<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 2000
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OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission file number 0-24947
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UCBH HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3072450
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
711 VAN NESS AVENUE, SAN FRANCISCO, CALIFORNIA 94102
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(Address of principal executive offices) (Zip Code)
(415) 928-0700
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ..X.. No ......
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.
As of August 2, 2000, the Registrant had 9,366,833 shares of common stock
outstanding.
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UCBH HOLDINGS, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Consolidated Financial Statements.......................................1-3
Notes to Consolidated Financial Statements..............................4-5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................6-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk...............17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................18
Item 2. Changes in Securities and Use of Proceeds................................18
Item 3. Defaults Upon Senior Securities..........................................18
Item 4. Submission of Matters to a Vote of Security Holders......................18
Item 5. Other Information........................................................19
Item 6. Exhibits and Reports on Form 8-K.........................................19
SIGNATURES.............................................................................20
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UCBH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
At June 30, At December 31,
2000 1999
----------- -----------
(unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks ...................................................... $ 21,413 $ 23,789
Federal funds sold ........................................................... 400 500
Investment and mortgage-backed securities available for sale, at fair value... 309,438 328,455
Investment and mortgage-backed securities, at cost (fair value $162,518 at
June 30, 2000 and $171,995 at December 31, 1999) ........................... 173,248 183,906
Federal Home Loan Bank stock ................................................. 28,039 27,024
Loans ........................................................................ 1,807,974 1,686,695
Allowance for loan losses .................................................... (22,521) (19,503)
----------- -----------
Net loans .................................................................... 1,785,453 1,667,192
----------- -----------
Accrued interest receivable .................................................. 16,065 14,628
Premises and equipment, net .................................................. 20,667 21,064
Other assets ................................................................. 15,257 18,242
----------- -----------
Total assets ............................................................... $ 2,369,980 $ 2,284,800
=========== ===========
LIABILITIES
Deposits ..................................................................... $ 1,758,751 $ 1,676,148
Borrowings ................................................................... 451,800 449,612
Guaranteed preferred beneficial interests in junior subordinated debentures... 30,000 30,000
Accrued interest payable ..................................................... 4,434 3,631
Other liabilities ............................................................ 6,826 15,302
----------- -----------
Total liabilities .......................................................... 2,251,811 2,174,693
----------- -----------
Commitments and contingencies ................................................ - -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 25,000,000 shares, issued and
outstanding 9,362,499 shares at June 30, 2000 and 9,333,333 shares at
December 31, 1999 ......................................................... 94 93
Additional paid-in capital ................................................... 59,922 59,485
Accumulated other comprehensive income ....................................... (16,303) (13,419)
Retained earnings-substantially restricted ................................... 74,456 63,948
----------- -----------
Total stockholders' equity ................................................. 118,169 110,107
----------- -----------
Total liabilities and stockholders' equity ................................. $ 2,369,980 $ 2,284,800
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
1
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<TABLE>
<CAPTION>
UCBH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited: Dollars in Thousands, Except for Per Share Data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ----------- --------- ----------
Interest income:
<S> <C> <C> <C> <C>
Loans............................................ $ 37,231 $ 29,818 $ 72,017 $ 58,785
Funds sold and securities purchased under
agreements to resell........................... 7 9 10 11
Investment and mortgage-backed securities........ 8,592 8,900 16,866 17,857
---------- ----------- --------- ----------
Total interest income....................... 45,830 38,727 88,893 76,653
---------- ----------- --------- ----------
Interest expense:
Deposits......................................... 17,757 15,330 33,617 31,501
Short-term borrowings............................ 3,741 2,266 7,144 4,254
Guaranteed preferred beneficial interests
in junior subordinated debentures.......... 703 703 1,406 1,406
Long-term borrowings............................. 3,196 3,194 6,392 6,353
---------- ----------- --------- ----------
Total interest expense...................... 25,397 21,493 48,559 43,514
---------- ----------- --------- ----------
Net interest income......................... 20,433 17,234 40,334 33,139
Provision for loan losses............................. 1,951 1,278 3,706 2,003
---------- ----------- --------- ----------
Net interest income after provision for loan
losses........................................ 18,482 15,956 36,628 31,136
---------- ----------- --------- ----------
Noninterest income:
Commercial banking fees.......................... 582 488 1,131 898
Service charges on deposit accounts.............. 297 188 520 370
Gain on sale of loans, securities and
servicing rights.............................. 217 672 437 680
Loan servicing fees.............................. 41 96 64 213
Miscellaneous ................................... 12 (8) 29 (11)
