<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 March 31, 1998
Commission File Number 0-22193
LIFE FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0743196
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10540 MAGNOLIA AVE., SUITE B, RIVERSIDE, CALIFORNIA 92505
- --------------------------------------------------------------------------------
(909) 637-4000
- --------------------------------------------------------------------------------
(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. [X] Yes [_] 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 May 14, 1998.
<PAGE>
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1 Consolidated Statements of Financial Condition:
March 31, 1998 (unaudited) and December 31, 1997................. 1
Consolidated Statements of Operations:
For the Three months ended March 31, 1998 and 1997 (unaudited)... 2
Consolidated Statements of Cash Flows:
For the Three months ended March 31, 1998 and 1997 (unaudited)... 3
Notes to Consolidated Financial Statements (unaudited)........... 4
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................... 7
Item 3 Quantitative and Qualitative Disclosures About Market Risk....... 15
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................ 16
Item 2 Changes in Securities and Use of Proceeds........................ 16
Item 3 Defaults Upon Senior Securities.................................. 16
Item 4 Submission of Matters to a Vote of Security Holders.............. 16
Item 5 Other Information................................................ 16
Item 6 Exhibits and Reports on Form 8-K................................. 16
ii
<PAGE>
Item 1. Financial Statements.
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents........................... $ 71,299 $ 11,503
Restricted cash..................................... 13,481 12,339
Securities held-to-maturity, estimated fair value
of $5,027 and $5,030 at March 31, 1998 and
December 31, 1997.............................. 5,011 5,012
Residual assets, at fair value...................... 43,275 40,746
Loans held-for-sale................................. 202,956 289,268
Loans held-for-investment - net of allowance for
estimated loan losses of $4,132 and $2,573
at March 31, 1998 and December 31, 1997........ 27,873 29,076
Mortgage servicing rights........................... 9,931 8,526
Accrued interest receivable......................... 2,052 2,638
Foreclosed real estate - net........................ 1,645 1,440
Premises and equipment - net........................ 6,012 4,764
Federal Home Loan Bank stock........................ 1,083 1,067
Other assets........................................ 2,569 5,406
-------- --------
TOTAL ASSETS................................... $387,187 $411,785
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposit accounts.................................... $239,805 $211,765
Federal Home Loan Bank advances..................... - 9,000
Other borrowings.................................... 48,482 100,170
Subordinated debentures............................. 10,000 10,000
Accounts payable and other liabilities.............. 30,364 26,031
-------- --------
Total liabilities.............................. 328,651 356,966
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 25,000,000 shares
authorized; 6,546,716 shares issued and
outstanding as of March 31, 1998 and
December 31, 1997.............................. 65 65
Additional paid-in capital.......................... 42,171 42,171
Retained earnings, partially restricted............. 16,300 12,583
-------- --------
Total stockholders' equity..................... 58,536 54,819
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $387,187 $411,785
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
1
<PAGE>
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Interest Income:
Loans $ 7,466 $ 1,872
Residual assets 1,497 173
Securities held to maturity 74 106
Other interest-earning assets 1,000 153
--------- ---------
Total interest income 10,037 2,304
--------- ---------
Interest Expense:
Deposit accounts 3,269 1,317
FHLB advances and other borrowings 2,783 173
Subordinated debentures 342 71
--------- ---------
Total interest expense 6,394 1,561
--------- ---------
Net Interest Income Before Provision for
estimated loan losses 3,643 743
Provision for estimated loan losses 1,630 500
Net Interest Income After Provision for
estimated loan losses 2,013 243
Non-Interest Income:
Loan servicing and other fees 1,052 120
Service charges on deposit accounts 39 30
Net gains from mortgage financing operations 8,462 5,877
Other income 165 58
--------- ---------
Total non-interest income 9,718 6,085
--------- ---------
Non-Interest Expense:
Compensation and benefits 2,977 1,582
Premises and occupancy 631 223
Data processing 304 135
Net loss on foreclosed real estate 82 63
FDIC insurance premiums 26 18
Marketing 330 68
Telephone 217 85
Professional services 294 58
Other expense 516 260
--------- ---------
Total non-interest expense 5,377 2,492
--------- ---------
Income Before Provision for tax expense 6,354 3,836
Provision for tax expense 2,637 1,594
--------- ---------
Net Income $ 3,717 $ 2,242
========= =========
Basic earnings per share $ 0.57 $ 0.70
========= =========
Basic weighted average shares outstanding 6,546,716 3,211,716
========= =========
Diluted earnings per share $ 0.54 $ 0.70
========= =========
Diluted weighted average shares outstanding 6,845,761 3,211,716
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
2
<PAGE>
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,717 $ 2,242
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 353 100
Provision for estimated loan losses 1,630 500
Accretion of deferred fees (10) (1)
Provision for estimated losses of foreclosed real estate 41 26
Gain on sale of foreclosed real estate, net (4) (3)
