2,703 64 4.74
Loans receivable, net(1) 126,934 3,348 10.55 72,659 1,615 8.89 112,989 5,220 9.24 72,787 3,213 8.83
Mortgage-backed securities, net 9 0 0.00 11 0 0.00 10 0 0.00 11 0 0.00
Residual assets 12,547 388 12.37 0 0 0.00 8,859 562 12.69 0 0 0.00
-------- ------ ------- ------ -------- ------ ------- ------
Total interest-earning assets 166,017 4,152 10.00 79,179 1,691 8.54 143,917 6,456 8.97 79,056 3,353 8.48
------ ------ ------ ------
Non-interest-earning assets(2) 10,556 5,564 14,315 4,873
-------- ------- -------- -------
Total assets(2) $176,573 $84,743 $158,232 $83,929
======== ======= ======== =======
Liabilities and Equity:
Interest-bearing liabilities:
Passbook accounts $ 4,089 22 2.15 $ 4,477 24 2.14 $ 4,025 42 2.09 $ 4,559 48 2.11
Money market accounts 2,950 22 2.98 3,998 30 3.00 2,987 44 2.95 3,935 59 3.00
Checking accounts 10,842 70 2.58 6,960 25 1.44 10,426 131 2.51 6,969 49 1.41
Certificate accounts 118,584 1,750 5.90 55,690 759 5.45 102,575 2,964 5.78 54,510 1,508 5.53
-------- ------ ------- ------ -------- ------ ------- ------
Total Deposit accounts 136,465 1,864 5.46 71,125 838 4.71 120,013 3,181 5.30 69,973 1,664 4.76
Borrowings 26,646 596 8.95 6,022 88 5.85 21,029 840 7.99 6,455 191 5.92
-------- ------ ------- ------ -------- ------ ------- ------
Total interest-bearing
liabilities 163,111 2,460 6.03 77,147 926 4.80 141,042 4,021 5.70 76,428 1,855 4.85
------ ------ ------ ------
Non-interest-bearing
liabilities(2) 1,006 2,532 6,006 3,101
-------- ------- -------- -------
Total liabilities(2) 164,117 79,679 147,048 79,529
Equity(2) 12,456 5,064 11,184 4,400
-------- ------- -------- -------
Total liabilities and equity(2) $176,573 $84,743 $158,232 $83,929
======== ======= ======== =======
Net interest income before provi-
sion for estimated loan losses $1,692 $ 765 $2,435 $1,498
====== ====== ====== ======
Net interest rate spread(3) 3.97 3.74 3.27 3.63
Net interest margin(4) 4.08 3.86 3.38 3.79
Ratio of interest-earning assets
to interest bearing liabilities 101.78 102.63 102.04 103.44
</TABLE>
(1) Amount is net of deferred loan origination fees, unamortized discounts,
premiums and allowance for estimated loan losses and includes loans held
for sale.
(2) Average balances are measured on a month-end basis.
(3) Net interest rate spread represents the difference between the yield on
interest-earning assets and the cost of interest bearing liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
<PAGE>
Provision for Estimated Loan Losses
- -----------------------------------
There were no provisions for estimated loan losses for the three months
ended June 30, 1997 compared to $40,000 for the three months ended June 30, 1996
due to a decline in the ratio of non-performing assets as a percentage of total
assets to 2.17% as of June 30, 1997 compared to 3.59% as of June 30, 1996
combined with a decrease in the loss percentage. The level of allowances for
estimated loan losses as a percent of non-performing loans was 63.3% as of June
30, 1997 compared to 66.1% as of June 30, 1996. Allowances for estimated loan
losses as a percent of loans held for investment were 4.56% as of June 30, 1997
compared to 2.49% as of June 30, 1996.