---------- ----------- --------- ----------
Total noninterest income.................... 1,149 1,436 2,181 2,150
---------- ----------- --------- ----------
Noninterest expense:
Personnel........................................ 4,886 4,577 10,004 9,254
Occupancy........................................ 1,195 1,175 2,338 2,468
Data processing.................................. 541 472 1,083 959
Furniture and equipment.......................... 566 511 1,101 1,101
Professional fees and contracted services........ 542 604 1,085 1,132
Deposit insurance................................ 86 237 171 472
Communication.................................... 124 115 244 217
Foreclosed assets................................ 29 91 50 76
Miscellaneous.................................... 1,857 1,507 3,494 2,978
---------- ----------- --------- ----------
Total noninterest expense.................. 9,826 9,289 19,570 18,657
---------- ----------- --------- ----------
Income before taxes................................... 9,805 8,103 19,239 14,629
Income tax expense.................................... 3,937 3,303 7,797 5,901
---------- ----------- --------- ----------
Net income.................................. $ 5,868 $ 4,800 $ 11,442 $ 8,728
========== =========== ========= ==========
Basic earnings per share.............................. $ 0.63 $ 0.51 $ 1.22 $ 0.94
========== =========== ========= ==========
Diluted earnings per share............................ 0.60 0.50 1.18 0.93
========== =========== ========= ==========
Dividends declared per share.......................... 0.05 - 0.10 -
========== =========== ========= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
UCBH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited: Dollars in Thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
---------------------
2000 1999
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ....................................................... $ 11,442 $ 8,728
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Provision for loan losses ..................................... 3,706 2,003
Increase in accrued interest receivable ....................... (1,437) (342)
Depreciation and amortization of premises and equipment ....... 1,274 1,184
Decrease in other assets ...................................... 5,065 982
Decrease in other liabilities ................................. (8,944) (2,496)
Increase in accrued interest payable .......................... 803 691
Gain on sale of loans, securities and other assets ............ (437) (680)
Other, net .................................................... 669 1,353
--------- ---------
Net cash provided by operating activities ................... 12,141 11,423
--------- ---------
INVESTING ACTIVITIES:
Investments and mortgage-backed securities, available for sale:
Principal payments and maturities ............................. 14,923 25,118
Purchases ..................................................... (3,348) (6,012)
Sales ......................................................... 1,816 -
Investments and mortgage-backed securities held to maturity:
Principal payments and maturities ............................. 10,932 9,859
Purchases ..................................................... (709) (3,214)
Loans purchased .................................................. (109) (123)
Loans originated, net of principal collections ................... (128,576) (105,540)
Proceeds from sale of loans ...................................... 6,396 8,042
Purchases of premises and equipment .............................. (780) (227)
Proceeds from sale of other assets ............................... 76 64
--------- ---------
Net cash used in investing activities ....................... (99,379) (72,033)
--------- ---------
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW, money market and savings
accounts ...................................................... 76,187 40,905
Net increase (decrease) in time deposits ......................... 6,416 (79,193)
Net increase in borrowings ....................................... 2,188 106,039
Proceeds from issuance of common stock ........................... 438 -
Payment of cash dividend on common stock ......................... (467) -
--------- ---------
Net cash provided by financing activities ................... 84,762 67,751
--------- ---------
Net (decrease) increase in cash and cash equivalents ............... (2,476) 7,141
Cash and cash equivalents at beginning of period ................... 24,289 15,109
--------- ---------
Cash and cash equivalents at end of period ......................... $ 21,813 $ 22,250
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ...................... $ 47,756 $ 42,823
Cash paid during the period for income taxes .................. 11,199 6,783
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired through foreclosure ...................... 176 115
Securities transferred to held to maturity .................... - 43,625
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
UCBH HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING
POLICIES
BASIS OF PRESENTATION
The Consolidated Balance Sheet as of June 30, 2000, the Consolidated
Statements of Income for the three and the six months ended June 30, 2000 and
1999, and the Consolidated Statements of Cash Flows for the six months ended
June 30, 2000 and 1999 have been prepared by UCBH Holdings, Inc. (the
"Company") and are not audited.
The unaudited financial statement information presented was prepared on the
same basis as the audited financial statements for the year ended December 31,
1999. In the opinion of management such unaudited financial statements reflect
all adjustments necessary for a fair statement of the results of operations and
balances for the interim periods presented. Such adjustments are of a normal
recurring nature. The results of operations for the six months ended June 30,
2000 are not necessarily indicative of the results to be expected for the full
year.
PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" as amended by FAS 138 will become effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 defines derivative instruments and
requires that they be recognized as assets or liabilities in the statement of
financial position, measured at fair value. It further specifies the nature of
changes in the fair value of the derivatives which are included in the current
period results of operations and those which are included in other comprehensive
income. Management has assessed the impact of SFAS No. 133 and determined that
adoption will not have a material impact on the financial statements of the
Company based on the hedges currently in place.
3. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share (dollars in thousands, except for per share
data):
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999
--------------------------------------- ------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Basic:
Net income.......................... $ 5,868 9,349,950 $ 0.63 $ 4,800 9,333,333 $ 0.51
Dilutive potential common shares.... - 416,966 - 176,778
----------- ------------- --------- ------------
Diluted:
Net income and assumed conversion... $ 5,868 9,766,916 $ 0.60 $ 4,800 9,510,111 $ 0.50
=========== ============= ========= ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 Six Months Ended June 30, 1999
--------------------------------------- -------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic:
Net income.......................... $ 11,442 9,341,642 $ 1.22 $ 8,728 9,333,333 $ 0.94
Dilutive potential common shares.... - 315,983 - 88,389
----------- ------------- ---------- ------------
Diluted:
Net income and assumed conversion... $ 11,442 9,657,625 $ 1.18 $ 8,728 9,421,722 $ 0.93
=========== ============= ========== ============
</TABLE>
4
<PAGE>
4. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," establishes presentation
and disclosure requirements for comprehensive income; however, it does not
affect existing recognition or measurement standards. For the Company,
comprehensive income consists of net income and the change in unrealized gains
and losses on available-for-sale securities. For the three months ended June 30,
2000, total comprehensive income was $3.0 million, an increase of $2.9 million,
compared to the three months ended June 30, 1999. Net income for the three
months ended June 30, 2000 was $5.9 million and unrealized losses on
available-for-sale securities increased by $2.8 million. For the corresponding
period of 1999, net income was $4.8 million and unrealized losses on
available-for-sale securities increased by $4.7 million. For the six months
ended June 30, 2000, total comprehensive income was $8.6 million, an increase of
$6.4 million, or 304.8%, compared to the six months ended June 30, 1999. Net
income for the six months ended June 30, 2000 was $11.4 million and unrealized
losses on available-for-sale securities increased by $2.9 million. For the
corresponding period of 1999, net income was $8.7 million and unrealized losses
on available-for-sale securities increased by $6.6 million.
5. SEGMENT INFORMATION
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
business into two reportable segments: Commercial Banking and Consumer Banking.
Both segments serve all of California's residents. Historically, our customer
base has been primarily the ethnic Chinese communities located mainly in the San
Francisco Bay area, Sacramento/Stockton and metropolitan Los Angeles.
The financial results of the Company's operating segments are presented on
an accrual basis. There are no significant differences between the accounting
policies of the segments as compared to the Company's consolidated financial
statements. The Company evaluates the performance of its segments and allocates
resources to them based on interest income, interest expense and net interest
income. There are no material intersegment revenues.
The table below presents information about the Company's operating segments
for the three and the six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Reconciling
Commercial Consumer Items Total
------------ ---------- ----------- ----------
For the Three Months Ended (Dollars in Thousands)
<S> <C> <C> <C> <C>
June 30, 2000:
Net interest income.......... $ 8,450 $ 11,983 $ - $ 20,433
Segment profit............... 2,859 3,009 - 5,868
Segment assets............... 1,160,277 1,209,703 - 2,369,980
June 30, 1999:
Net interest income.......... $ 5,210 $ 12,024 $ - $ 17,234
Segment profit............... 1,105 3,511 184(1) 4,800
Segment assets............... 851,125 1,364,142 - 2,215,267
For the Six Months Ended
June 30, 2000:
Net interest income.......... $ 16,498 $ 23,836 $ - $ 40,334
Segment profit............... 5,188 6,254 - 11,442
Segment assets............... 1,160,277 1,209,703 - 2,369,980
June 30, 1999:
Net interest income.......... $ 10,396 $ 22,743 $ - $ 33,139
Segment profit............... 1,743 6,801 184(1) 8,728
Segment assets............... 851,125 1,364,142 - 2,215,267
</TABLE>
(1) Reconciling item represents gain on sale of nonperforming asset.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q may include certain forward-looking statements based on
current management expectations. The Company's actual results could differ
materially from those management expectations. Factors that could cause
future results to vary from current management expectations include, but are
not limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes in
tax policies, rates and regulations of federal, state and local tax
authorities, changes in interest rates, deposit flows, the cost of funds,
demand for loan products, demand for financial services, competition, changes
in the quality or composition of the Company's wholly-owned subsidiary,
United Commercial Bank's (the "Bank") loan and investment portfolios, changes
in accounting principles, policies or guidelines, and other economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices. Further description of
the risks and uncertainties to the business are included in detail in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 as
filed with the Securities and Exchange Commission.