Gain on sale and securitization of loans held-for-sale (8,696) (5,358)
Unrealized gain on residual assets (42) -
Net accretion of residual assets (355) (519)
Change in valuation allowance on mortgage servicing rights - (202)
Amortization of mortgage servicing rights 418 172
Purchase and origination of loans held-for-sale, net of loan fees (254,118) (93,866)
Proceeds from sales and securitization of loans held-for-sale 320,310 80,016
Increase in restricted cash (1,142) (5,262)
(Increase) decrease in accrued interest receivable 586 (129)
Change in valuation allowance on residual assets 280 -
Increase (decrease) in accounts payable and other liabilities 4,333 (354)
Federal Home Loan Bank stock dividend (16) (13)
Decrease (increase) in other assets 2,837 (1,052)
--------- --------
Net cash provided by (used in) operating activities 70,122 (23,703)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans 25,891 4,470
Proceeds from sale of foreclosed real estate 443 35
Purchase of securities held-to-maturity - (1,000)
Proceeds from maturities of securities held-to-maturity - 1,000
Additions to premises and equipment, net (1,591) (181)
Purchase of Federal Home Loan Bank stock - (171)
Cash (paid) received on residual assets (2,412) 809
--------- --------
Net cash provided by investing activities 22,331 4,962
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 28,040 45,097
Proceeds from other borrowings (51,697) (3,278)
Repayment of Federal Home Loan Bank advances (9,000) -
Net proceeds from issuance of subordinated debentures - 9,644
--------- --------
Net cash (used in) provided by financing activities (32,657) 51,463
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 59,796 32,722
CASH AND CASH EQUIVALENTS, beginning of period 11,503 13,265
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 71,299 $ 45,987
========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 5,267 $ 1,507
========= ========
Income taxes paid $ - $ 1,240
========= ========
NONCASH INVESTING ACTIVITIES DURING THE PERIOD:
Transfers from loans to foreclosed real estate $ 685 $ 846
========= ========
Loans to facilitate sales of foreclosed real estate $ - $ 166
========= ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(UNAUDITED)
1. Basis of Presentation:
----------------------
The consolidated financial statements include the accounts of LIFE
Financial Corporation (the "Company") and its subsidiaries, LIFE Bank (formerly
Life Savings Bank, Federal Savings Bank), (the "Bank") and Life Investment
Holdings, Inc. All material intercompany accounts and transactions have been
eliminated in consolidation.
The Company is a savings and loan holding company, incorporated in the
State of Delaware, that was initially organized for the purpose of acquiring all
of the capital stock of the Bank through the holding company reorganization (the
"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 interests. On June 30, 1997, the Company completed its sale of
2,900,000 additional shares of its common stock through an initial public
offering (the "IPO"). On July 2, 1997, the Company issued 435,000 shares of
common stock to the public through the exercise of the underwriter's over-
allotment option, bringing the total shares outstanding to 6,546,716. The
consolidated financial condition and results of operations of the Company for
the periods prior to the date of Reorganization consist of those of the Bank.
Since the Reorganization and the IPO, the Company has purchased residual
assets and restricted cash from the Bank.
4
<PAGE>
The Bank is a federally chartered stock savings and loan whose primary
business is the origination and sale of high loan-to-value second trust deeds,
sub-prime one-to-four family residential mortgage loans and, to a much lesser
extent, multi-family residential and commercial real estate loans. The
Company'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 Company have been from deposits, Federal Home Loan Bank advances, $250
million in lines of credit from two major investment banks, a $40 million
residual financing line of credit, as well as, from loan sales and
securitizations. As of March 31, 1998, the Bank had two depository branch
offices in San Bernardino and Riverside, California, nine retail lending offices
in Southern California, four regional loan centers located in Riverside,
California, Jacksonville, Florida, the Boston, Massachusetts area and the
Denver, Colorado metropolitan area and a capital markets group located in
Seattle, Washington.
The accompanying unaudited 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. Certain reclassifications have been made to
the consolidated financial statements for 1997 to conform to the 1998
presentation. The results of operations for the three month period ended March
31, 1998 are not necessarily indicative of the results that may be expected for
the entire fiscal year.
2. Approved Stock Compensation Plans
---------------------------------
On November 21, 1996, the Board of Directors of the Bank adopted the Life
Bank 1996 Stock Option Plan (the "1996 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 1996 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 1996 Option
Plan will be in effect for a period of ten years from the adoption by the Board
of Directors. Options granted under the 1996 Option Plan will be made at an
exercise price equal to the fair market value of the stock 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 which change in control did not include the
reorganization of the Bank into the holding company. 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
Board of Directors. The options granted under the 1996 Option Plan will vest at
a rate of 33.3% per year, beginning on November 21, 1999. At December 31, 1997
and March 31, 1998, 27,540 options held by three retired directors were
exercisable.