Provisions for loan losses were $500,000 for the six months ended June 30,
1997 compared to $108,000 for the six months ended June 30, 1996. The increase
in provisions was based on an estimate of charge offs for the six months ended
June 30, 1997 combined with a re-evaluation of the composition of the Company's
loan portfolio. Charge-offs for the six months ended June 30, 1997 were
$529,000, with recoveries for the same period of $9,000, leaving the Company
with net charge offs of $520,000 for the period. Charge-offs for the six months
ended June 30, 1996 were $325,000. (See "Financial Condition")
Non-Interest Income
- -------------------
Net gains from mortgage financing operations for the three months ended
June 30, 1997 totaled $3.2 million, compared to $1.3 million for the quarter
ended June 30, 1996. This increase was attributable to the increase in the
level of mortgage financing operations, with loans sold and securitized totaling
$93.2 million (including $73.3 million in whole loan sales) during the quarter
ended June 30, 1997, compared to loans sold totaling $56.9 million for the
quarter ended June 30, 1996. There were no loans securitized during the quarter
ended June 30, 1996. Net gains from mortgage financing operations as a percent
of loans sold or securitized was 3.43% for the quarter ended June 30, 1997, as
compared to 2.24% for the quarter ended June 30, 1996. This increase in
percentage reflected the effects of the securitization of loans compared to
whole loan sales. Gains on loans securitized totaled $1.7 million during the
quarter ended June 30, 1997, or 8.32% of such loans sold. Gains on loans sold
totaled $1.7 million, or 2.33% of such loans sold, and was partially offset by a
loss of $175,000 from a hedge position entered into by the Company for the
purpose of reducing interest rate risk on fixed-rate loans and commitments to
originate fixed-rate loans prior to sale. The effect of the hedge reduced the
gain as a percentage of loans sold to 2.10%. Loans originated and purchased
totaled $150.9 million for the quarter ended June 30, 1997, compared to $52.9
million for the quarter ended June 30, 1996.
For the six months ended June 30, 1997, net gains from mortgage financing
operations totaled $9.1 million compared to $2.2 million for the six months
ended June 30, 1996. This increase was attributable to the increase in the
level of mortgage financing operations, with loans sold or securitized totaling
$176.4 million (including $73.3 million in whole loans sales) during the six
months ended June 30, 1997, compared to loans sold totaling $94.7 million for
the six months ended June 30, 1996. There were no loans securitized during the
six months ended June 30, 1996. Net gains from mortgage financing operations as
a percent of loans sold and
<PAGE>
securitized was 5.14% for the six months ended June 30, 1997 compared to 2.28%
for the six months ended June 30, 1996. This increase in percentage reflected
the effects of the securitization of loans compared to whole loans sales. Loans
originated and purchased totaled $243.1 million for the six months ended June
30, 1997 compared to $103.9 million for the six months ended June 30, 1996.
Non-Interest Expense
- --------------------
Non-interest expense was $2.5 million for the three months ended June 30,
1997 compared to $2.1 million for the three months ended June 30, 1996. For the
six months ended June 30, 1997, non-interest expense was $5.0 million compared
to $3.6 million for the six months ended June 30, 1996. The increase was due
primarily to the expansion of the mortgage financing operations. New loans
originated and purchased increased to $150.9 million for the quarter ended June
30, 1997, compared to $52.9 million for the quarter ended June 30, 1996, and
were $243.1 million for the six months ended June 30, 1997 compared to $127.1
million for the six months ended June 30, 1996, which resulted in increased
compensation and benefits and other operating expenses.
Compensation and benefits increased to $1.5 million for the quarter ended
June 30, 1997 from $1.3 million for the quarter ended June 30, 1996. For the
six months ended June 30, 1997, compensation and benefits were $3.1 million
compared to $2.2 million for the six months ended June 30, 1996. These costs
are directly related to the expansion of the mortgage financing operations and
the corresponding increase in personnel, to an average of 164 employees for the
quarter ended June 30, 1997 compared to 88 for the quarter ended June 30, 1996.
Average employees for the six months ended June 30, 1997 were 154 compared to 84
for the six months ended June 30, 1997.
Premises and occupancy expenses increased to $250,000 for the quarter ended
June 30, 1997 compared to $188,000 for the quarter ended June 30, 1996, and were
$473,000 for the six months ended June 30, 1997 compared to $354,000 for the six
months ended June 30, 1996 due to the expansion of the mortgage financing
operation and the addition of the regional operating center in the Denver,
Colorado metropolitan operating area, as well as leased temporary space on a
month to month basis in Corona, California. The Corona facility lease will be
terminated upon the completion of the new executive offices. As a result of
leasing office space for the Company's and the Company's executive offices and
the western regional office of Life Financial Services, combined with the
relocation of the Florida regional office, premises and occupancy expenses are
expected to increase to approximately $450,000 per quarter.
As a result of the expansion of the mortgage financing operations, other
operating expenses increased as well. Data processing increased to $160,000 for
the three months ended June 30, 1997 compared to $96,000 for the three months
ended June 30, 1996, and was $295,000 for the six months ended June 30, 1997
compared to $183,000 for the six months ended June 30, 1996. Telephone,
professional services and other expense increased to $132,000, $74,000 and
$307,000, respectively, for the quarter ended June 30, 1997 compared to $53,000,
$46,000 and $223,000 for the quarter ended June 30, 1996 and were $217,000,
$132,000 and $567,000 for the six months ended June 30, 1997 compared to
$93,000, $73,000 and $436,000 for the six months ended June 30, 1996.