The following discussion and analysis is intended to provide details of
the results of operations of the Company for the three months and the six
months ended June 30, 2000 and 1999 and financial condition at June 30, 2000
and at December 31, 1999. The following discussion should be read in
conjunction with the information set forth in the Company's Consolidated
Financial Statements and notes thereto and other financial data included.
RESULTS OF OPERATIONS
GENERAL. The Company's primary source of income is net interest income,
which is the difference between interest income from interest-earning assets and
interest paid on interest-bearing liabilities, such as deposits and other
borrowings used to fund those assets. The Company's net interest income is
affected by changes in the volume of interest-earning assets and
interest-bearing liabilities as well as by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and other
borrowed funds. The Company also generates noninterest income, including
commercial banking fees and other transactional fees and seeks to generate
additional fees in connection with the shift in its business focus to commercial
banking. The Company's noninterest expenses consist primarily of personnel,
occupancy, and furniture and equipment expenses and other operating expenses.
The Company's results of operations are affected by its provision for loan
losses and may also be significantly affected by other factors including general
economic and competitive conditions, changes in market interest rates,
governmental policies and actions of regulatory agencies.
NET INCOME. The consolidated net income of the Company during the three
months ended June 30, 2000 increased by $1.1 million, or 22.3%, to $5.9
million, compared to $4.8 million for the corresponding period of the
preceding year. The increase resulted primarily from an increase in interest
income on loans due to growth in commercial loans. The annualized return on
average equity ("ROE") and average assets ("ROA") ratios for the three months
ended June 30, 2000 were 20.89% and 1.00%, respectively. This compares with
annualized ROE and ROA ratios of 18.15% and 0.88%, respectively, for the
three months ended June 30, 1999. The resulting efficiency ratios improved to
45.53% for the three months ended June 30, 2000 compared with 49.75% for the
corresponding period of the preceding year. Diluted earnings per common share
were $0.60 for the three months ended June 30, 2000 compared with $0.50 for
the comparable period of the preceding year.
The consolidated net income of the Company during the six months ended June
30, 2000 increased by $2.7 million, or 31.1%, to $11.4 million, compared to $8.7
million for the corresponding period of the preceding year. The increase
resulted primarily from an increase in interest income on loans due to growth in
commercial loans. The annualized return on average equity and average assets
ratios for the six months ended June 30, 2000 were 20.38% and 0.99%,
respectively. This compares with annualized ROE and ROA ratios of 16.62% and
0.81%, respectively, for the six months ended June 30, 1999. The resulting
efficiency ratios improved to 46.03% for the six months ended June 30, 2000
compared with 52.87% for the corresponding period of the prior year. Diluted
earnings per common share were $1.18 for the six months ended June 30, 2000
compared with $0.93 for the comparable period of the preceding year.
6
<PAGE>
The provision for loan losses of $2.0 million for the three months ended
June 30, 2000 is an increase of $673,000 compared to a provision of $1.3 million
for the corresponding period of 1999. See "Provision for Loan Losses."
Noninterest expense for the three months ended June 30, 2000 was $9.8 million,
an increase of $537,000, or 5.8%, compared with $9.3 million for the
corresponding period of the prior year. Personnel expenses increased to $4.9
million for the three months ended June 30, 2000 as compared to $4.6 million for
the corresponding period of 1999. This increase of $309,000, or 6.8%, resulted
from additional staffing required to support growth of the Bank's commercial
banking business.
The provision for loan losses of $3.7 million for the six months ended June
30, 2000 is an increase of $1.7 million compared to a provision of $2.0 million
for the corresponding period of 1999. See "Provision for Loan Losses."
Noninterest expense for the six months ended June 30, 2000 was $19.6 million, an
increase of $913,000, or 4.9%, compared with $18.7 million for the corresponding
period of the prior year. Personnel expenses increased to $10.0 million for the
six months ended June 30, 2000 from $9.3 million in the same period of 1999.
This increase of $750,000, or 8.1%, resulted primarily from additional staffing
required to support growth of the Bank's commercial banking business.
NET INTEREST INCOME. Net interest income before provision for loan
losses of $20.4 million for the three months ended June 30, 2000 represented
a $3.2 million, or 18.6%, increase over net interest income of $17.2 million
for the three months ended June 30, 1999. This increase was primarily due to
a $164.1 million growth in the average interest-earning assets and an
increase in the average yield on interest-earning assets. The yield on
interest-earning assets increased to 8.01% for the three months ended June
30, 2000 from 7.29% for the corresponding period of 1999. The average cost of
deposits increased to 4.14% for the three months ended June 30, 2000 from
3.79% for the three months ended June 30, 1999, primarily due to increases in
market interest rates. The increase in loans contributed to an increase of
$7.1 million in interest on earning assets to $45.8 million for the three
months ended June 30, 2000, from $38.7 million for the three months ended
June 30, 1999. This compares with an increase of $3.9 million in interest
expense, to $25.4 million for the three months ended June 30, 2000 from $21.5
million for the three months ended June 30, 1999.