The Board of Directors of the Company has adopted the LIFE Financial
Corporation 1997 Stock Option Plan (the "1997 Option Plan"), which became
effective upon the Reorganization (the 1996 Option Plan and the 1997 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 that were exchanged for Bank options
pursuant to the 1996 Option Plan for issuance under the Option Plans. Stock
options with respect to shares of the Bank's Common Stock granted under the 1996
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. On March 31, 1998, 201,000 shares of
the 1997 Option Plan were granted at an exercise prices ranging from $11.00 to
$18.50 per share. The options granted under the 1997 Option Plan will vest at a
rate of 33.3% per year, beginning on June 30, 2000. There were 17,500 options
at December 31, 1997 and March 31, 1998 held by one director which were
exercisable.
5
<PAGE>
3. Comprehensive Income
--------------------
The Company adopted Statement Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income" effective with the fiscal year beginning
January 1, 1998. SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings, paid-in capital in the equity section of the
statement of financial position. The Company has no differences between net
income and comprehensive income as of March 31, 1998.
4. Earnings Per Share
------------------
The Company adopted effective December 31, 1997, SFAS No. 128 "Earnings Per
Share" effective as of December 31, 1997. The Statement establishes standards
for computing and presenting earnings per share (EPS) and applies to entities
with publicly-held common stock or potential common stock. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS calculation to the numerator
and denominator of the diluted EPS computation. The adoption of SFAS No. 128 did
not have a significant impact on the Company's earnings per share.
Earnings per share has been adjusted retroactively to reflect the three-
for-one stock exchange effected pursuant to the Reorganization and the stock
split effected in the form of a dividend during 1996.
The following table is a reconciliation of the numerators and denominators
of the basic and diluted EPS computations for the net earnings for the Company
(dollars in thousands, except share data):
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1998(a) 1997
----------------------------------- ------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Earnings $3,717 $2,242
Basic EPS
Earnings available to
common stockholders 3,717 6,546,716 $0.57 2,242 3,211,716 $0.70
===== =====
Effect of Dilutive
Securities Options 299,045 -- --
------ --------- ------ ---------
Diluted EPS
Earnings available to
common stockholders
plus assumed conversions $3,717 6,845,761 $0.54 $2,242 3,211,716 $0.70
====== ========= ===== ====== ========= =====
</TABLE>
(a) Options to purchase 3,500 shares of common stock at $18.50 per share were
outstanding during the three months ended March 31, 1998 but were not included
in the computation of diluted EPS because the options' exercise price was
greater than the average market price of the common shares. The options, which
expire July 22, 2007, were still outstanding at March 31, 1998.
6
<PAGE>
5. FIRSTPLUS Financial Group merger
--------------------------------
On March 11, 1998, the Company entered into an agreement and plan of merger
(Merger Agreement) with FIRSTPLUS Financial Group, Inc. (FIRSTPLUS). The Merger
Agreement provides for the merger of the Company with and into FIRSTPLUS, with
FIRSTPLUS as the surviving corporation. The Merger Agreement is subject to the
receipt of regulatory approval and the approval of the shareholders of the
Company. Under the Merger Agreement, at the effective date of the merger, each
outstanding share of Company common stock will be converted into the right to
receive between 0.500 and 0.667 share of FIRSTPLUS common stock.
6. Recent Accounting Pronouncements
--------------------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS No.
131 establishes standards of reporting by publicly held business enterprises and
requires disclosures for each segment that are similar to those required under
current standards with the addition of quarterly disclosure requirements and a
finer partitioning of geographic disclosures. It requires limited segment data
on a quarterly basis. It also requires geographic data by country, as opposed
to broader geographic regions, as permitted under current standards. SFAS No.
131 is effective for the fiscal years beginning after December 15, 1997 with
earlier application permitted. The Company does not anticipate the adoption of
SFAS No. 131 will have a material impact on its financial reporting.
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 Annual
Report on Form 10K, which focuses upon relevant matters occurring during the
year ended December 31, 1997. Accordingly, the ensuing discussion focuses upon
the material matters at and for the three months ended March 31, 1998.
GENERAL
- -------
The Company originates, purchases, sells, services and securitizes
primarily non-conventional mortgage loans principally secured by first and
second mortgage loans on one- to-four family residences. The Company makes
Liberator Series loans, which are for the purchase or refinance of residential
real property by sub-prime borrowers and Portfolio Series loans, which are debt
consolidation loans for borrowers whose credit qualifies for Fannie Mae or
Freddie Mac loans ("Agency-Qualified Borrowers"), generally with loan-to-value
ratios of up to 125%. While the Company is currently emphasizing the origination
of Portfolio Series loans, it intends to market both products as demand permits.