<PAGE>
Income Taxes
- ------------
The provision for income taxes increased to $1.1 million for the quarter
ended June 30, 1997 compared to $46,000 due to an increase in income before
income tax provision. Income before income tax provision increased to $2.6
million for the quarter ended June 30, 1997 from $107,000 for the quarter ended
June 30, 1996. The effective tax rate decreased to 41.7% for the quarter ended
June 30, 1997 from 43.0% for the quarter ended June 30, 1996.
The provision for income taxes increased to $2.7 million for the six months
ended June 30, 1997 compared to $125,000 for the six months ended June 30, 1996.
Income before income tax provision increased to $6.4 million for the six months
ended June 30, 1997 compared to $291,000 for the six months ended June 30, 1996.
The effective tax rate decreased to 41.6% for the six months ended June 30, 1997
compared to 43.0% for the six months ended June 30, 1997.
COMPARISON OF FINANCIAL CONDITION AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
- ----------------------------------------------------------------------------
Total assets increased to $195.3 million as of June 30, 1997 compared to
$104.0 million as of December 31, 1996 due to the receipt of the net proceeds
from the initial public offering of common stock of the Company completed on
June 30, 1997, combined with the expansion of the mortgage financing operations.
Loans held for sale totaled $99.4 million as of June 30, 1997 compared to $31.0
million as of December 31, 1996. This increase was partially offset by a
decrease in loans held for investment to $33.6 million as of June 30, 1997
compared to $36.9 million as of December 31, 1996. During the six months ended
June 30, 1997, the Company originated or purchased $243.1 million of loans.
During the same six month period, the Company sold or securized $176.4 million
of loans(including $73.3 million in whole loan sales). The increase in loans
held for sale also resulted in an increase in accrued interest receivable to
$1.1 million as of June 30, 1997 compared to $537,000 as of December 31, 1996.
As a result of the Company's loan securitization activities, residual
assets and restricted cash increased to $13.7 million and $9.5 million,
respectively, as of June 30, 1997 compared to $5.7 million and $1.6 million as
of December 31, 1996. Mortgage servicing rights also increased as a result of
the securitization of loans with servicing retained to $4.2 million as of June
30, 1997 compared to $2.6 million as of December 31, 1997.
Cash and cash equivalents increased as a result of the completion of the
initial public offering of the Company's common stock to $19.2 million as of
June 30, 1997 compared to $13.3 million as of December 31, 1996. During the six
months ended June 30, 1997, the Company began leasehold improvements on the new
corporate headquarters as well as adding the Denver, Colorado regional loan
center, increasing premises and equipment to $2.7 million as of June 30, 1997
compared to $1.6 million as of December 31, 1996. Real estate owned increased
to $1.1 million as of June 30, 1997 compared to $537,000 as of December 31, 1996
as part of the Company's continuing effort to resolve problem assets.
During the six months ended June 30, 1997, the Company issued $10.0 million
in Subordinated Debentures in order to increase its risk based capital. The
additional funds, net of debt issuance costs, were used to fund loans during the
six months ended June 30, 1997. In
<PAGE>
addition, the Company increased its liabilities by increasing deposit accounts
to $136.5 million as of June 30, 1997 compared to $85.7 million as of December
31, 1996. The major component of deposit accounts is certificates of deposit,
which increased to $119.6 million as of June 30, 1997 compared to $69.4 million
as of December 31, 1996. The additional funds were used to fund loans during
the six months ended June 30, 1997.
Accounts payable and other liabilities increased to $7.0 million as of June
30, 1997 compared to $5.7 million as of December 31, 1996 due to an increase in
loans serviced for other investors and the corresponding increase in amounts due
investors between the time the borrowers make payments to the Company and the
time the Company remits payments to the investors.
Stockholders' equity increased to $41.7 million as of June 30, 1997 from
$9.3 million as of December 31, 1996 due to the issuance of 2,900,000 shares of
Company common stock to the public in the Company's initial public offering,
completed on June 30, 1997. The initial offering price to the public was $11.00
per share, which resulted in $28.7 million in net proceeds after expenses.
Subsequent to June 30, 1997, the Company issued an additional 435,000 shares to
the public at $11.00 per share pursuant to the exercise of the underwriter's
overallotment option.