Net interest income before provision for loan losses of $40.3 million
for the six months ended June 30, 2000 represented a $7.2 million, or 21.7%,
increase over net interest income before provision for loan losses of $33.1
million for the six months ended June 30, 1999. This increase was primarily
due to a $157.9 million growth in the average interest-earning assets and an
increase in the average yield on interest-earning assets. The yield on
interest-earning assets increased to 7.85% for the six months ended June 30,
2000 from 7.28% for the corresponding period of 1999. The increase in loans
contributed to an increase of $12.2 million in interest on earning assets to
$88.9 million for the six months ended June 30, 2000, from $76.7 million for
the six months ended June 30, 1999. This compares with an increase of $5.0
million in interest expense to $48.6 million for the six months ended June
30, 2000, from $43.5 million for the six months ended June 30, 1999.
Average outstanding loans increased to $1.74 billion for the six months
ended June 30, 2000 from $1.51 billion for the corresponding period of 1999, an
increase of $227.7 million, or 15.1%, as a result of the Bank's continued focus
on commercial lending activities. Average commercial loans increased $337.8
million to $1.08 billion for the six months ended June 30, 2000, from $741.0
million for the six months ended June 30, 1999 while average consumer loans
decreased $110.1 million to $661.7 million for the six months ended June 30,
2000, from $771.8 million for the six months ended June 30, 1999. Average
securities decreased to $523.4 million for the six months ended June 30, 2000
from $593.1 million for the same period of 1999, a decrease of $69.7 million, or
11.7%. The decrease in average securities resulted primarily from the
amortization and prepayment of loans underlying the mortgage-backed securities
portfolio. Average noninterest-bearing deposits increased to $70.6 million for
the six months ended June 30, 2000 from $51.3 million for the corresponding
period of the prior year.
NET INTEREST MARGIN. The net interest margin, calculated on a fully tax
equivalent basis, was 3.61% for the six months ended June 30, 2000 compared with
3.20% for the corresponding period of 1999. The increase in the net interest
margin resulted primarily from an increase in average interest-earning assets
due to continued growth in our commercial loan portfolio, a significant increase
in core deposits, and the improvement in the yield on interest-earning assets.
7
<PAGE>
The following table presents condensed average balance sheet information
for the Company, together with interest rates earned and paid on the various
sources and uses of funds for each of the periods indicated:
<TABLE>
<CAPTION>
At For the Six Months Ended For the Six Months Ended
June 30, 2000 June 30, 2000 June 30, 1999
------------- ----------------------------- ----------------------------
(Dollars in Thousands)
Interest Interest
Average Income Average Average Income Average
Yield/Cost Balance or Expense Yield/Cost Balance or Expense Yield/Cost
---------- ------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1).................................. 8.50% $1,740,516 $ 72,017 8.28% $1,512,797 $ 58,784 7.77%
Securities................................. 6.83 523,394 16,866 6.44 593,071 17,857 6.02
Other...................................... 6.38 373 10 5.36 501 12 4.69
---------- --------- ---------- ---------
Total interest-earning assets................ 8.13 2,264,283 88,893 7.85 2,106,369 76,653 7.28
Noninterest-earning assets................... - 50,208 - - 57,508 - -
---------- --------- ---------- ---------
Total assets................................. 7.96 $2,314,492 $ 88,893 7.68 $2,163,877 $ 76,653 7.08
------- ========== --------- -------- ========== --------- ------
Interest-bearing liabilities:
Deposits:
NOW, demand deposits and
money market accounts................ 2.12 $ 143,257 $ 1,323 1.85 $134,698 $ 1,249 1.85
Savings accounts....................... 2.21 273,347 2,919 2.14 235,234 2,474 2.10
Time deposits.......................... 5.42 1,204,704 29,375 4.88 1,201,979 27,778 4.62
--------- -------- --------- ---------
Total deposits............................ 4.55 1,621,308 33,617 4.15 1,571,911 31,501 4.01
Borrowings................................ 5.92 458,829 13,536 5.90 388,605 10,608 5.46
Guaranteed preferred beneficial
interests in junior subordinated
debentures................................ 9.38 30,000 1,406 9.38 30,000 1,406 9.38
--------- -------- --------- ---------
Total interest-bearing liabilities........... 4.90 2,110,137 48,559 4.60 1,990,516 43,515 4.37
------ --------- -------- -------- --------- --------- --------
Noninterest-bearing deposits................. 70,616 51,326
Other noninterest-bearing liabilities........ 21,429 17,002
Stockholders' equity......................... 112,310 105,033
---------- ----------
Total liabilities and stockholders' equity... $2,314,492 $2,163,877
========== ==========
Net interest income/interest rate
spread (2)................................... 3.23% $ 40,334 3.25% $ 33,138 2.91%
====== ======== ==== ========= ========
Net interest-earning assets/net interest
margin (3)................................... 3.57% $ 154,146 3.56% $115,853 3.15%
====== ========== ==== ========== ========
Ratio of interest-earning assets to
interest-bearing liabilities................. 1.07x 1.07x 1.06x
====== ========== =====
</TABLE>
-----------------
(1) Nonaccrual loans are included in the table for computation purposes,
but the foregone interest on such loans is excluded.