In addition, to a much lesser extent, the Company originates multi-family
residential and commercial loans. The Company purchases and originates mortgage
loans and other real estate secured loans through a network of approved
correspondents and independent mortgage brokers ("Originators") throughout the
country. The Company funds substantially all of the loans which it originates or
purchases through deposits, internally generated funds, FHLB advances, three
warehouse lines of credit and 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, sell and securitize 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, sale and securitization of loans in recent
periods, 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.
7
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net income was $3.7 million for the three months ended March 31, 1998
compared to $2.2 million for the three months ended March 31, 1997, an increase
of $1.5 million. For the three month periods ending March 31, 1998 and 1997,
the diluted earnings per share were $0.54 and $0.70, respectively. The
increase in net income was primarily enhanced by gains from whole loan sale
activities and other related mortgage financing operations as well as an
increase in net interest income. The decrease in the earnings per share
reflects the increase in outstanding shares due to the public offering completed
on June 30, 1997.
Interest Income
- ---------------
Interest income was $10.0 million for the three months ended March 31, 1998
compared to $2.3 million for the three months ended March 31, 1997 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-earning assets
increased to $390.8 million for the three months ended March 31, 1998 compared
to $121.6 million for the three months ended March 31, 1997. The yield on
interest-earning assets increased to 10.27% for the three months ended March 31,
1998 compared to 7.58% for the three months ended March 31, 1997.
The largest single component of interest-earning assets was average loans
receivable, net, which were $310.0 million with a yield of 9.63% for the three
months ended March 31, 1998 compared to $98.9 million with a yield of 7.57% for
the three months ended March 31, 1997. The increase in average loans
receivable, net was due to an increase in loans held-for-sale. Loans held-for-
sale were $203.0 million at March 31, 1998 compared to $38.3 million at March
31, 1997. This increase was attributed to the continued growth of the
Company's mortgage financing operation. The yield has increased by 206 basis
points due to both the composition of the loans held-for-sale which is
approximately 60% consumer loans with high loan-to-value ratios and higher
interest rates on these loans.
Other interest-earning assets reflects income earned during the three
months ended March 31, 1998 of $661,000 due to interest received at a yield of
4.75% on $62.5 million which represents the pre-fund for the 1997-3
securitization.
Interest Expense
- ----------------
Interest expense increased to $6.4 million for the three months ended March
31, 1998 compared to $1.6 million for the three months ended March 31, 1997 due
to an increase in the average interest-bearing liabilities combined with an
increase in the cost of those liabilities. On March 14, 1997, the Company
issued $10 million in subordinated debentures (Debentures) through a private
placement and pursuant to a Debenture Purchase Agreement. The Debentures mature
on March 15, 2004 and bear interest at a rate of 13.5% per annum, payable semi-
annually. The Debentures are redeemable at the option of the Company, in whole
or in part, at any time after September 15, 1998 at the aggregate principal
amount thereof, plus accrued and unpaid interest, if any. The holders of the
Debentures have a thirty day option from September 15, 1998 to require the
Company to purchase all or part at the aggregate principal amount plus accrued
interest through the repurchase date. The issuance of debentures, combined with
an increased reliance on certificate accounts and other borrowings, resulted in
an increase in the average cost of interest-bearing liabilities to 7.40% for the
three months ended March 31, 1998 compared to 5.33% for the three months ended
March 31, 1997. Average interest-bearing liabilities were $350.4 million for the
three months ended March 31, 1998 compared to $118.7 million for the three
months ended March 31, 1997.
The largest component of average interest-bearing liabilities was
certificate accounts, which averaged $213.3 million with an average cost of
5.96% for the three months ended March 31, 1998, compared to $86.3 million with
an average cost of 5.70% for the three months ended March 31, 1997. The second
largest component of average interest-bearing liabilities was borrowings, which
increased to an average balance of $114.9 million with an average cost of 11.03%
for the three months ended March 31, 1998 compared to $15.4 million with an
average cost of 6.45% for the three months ended March 31, 1997. In addition to
the Debentures issued during 1997, the Company began utilizing two warehouse
lines of credit and a residual financing line for total lines of credit of
$290.0 million
8
<PAGE>
which are indexed to London Interbank Offering Rate index ("LIBOR").