The Company's non-performing assets increased to $3.6 million as of June
30, 1997 compared to $3.0 million as of December 31, 1996. Non-performing loans
as a percent of gross loans receivable declined to 1.97% as of June 30, 1997
from 3.50% as of December 31, 1997. Non-performing assets as a percent of total
assets decreased to 1.86% as of June 30, 1997 from 2.86% as of December 31,
1996. The following table sets forth the non-performing assets at June 30, 1997
and December 31, 1996:
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1997 1996
------ ------
(dollars in thousands)
<S> <C> <C>
Non-accrual loans $2,536 $2,416
Foreclosed real estate 1,088 561
------ ------
Total non-performing assets $3,624 $2,977
====== ======
Allowance for estimated loan losses as a percent of gross loans
receivable 1.25% 2.36%
Allowance for estimated loan losses as a percent of total non-
performing loans 63.29 67.26
Non-performing loans as a percent of gross loans receivable 1.97 3.50
Non-performing assets as a percent of total assets 1.86 2.86
</TABLE>
<PAGE>
The Company, in consideration of the current economic environment and the
condition of the loan portfolio, has established an allowance for estimated loan
losses as of June 30, 1997 of $1.6 million. The allowance for estimated losses
is maintained at an amount management considers adequate to cover estimated
losses in loans receivable which are deemed probable and estimable. The
allowance is based upon a number of factors, including current economic
conditions, actual loss experience and industry trends. The Company's non-
performing loans are primarily made up of one- to four-family residential
mortgage loans.
The following table sets forth the activity in the Company's allowance for
estimated loan losses for the six months ended June 30, 1997:
<TABLE>
<CAPTION>
(dollars in thousands) % of Loans held
for investment
----------------
<S> <C> <C>
Balance as of December 31, 1996 $1,625 4.22%
Add:
Provision for estimated loan losses 500
Recoveries of previous charge-offs 9
Less:
Charge-offs 529
------
Balance as of June 30, 1997 $1,605 4.56
======
</TABLE>
MANAGEMENT OF INTEREST RATE RISK
- --------------------------------
The principal objective of the Company's interest rate risk management
function is to evaluate the interest rate risk included in certain balance sheet
accounts, determine the level of appropriate risk given the Company's business
focus, operating environment, capital and liquidity requirements and performance
objectives and manage the risk consistent with Board approved guidelines through
the establishment of prudent asset concentration guidelines. Through such
management, management of the Company seeks to reduce the vulnerability of the
Company's operations to changes in interest rates. Management of the Company
monitors its interest rate risk as such risk relates to its operating
strategies. The Company's Board of Directors reviews on a quarterly basis the
Company's asset/liability position, including simulations of the effect on the
Company's capital of various interest rate scenarios. The extent of movement in
interest rates, higher or lower, is an uncertainty that could have a negative
impact on the earnings of the Company.
Between the time the Company originates loans and purchase commitments are
issued, the Company is exposed to both upward and downward movements in interest
rates which may have a material adverse effect on the Company. The Board of
Directors of the Company recently implemented a hedge management policy
primarily for the purpose of hedging the risks associated with loans held for
sale in the Company's mortgage pipeline. In a flat or rising interest rate
environment, this policy enables management to utilize mandatory forward
commitments to sell fixed rate assets as the primary hedging vehicles to shorten
the maturity of
<PAGE>
such assets. In a declining interest environment, the policy enables management
to utilize put options. The hedge management policy also permits management to
extend the maturity of its liabilities through the use of short financial
futures positions, purchase of put options, interest rate caps or collars, and
entering into "long" interest rate swap agreements. Management may also utilize
"short" interest rate swaps to shorten the maturity of long-term liabilities
when the net cost of funds raised by using such a strategy is attractive,
relative to short-term CD's or borrowings. No hedging positions were
outstanding as of June 30, 1997.
LIQUIDITY
- ---------
The Company's primary sources of funds are deposits, a warehouse line of
credit, FHLB advances, principal and interest payments on loans, cash proceeds
from the sale of loans and securitizations, and to a lesser extent, interest
payments on investment securities and proceeds from the maturation of investment
securities. While maturities and scheduled amortization of loans are a
predictable source of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition.
However, the Company has continued to maintain the required minimum levels of
liquid assets as defined by OTS regulations. This requirement, which may be
varied at the direction of the OTS depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required ratio is currently 5%. The Company's average liquidity ratios were
12.35% and 6.23% for the three months ended June 30, 1997 and June 30, 1996,
respectively.
COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------
As of June 30, 1997, the Bank had outstanding commitments to originate or
purchase mortgage loans of $36.4 million compared to $9.2 million as of December
31, 1996 due to the expansion of the mortgage financing operations. Other than
commitments to originate or purchase mortgage loans, there were no material
changes to the Company's commitments or contingent liabilities as of June 30,
1997 compared to the period ended December 31, 1996 as discussed in the notes to
the audited financial statements of Life Savings Company, Federal Savings Bank
for the year ended December 31, 1996 included in the Company's Registration
Statement on Form S-1, filed on May 29, 1997, as amended and declared effective
on June 24, 1997 (SEC File No. 333-28035).
REGULATORY CAPITAL
- ------------------
The Office of Thrift Supervision (OTS) capital regulations require savings
institutions to meet three minimum capital requirements: a 1.5% tangible capital
ratio, a 3.0% leverage (core capital) ratio and an 8.0% risk-based capital
ratio. The core capital requirement has been effectively increased to 4.0%
because the prompt corrective action legislation provides that institutions with
less than 4.0% core capital will be deemed "undercapitalized". In addition, the
OTS, under the prompt corrective action regulation can impose various
constraints on institutions depending on their level of capitalization ranging
from well-capitalized to critically undercapitalized. As of June 30, 1997, the
Bank was considered "well-capitalized".
<PAGE>
The Bank was in compliance with the capital requirements in effect as of
June 30, 1997. The following table reflects the required ratios and the actual
capital ratios of the Bank as of June 30, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
Actual Required Excess Actual Required
Capital Capital Amount Percent Percent
-------- ----------- --------- ------- --------
(dollars in thousands)
Tangible $13,038 $ 2,619 $10,419 7.47% 1.50%
Core $13,038 $ 5,238 $ 7,800 7.47% 3.00%
Risk-based $24,361 $10,472 $13,889 18.61% 8.00%
</TABLE>
The Bank has been required by the OTS since the Bank's examination
completed August 9, 1996 to compute its regulatory capital ratios based upon the
higher of (1) the average of total assets based on month-end results or (2)
total assets as of quarter-end.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is involved as plaintiff or defendant in various legal
actions incident to its business, none of which is believed by management to be
material to the financial condition of the Company.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are filed as part of this report:
3.1 Certificate of Incorporation of Life Financial Corp. *
3.2 Bylaws of Life Financial Corp. *
27.0 Financial data schedule (filed herewith).
(b) Reports on Form 8-K
None.
. Incorporated herein by reference to Exhibits of the same number from the
Company's Registration Statement on Form S-4 (filed initially on Form S-1),
filed on January 27, 1997, as amended on March 27, 1997, and as further
amended on May 29, 1997 and June 11, 1997 ( Registration No. 333-20497).
. 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.
LIFE FINANCIAL CORP.
August 13, 1997 By: /s/ DANIEL L. PERL
- --------------- --------------------------
Date Daniel L. Perl
President and Chief
Executive Officer
(principal executive officer)
August 13, 1997 /s/ L. BRUCE MILLS, JR.
- --------------- -------------------------------
Date L. Bruce Mills, Jr.
Executive Vice President
Chief Financial Officer and
Treasurer
(principal financial and accounting
officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,929
<INT-BEARING-DEPOSITS> 10,146
<FED-FUNDS-SOLD> 15,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,719
<INVESTMENTS-CARRYING> 8,018
<INVESTMENTS-MARKET> 8,019
<LOANS> 134,626
<ALLOWANCE> 1,605
<TOTAL-ASSETS> 195,290
<DEPOSITS> 136,519
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,026
<LONG-TERM> 10,000
0
0
<COMMON> 61
<OTHER-SE> 41,684
<TOTAL-LIABILITIES-AND-EQUITY> 195,290
<INTEREST-LOAN> 5,220
<INTEREST-INVEST> 219
<INTEREST-OTHER> 1,017
<INTEREST-TOTAL> 6,456
<INTEREST-DEPOSIT> 3,181
<INTEREST-EXPENSE> 4,021
<INTEREST-INCOME-NET> 2,435
<LOAN-LOSSES> 500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,971
<INCOME-PRETAX> 6,447
<INCOME-PRE-EXTRAORDINARY> 6,447
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,765
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 8.97
<LOANS-NON> 2,536
<LOANS-PAST> 0
<LOANS-TROUBLED> 130
<LOANS-PROBLEM> 740
<ALLOWANCE-OPEN> 1,625
<CHARGE-OFFS> 529
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 1,605
<ALLOWANCE-DOMESTIC> 1,605
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,323
</TABLE>