(2) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin represents net interest income divided by average
interest-earning assets.
PROVISION FOR LOAN LOSSES. The provision for loan losses reflects
management's judgment of the current period cost associated with credit risk
inherent in the Company's loan portfolio. Specifically, the provision for loan
losses represents the amount charged against current period earnings to achieve
an allowance for loan losses that, in management's judgment, is adequate to
absorb losses inherent in the Company's loan portfolio.
The provision for loan losses of $3.7 million for the six months ended June
30, 2000 represented an increase of $1.7 million as compared to a provision of
$2.0 million for the corresponding period of the preceding year. At June 30,
2000, the allowance for loan losses was $22.5 million. Net loan charge-offs were
$688,000 for the six months ended June 30, 2000 and $538,000 for the
corresponding period of 1999.
8
<PAGE>
NONINTEREST INCOME. Noninterest income for the three months ended June 30,
2000 was $1.1 million compared to $1.4 million for the corresponding period of
1999, a decrease of $287,000, or 20.0%, primarily as a result of a decrease in
the sale of SBA loans. Commercial banking fees increased 19.3% to $582,000 for
the three months ended June 30, 2000 as compared to $488,000 for the
corresponding period of 1999, as a result of increased commercial banking
activities. Service charges on deposit accounts increased 58.0% to $297,000 for
the three months ended June 30, 2000 from $188,000 for the corresponding period
of 1999.
Noninterest income for the six months ended June 30, 2000 was $2.2 million,
a slight increase of $31,000, or 1.4%, compared to the corresponding period of
1999. Commercial banking fees increased 25.9% to $1.1 million for the six months
ended June 30, 2000 as compared to $898,000 for the corresponding period of
1999, as a result of increased commercial banking activities. Service charges on
deposit accounts increased 40.5% to $520,000 for the six months ended June 30,
2000 from $370,000 for the corresponding period of 1999.
NONINTEREST EXPENSE. Noninterest expense of $9.8 million for the three
months ended June 30, 2000 represented growth of $537,000, or 5.8%, compared
with $9.3 million for the corresponding quarter of 1999. Personnel expenses
increased to $4.9 million for the three months ended June 30, 2000, from $4.6
million for the corresponding period of 1999, an increase of $309,000, or 6.8%,
primarily due to the additional staffing required to support growth of the
Bank's commercial banking business.
Noninterest expense of $19.6 million for the six months ended June 30, 2000
represented growth of $913,000, or 4.9%, compared with $18.7 million for the
corresponding period of 1999. Personnel expenses increased to $10.0 million for
the six months ended June 30, 2000, from $9.3 million for the corresponding
period of 1999, an increase of $750,000, or 8.1%, primarily due to the
additional staffing required to support growth of the Bank's commercial banking
business and personnel salary level increases.
PROVISION FOR INCOME TAXES. The provision for income taxes of $3.9 million
and $3.3 million on the income before taxes of $9.8 million and $8.1 million for
the three months ended June 30, 2000 and 1999, respectively, represents
effective tax rates of 40.2% and 40.8%, respectively.
The provision for income taxes of $7.8 million and $5.9 million on the
income before taxes of $19.2 million and $14.6 million for the six months ended
June 30, 2000 and 1999, respectively, represents effective tax rates of 40.5%
and 40.3%, respectively.
FINANCIAL CONDITION
The Company experienced asset growth during the six months ended June 30,
2000. Total assets at June 30, 2000 were $2.37 billion, an increase of $85.2
million, or 3.7%, from $2.28 billion at December 31, 1999. The growth resulted
primarily from an increase in the loan portfolio, partially offset by a decrease
in the securities portfolio.
During the six months ended June 30, 2000, loans increased by $121.3
million, or 7.2%, to $1.81 billion. This growth was led by an increase in
commercial loans due to the Bank's continuing focus on originating such loans.