Net Interest Income Before Provision for Estimated Loan Losses
- --------------------------------------------------------------
Net interest income before provision for estimated loan losses for the
three months ended March 31, 1998 was $3.6 million compared to $743,000 for the
three months ended March 31, 1997. 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 and an increase in
the ratio of interest-earning assets to interest-bearing liabilities. Average
interest-earning assets increased to $390.8 million with a yield of 10.27% for
the three months ended March 31, 1998 compared to $121.6 million with a yield of
7.58% for the three months ended March 31, 1997. Average interest-bearing
liabilities increased to $350.4 million with an average cost of 7.40% for the
three months ended March 31, 1998 compared to $118.7 million with an average
cost of 5.33% for the three months ended March 31, 1997. The net interest
margin increased to 3.73% for the three months ended March 31, 1998 compared to
2.44% for the three months ended March 31, 1997. The ratio of interest-earning
assets to interest-bearing liabilities was 111.58% for the three months ended
March 31, 1998 compared to 102.43% for the three months ended March 31, 1997.
9
<PAGE>
Average Balance Sheets. The following tables set forth certain information
- ----------------------
relating to the Company for the three month periods ended March 31, 1998 and
1997 . 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
March 31, 1998 March 31, 1997
----------------------------------- --------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets: Average Average Average Average
Interest-earning assets: Balance Interest Yield/Cst Balance Interest Yield/Cst
------- -------- --------- ------- -------- ---------
Interest-earning deposits
and short-term investments(1) $ 33,517 $ 983 11.74% $ 8,914 $ 139 6.24%
Investment securities(2) 6,081 91 5.92 8,628 120 5.56
Loans receivable, net(3) 309,916 7,466 9.63 98,890 1,872 7.57
Mortgage-backed securities, net(2) 9 -- 0.00 10 -- 0.00
Residual assets 41,311 1,497 14.69 5,131 173 13.49
--------- ------ ---------- --------
Total interest-earning assets 390,834 10,037 10.27 121,573 2,304 7.58
Non-interest-earning assets(4) 28,804 ------ 20,317 --------
--------- ----------
Total assets(4) $ 419,638 $ 141,890
========= ==========
Liabilities and Equity:
Interest-bearing liabilities:
Passbook accounts $ 4,007 24 2.43 $ 3,959 20 2.05
Money market accounts 2,822 31 4.46 3,025 23 3.08
Checking accounts 15,335 80 2.12 10,006 61 2.47
Certificate accounts 213,330 3,134 5.96 86,348 1,213 5.70
--------- ------ ---------- --------
Total deposit accounts 235,494 3,269 5.63 103,338 1,317 5.17
Borrowings(5) 114,895 3,125 11.03 15,350 244 6.45
--------- ------ ---------- --------
Total interest-bearing liabilities 350,389 6,394 7.40 118,688 1,561 5.33
Non-interest-bearing liabilities(4) 12,391 13,290 --------
--------- ----------
Total liabilities(4) 362,780 131,978
Equity(4) 56,858 9,912
--------- ----------
Total liabilities and equity(4) $ 419,638 $ 141,890
========= ==========
Net interest income before Provision
for estimated loan losses $ 3,643 $ 743
Net interest rate spread(6) ======== 2.87 ======== 2.25
Net interest margin(7) 3.73 2.44
Ratio of interest-earning assets to
interest-bearing liabilities 111.58% 102.43%
</TABLE>
(1) Interest income for the three months ended March 31, 1998 includes
$661,000 received on the $62.5 million 1997-3 asset securitization held in
trust. Without this income, the yield would be 3.90%.
(2) Includes unamortized discounts and premiums.
(3) Amount is net of deferred loan origination fees, unamortized discounts,
premiums and allowance for estimated loan losses and includes loans held-
for-sale.
(4) Average balances are measured on a month-end basis.
(5) Interest expense on borrowings for the three months ended March 31, 1998
includes $314,000 due to $62.5 million in bonds issued as part of the
1997-3 asset securitization. Without this expense, the costs would be
9.92%.
(6) Net interest rate spread represents the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities.
(7) Net interest margin represents net interest income divided by average
interest-earning assets.
10
<PAGE>
Provision for Estimated Loan Losses
- -----------------------------------
Provisions for estimated loan losses were $1.6 million for the three months
ended March 31, 1998 compared to $500,000 for the three months ended March 31,
1997. The increase in provisions is due to management's analysis of the risks
inherent in its loans held-for-investment and loans held-for-sale portfolios.
With the additional provision, the level of allowances for estimated loan losses
as a percent of non-performing loans was 53.14% as of March 31, 1998 compared to
103.62% as of March 31, 1997. The ratio of non-performing assets as a percentage
of total assets increased to 2.43% as of March 31, 1998 compared to 1.85% as of
March 31, 1997. (See "Financial Condition").
Non-Interest Income
- -------------------
Net gains from mortgage financing operations for the three months ended
March 31, 1998 totaled $8.5 million, compared to $5.9 million for the three
months ended March 31, 1997. This gain is net of a mark-to-market write down on
residual assets of $280,000 which was the result of loan characteristic changes
based upon prepayment speeds on the Company's 1997-2 securitization of loans.
The increase in gains from mortgage financing operations was attributable to the
increase in the level of mortgage financing operations, due to whole loan sales
of $249.3 million and the completion of the pre-fund for the 1997-3
securitization in the amount of $62.5 million for a total of $311.8 million,
compared to loans securitized totaling $83.2 million for the three months ended
March 31, 1997. Net gains from mortgage financing operations as a percent of
loans sold or securitized was 2.80% for the three months ended March 31, 1998,
as compared to 7.06% for the three months ended March 31, 1997. This decrease in
percentage reflected the effects of the securitization of loans compared to
whole loan sales. Loans originated and purchased, net of loan fees, totaled
$254.1 million for the three months ended March 31, 1998, compared to $93.9
million for the three months ended March 31, 1997.
Non-Interest Expense
- --------------------
Non-interest expense was $5.4 million for the three months ended March 31,
1998 compared to $2.5 million for the three months ended March 31, 1997. The
increase was due primarily to an increase in compensation and benefits and other
operating expenses resulting from the expansion of the mortgage financing
operations.
Compensation and benefits increased to $3.0 million for the three months
ended March 31, 1998 from $1.6 million for the three months ended March 31,
1997. These costs are directly related to the expansion of the mortgage
financing operations and the corresponding increase in personnel, to an average
of 293 employees for the three months ended March 31, 1998 compared to 161 for
the three months ended March 31, 1997.
Premises and occupancy expenses increased to $631,000 for the three months
ended March 31, 1998 compared to $223,000 for the three months ended March 31,
1997 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 the opening of the new Corporate Headquarters and regional
lending center located in Riverside, California, the relocation of the Florida
regional office, the addition of nine low cost retail lending offices in
California, and the opening of one new retail bank branch in Riverside,
California. The Company anticipates that premises and occupancy expense will
continue to increase as the Company adds new retail lending and retail banking
offices with the Call Center opening in May in Riverside and the Redlands,
California branch opening in June, 1998; as well as, additional office space for
the expansion of the loan servicing operations.
As a result of the expansion of the mortgage financing operations, other
operating expenses increased as well. Data processing increased to $304,000 for
the three months ended March 31, 1998 compared to $135,000 for the three months
ended March 31, 1997. Marketing expense increased to $330,000 for the three
months ended March 31, 1998 compared to $68,000 for the three months ended March
31, 1997 as marketing campaigns to increase retail deposits and loan
originations were implemented during the current quarter. Telephone,
professional services and other expense increased to $217,000, $294,000 and
$516,000, respectively, for the three months ended March 31, 1998 compared to
$85,000, $58,000 and $260,000 for the three months ended March 31, 1997.
11
<PAGE>
Income Taxes
- ------------
The provision for tax expense increased to $2.6 million for the three
months ended March 31, 1998 compared to $1.6 million for the three months ended
March 31, 1997 due to an increase in income before provision for tax expense.
Income before provision for tax expense increased to $6.4 million for the three
months ended March 31, 1998 from $3.8 million for the three months ended March
31, 1997. The effective tax rate remained stable at 41.5% and 41.6% for the
three months ended March 31, 1998 and 1997, respectively.
COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
- ----------------------------------------------------------------------------
Total assets decreased to $387.2 million as of March 31, 1998 compared to
$411.8 million as of December 31, 1997. This decrease was attributable to the
cash loan sales during the quarter ended March 31, 1998. Loans held-for-sale
totaled $203.0 million as of March 31, 1998 compared to $289.3 million as of
December 31, 1997. Loans held-for-investment decreased to $27.9 million as of
March 31, 1998 compared to $29.1 million as of December 31, 1997.
As a result of the Company's loan securitization activities during the past
year, residual assets and restricted cash increased to $43.3 million and $13.5
million, respectively, as of March 31, 1998 compared to $40.7 million and $12.3
million as of December 31, 1997. Mortgage servicing rights also increased as a
result of the loan sales with servicing retained to $9.9 million as of March 31,
1998 compared to $8.5 million as of December 31, 1997.
Cash and cash equivalents were $71.3 million as of March 31, 1998 compared
to $11.5 million as of December 31, 1997. Cash and cash equivalents increased
by $59.8 million during the quarter ended March 31, 1998 due to the March 30
loan sales. Premises and equipment increased to $6.0 million as of March 31,
1998 compared to $4.8 million as of December 31, 1997. This increase of $1.2
million is primarily due to the loan servicing department moving to a new
location and retrofitting their previous facility in order to house the new Call
Center operation which will open in May, 1998. Real estate owned increased to
$1.6 million as of March 31, 1998 compared to $1.4 million as of December 31,
1997 as part of the Company's continuing effort to resolve problem assets.