Total commercial loans grew to $1.17 billion at June 30, 2000, from $1.01
billion at December 31, 1999. Loan originations of $309.1 million for the six
months ended June 30, 2000 were comprised of $288.2 million of commercial loans
and $20.9 million of consumer loans. Securities (including available-for-sale
and held-to-maturity) totaled $482.7 million at June 30, 2000, a decrease of
$29.7 million, or 5.8%, from $512.4 million at December 31, 1999, due to the
runoff of existing securities.
The quality of loans continued to be strong. Total past due loans were
0.77% of total loans at June 30, 2000, compared with 1.12% at December 31, 1999.
Nonperforming assets of $5.1 million, or 0.22% of total assets at June 30, 2000,
compared with nonperforming assets of $5.4 million, or 0.23% of total assets at
December 31, 1999. The allowance for loan losses was $22.5 million at June 30,
2000, an increase of $3.0 million from $19.5 million at December 31, 1999. The
increase in the allowance for loan losses reflected the growth in the loan
portfolio during the six months ended June 30, 2000 and increased concentration
in commercial loans. Commercial loans generally have greater inherent risk than
residential mortgage (one to four family) loans.
9
<PAGE>
The following table shows the composition of the Bank's loan portfolio by
amount and percentage of gross loans in each major loan category at the dates
indicated:
<TABLE>
<CAPTION>
At June 30, 2000 At December 31, 1999
---------------------------- -----------------------------
Amount % Amount %
----------- ----------- ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial
Secured by real estate-nonresidential........ $ 508,308 28.08% $ 435,061 25.77%
Secured by real estate-multifamily........... 473,501 26.16 423,838 25.11
Construction................................. 104,898 5.80 89,710 5.31
Commercial business.......................... 81,620 4.51 59,332 3.52
----------- ----------- ------------ ------------
Total commercial loans....................... 1,168,327 64.55 1,007,941 59.71
----------- ----------- ------------ ------------
Consumer
Residential mortgage (one to four family).... 627,384 34.66 665,923 39.45
Other........................................ 14,211 0.79 14,248 0.84
----------- ----------- ------------ ------------
Total consumer loans......................... 641,595 35.45 680,171 40.29
----------- ----------- ------------ ------------
Total gross loans................................. 1,809,922 100.00% 1,688,112 100.00%
=========== ============
Net deferred loan origination fees................ (1,948) (1,417)
----------- ------------
Loans............................................. 1,807,974 1,686,695
Allowance for loan losses......................... (22,521) (19,503)
----------- ------------
Net loans......................................... $ 1,785,453 $ 1,667,192
=========== ============
</TABLE>
The Company continues to emphasize production of commercial real
estate and commercial business loans and to place reduced emphasis on the
origination volume of residential mortgage mortgage (one to four family)
loans. The Bank holds substantially all of its loan originations in portfolio.
Due to changing the loan origination focus to commercial loans, the Bank is
originating more loans which reprice in shorter time periods than the
traditional repricing terms of residential mortgage (one to four family) loans.
Construction, commercial business loans and SBA loans generally have monthly
repricing terms. Commercial real estate loans generally reprice each month or
are intermediate fixed, meaning that the loans have interest rates which are
fixed for a period, typically five years, and then generally reprice monthly or
become due and payable. Residential mortgage (one to four family) loans may be
fixed rate for terms of 15 or 30 years, have interest rates that are fixed for a
period, typically five years, and then generally reprice semi-annually, or
reprice semi-annually or annually.
As a result of the change of focus to commercial lending, adjustable-rate
loans increased to $920.4 million, an increase of $158.5 million, or 20.8%, from
$761.9 million at December 31, 1999. Fixed-rate loans at June 30, 2000 were
$619.6 million compared with $628.0 million at December 31, 1999, a slight
decrease of $8.4 million, or 1.3%. At June 30, 2000, total gross loans included
$269.9 million of intermediate fixed-rate loans compared with $298.3 million at
December 31, 1999, a decrease of $28.3 million, or 9.5%.
10
<PAGE>
The following table shows the Bank's new loan commitments during the
periods indicated:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------------------------------------
2000 1999
-------------- --------------
(Dollars in Thousands)
<S> <C> <C>
Commercial:
Secured by real estate-nonresidential (1)............. $ 100,548 $ 136,608
Secured by real estate-multifamily (1)................ 68,221 64,954
Construction.......................................... 78,912 76,575
Commercial business................................... 34,533 31,922
Small Business Administration......................... 5,935 7,601
-------------- --------------
Total commercial loans............................. $ 288,149 $ 317,660
-------------- --------------
Consumer:
Residential mortgage (one to four family) (1)......... $ 14,365 $ 47,287
Home equity and other................................. 6,569 5,121
-------------- --------------
Total consumer loans............................... 20,934 52,408
-------------- --------------
Total new commitments................................. $ 309,083 $ 370,068
============== ==============
</TABLE>
(1) For nonresidential loans, substantially all commitments have been
funded. For multifamily and residential mortgage (one to four
family) loans, all commitments have been funded.