The Company increased its liabilities by increasing deposit accounts to
$239.8 million as of March 31, 1998 compared to $211.8 million as of December
31, 1997. The major component of deposit accounts is certificates of deposit,
which increased to $217.1 million as of March 31, 1998 compared to $193.8
million as of December 31, 1997.
The Bank decreased FHLB advances and other borrowings from $119.2 million
at December 31, 1997 to $58.5 million at March 31, 1998 with the proceeds of the
loan sales completed during the first quarter of 1998.
Accounts payable and other liabilities increased to $30.4 million as of
March 31, 1998 compared to $26.0 million as of December 31, 1997 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 $58.5 million as of March 31, 1998 from
$54.8 million as of December 31, 1997 due to the quarterly earnings of $3.7
million.
The Company's non-performing assets increased to $9.4 million as of March
31, 1998 compared to $6.6 million as of December 31, 1997. The increase of $2.9
million is due primarily to non-accrual loans with an
12
<PAGE>
increase of $2.1 million in one- to-four family residential loans and $596,000
in consumer loans. Non-performing loans as a percent of gross loans receivable
increased to 3.39% as of March 31, 1998 from 1.64% as of December 31, 1997. Non-
performing assets as a percent of total assets decreased to 2.43% as of March
31, 1998 from 1.59% as of December 31, 1997. The following table sets forth the
non-performing assets at March 31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1998 1997
------- -------
(Dollars in thousands)
<S> <C> <C>
Non-accrual loans $ 7,775 $ 5,126
Foreclosed real estate 1,645 1,440
------- -------
Total non-performing assets $ 9,420 $ 6,566
======= =======
Allowance for estimated loan losses as a percent of gross loans
receivable(1) 1.80% 0.82%
Allowance for estimated loan losses as a percent of total non-performing
loans(2) 53.14 50.20
Non-performing loans as a percent of gross loans receivable(1)(2) 3.39 1.64
Non-performing assets as a percent of total assets(2) 2.43 1.59
</TABLE>
_______________
(1) Gross loans receivable is comprised of loans held-for-sale and loans held-
for-investment.
(2) Non-performing loans is comprised of non-accrual loans and foreclosed real
estate.
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 March 31, 1998 of $4.1 million compared to $2.6 million as of
December 31, 1997. 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 consist of one- to-four family residential
mortgage loans and consumer loans. Management believes that the allowance for
loan losses at March 31, 1998 was adequate to absorb known and inherent risks in
the Company's loan portfolio. No assurances can be given, however, the economic
conditions which may adversely affect the Company's or the Bank's service area
or other circumstances will not be reflected in increased losses in the loan
portfolio. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance or to
take charge-offs (reductions of the allowance) in anticipation of losses.
The following table sets forth the activity in the Company's allowance for
estimated loan losses for the three months ended March 31, 1998:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance as of December 31, 1997 $2,573
Add:
Provision for estimated loan losses 1,630
Recoveries of previous charge-offs --
Less:
Charge-offs 71
------
Balance as of March 31, 1998 $4,132
======
</TABLE>
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary sources of funds are deposits, warehouse lines 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 4%. The Company's average liquidity ratios were
9.25% and 12.60% for the three months ended March 31, 1998 and March 31, 1997,
respectively.
The Company's cash flows are comprised of three primary classifications:
cash flows from operating activities, investing activities and financing
activities. Cash flows provided in (used in) operating activities were $70.1
million and $(23.7) million for the quarters ended March 31, 1998 and 1997,
respectively. Such cash flows primarily consisted of loans originated and
purchased for sale (net of loan fees) of $254.1 million and $93.9 million, net
of proceeds from the sale and securitization of loans held for sale of $320.3
million and $80.0 million for the quarters ended March 31, 1998 and 1997,
respectively. Net cash provided from investing activities were $22.3 million
and $5.0 million for the quarters ended March 31, 1998 and 1997, respectively,
and consisted primarily of principal collections on loans. Proceeds from the
principal collections were $25.9 million and $4.5 million for the quarters ended
March 31, 1998 and 1997, respectively. Net cash provided from financing
activities consisted primarily of net activity in deposit accounts and
borrowings. The net (decrease)/increase in deposits and borrowings was $(32.6)
million and $51.5 million for the quarters ended March 31, 1998 and 1997,
respectively. The Company paid down the lines of credit by $51.7 million and
$3.3 million for the quarters ended March 31, 1998 and 1997, respectively. Net
deposits increased by $28.0 million and $45.1 million for the quarters ended
March 31, 1998 and 1997, respectively. During the quarter ended March 31, 1998,
the Company reduced its FHLB advances by $9.0 million and had no outstanding
advances at quarter end. During the quarter ended March 31, 1997, the Company
received the proceeds of $9.6 million on the issuance of subordinated
debentures.
The Company's most liquid assets are unrestricted cash and short-term
investments. The levels of these assets are dependent on the Company's
operating, lending and investing activities during any given period. At March
31, 1998, cash and short-term investments totalled $71.3 million. The Company
has other sources of liquidity if a need for additional funds arises, including
the utilization of FHLB advances. Other sources of liquidity include investment
securities maturing within one year. The Bank also has two warehouse lines of
credit available in the amount of $250 million of which $33.0 million had been
drawn upon at March 31, 1998. The Company has a residual financing line of
credit in the amount of $40.0 million, with an outstanding balance of $15.5
million as of the quarter ending March 31, 1998.
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 March 31, 1998, the
Bank was considered "well-capitalized".
14
<PAGE>
The Bank was in compliance with the capital requirements in effect as of
March 31, 1998. The following table reflects the required ratios and the actual
capital ratios of the Bank as of March 31, 1998:
<TABLE>
<CAPTION>
Actual Required Excess Actual Required
Capital Capital Amount Percent Percent(a)
-------- ----------- --------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tangible $25,305 $13,193 $12,112 7.67% 1.50%
Core $25,305 $13,193 $12,112 7.67% 3.00%
Risk-based $27,551 $18,073 $ 9,478 12.20% 8.00%
</TABLE>
- ---------------
(a) The percentages and ratios to be well-capitalized under prompt and
corrective action provisions as issued by the OTS are 10.00% for risk-based
assets, 5% for core capital and 6% for Tier I capital. At March 31, 1998, the
Bank's ratios were 12.20%, 7.67% and 11.20%, respectively.
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.
As of March 31, 1998, the Bank had outstanding commitments to originate or
purchase mortgage loans of $28.7 million compared to $29.2 million as of
December 31, 1997 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
March 31, 1998 compared to the period ended December 31, 1997 as discussed in
the notes to the audited consolidated financial statements of LIFE Financial
Corporation for the year ended December 31, 1997 included in the Company's
Annual Report on Form 10K.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
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 has 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 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. Management is continuing
15
<PAGE>
to evaluate and refine its hedging policies. No hedging positions were
outstanding as of March 31, 1998 nor December 31, 1997.
Year 2000 Compliance: As the year 2000 approaches, a critical business
---------------------
issue has emerged regarding how existing application software programs and
operating systems can accommodate this date value. The Company has implemented
a program designed to ensure that all software used in connection with the
Company's business will manage and manipulate data involving the transition from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data. The Company will utilize internal resources to
monitor and test for year 2000 compliance. However, there can be no assurances
that such a program will be effective. To the extent that the Company system's
are not fully year 2000 compliant, there can be no assurances that potential
system interruptions or the cost necessary to update software would not have a
material effect on the Company's business, financial condition, results of
operation and business prospects. In addition, the Company has limited
information concerning the compliance status of its suppliers and customers. In
the event that any of the Company's significant suppliers do not successfully
and timely achieve year 2000 compliance, the Company's business or operations
could be adversely affected. The costs associated with the compliance efforts
are not expected to have a significant impact on the Company's ongoing results
of operation.
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 and Use of Proceeds
-----------------------------------------
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.
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
On March 25, 1998, the Company filed a report on Form 8-K,
reporting under Item 5 the entrance into a definite Agreement
and Plan of Merger between the Company and FIRSTPLUS Financial
Group, Inc. The Agreement and Plan of Merger was filed as an
Exhibit at Item 7.
. 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).
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIFE FINANCIAL CORP.
May 14, 1998 By: /s/ Daniel L. Perl
- ------------ ------------------------------------
Date Daniel L. Perl
President and Chief
Executive Officer
(principal executive officer)
May 14, 1998 /s/ Jeff Blake
- ------------ -------------------------------------
Date Acting Chief Financial Officer and
Treasurer
(principal financial and accounting
officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,699
<INT-BEARING-DEPOSITS> 13,481
<FED-FUNDS-SOLD> 53,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 234,961
<ALLOWANCE> 4,132
<TOTAL-ASSETS> 387,187
<DEPOSITS> 239,805
<SHORT-TERM> 48,482
<LIABILITIES-OTHER> 30,364
<LONG-TERM> 10,000
0
0
<COMMON> 58,536
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 387,187
<INTEREST-LOAN> 7,466
<INTEREST-INVEST> 74
<INTEREST-OTHER> 2,497
<INTEREST-TOTAL> 10,037
<INTEREST-DEPOSIT> 3,269
<INTEREST-EXPENSE> 6,394
<INTEREST-INCOME-NET> 3,643
<LOAN-LOSSES> 1,630
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,377
<INCOME-PRETAX> 6,354
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,717
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 10.27
<LOANS-NON> 7,775
<LOANS-PAST> 7,775
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,573
<CHARGE-OFFS> 71
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 4,132
<ALLOWANCE-DOMESTIC> 4,132
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,246
</TABLE>