NONPERFORMING ASSETS AND OREO. Management generally places loans on
nonaccrual status when they become 90 days past due, unless they are both well
secured and in the process of collection. When a loan is placed on nonaccrual
status, any interest previously accrued but not collected is reversed from
income. Nonaccrual loans were $4.3 million at June 30, 2000 compared to $4.6
million at December 31, 1999. Foreclosures are a normal part of the credit
process. Other real estate owned ("OREO") consists of real property acquired
through foreclosure on the collateral underlying defaulted loans.
11
<PAGE>
The following table sets forth information regarding nonperforming assets
at the dates indicated:
<TABLE>
<CAPTION>
At June 30, At December 31,
2000 1999
--------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Nonaccrual loans:
Commercial
Secured by real estate-nonresidential................... $ 3,290 $ 3,806
Construction loans...................................... 104 104
--------------- ----------------
Total commercial................................ 3,394 3,910
--------------- ----------------
Consumer
Residential mortgage (one to four family)............... 838 722
Other 31 -
--------------- ----------------
Total consumer...................................... 869 722
--------------- ----------------
Total nonaccrual loans.......................... 4,263 4,632
Other real estate owned ("OREO")............................. 842 722
--------------- ----------------
Total nonperforming assets................................... $ 5,105 $ 5,354
=============== ================
Nonperforming assets to total assets......................... 0.22% 0.23%
Nonaccrual loans to loans.................................... 0.24 0.27
Nonperforming assets to loans and OREO....................... 0.28 0.32
Loans........................................................ $ 1,807,974 $ 1,686,695
=============== ================
Gross income not recognized on nonaccrual loans.............. $ 191 $ 201
Accruing loans contractually past due 90 days or more........ 3,146(1) -
</TABLE>
(1) Loan has subsequently paid off.
Total nonperforming assets were $5.1 million at June 30, 2000, a decrease
of $249,000, or 4.7%, from $5.4 million at December 31, 1999. The Bank records
OREO at the lower of carrying value or fair value less estimated disposal costs.
Any write-down of OREO is charged to earnings. At June 30, 2000, OREO consisted
of two properties acquired through foreclosure with a carrying value of
$842,000, compared to $722,000 at December 31, 1999.
The Bank has a risk-rating process to which all loans in the portfolio are
subjected. Criticized loans are classified in the following categories:
"Special Mention": loans that should not yet be adversely classified, but
have credit deficiencies or potential weaknesses that warrant attention.
"Substandard": loans with one or more well-defined weaknesses which have
the distinct possibility that some loss will be sustained if the weaknesses
are not corrected.
"Doubtful": loans with the weaknesses of a substandard loan plus such
weaknesses which make collection or liquidation in full questionable, based
on current information, and have a high probability of loss.
"Loss": loan considered uncollectible.
12
<PAGE>
The following table sets forth criticized loans at the dates indicated:
<TABLE>
<CAPTION>
At June 30, At December 31,
2000 1999
----------- --------------
(Dollars in Thousands)
<S> <C> <C>
Special mention loans......................................... $ 4,186 $ 833
Substandard and doubtful loans................................ 7,884 10,889
----------- ------------
Total criticized loans...................................... $ 12,070 $ 11,722
=========== ============
Total allowance for loan losses............................... $ 22,521 $ 19,503
=========== ============
Special mention loans to total loans.......................... 0.23% 0.05%
Substandard and doubtful loans to total loans................. 0.44 0.65
Criticized loans to total loans............................... 0.67 0.69
Allowance for loan losses to substandard and doubtful loans... 285.65 179.11
Allowance for loan losses to criticized loans................. 186.59 166.38
</TABLE>
With the exception of the criticized loans described above, management is
not aware of any other loans as of June 30, 2000 where the known credit problems
of the borrower would cause management to doubt such borrower's ability to
comply with their loan repayment schedule, or that would result in such loans
being included in the criticized loan table above at some future date.
The Bank engages an independent loan review firm to examine the
classification of our commercial loan portfolio. This firm is comprised of
former bank regulators and former bankers. They made no material recommendations
for changes to our classifications as a result of their review.
Management cannot predict the extent to which economic conditions in the
Bank's market area may worsen or the full impact such conditions may have on the
Bank's loan portfolio. Accordingly, there can be no assurance that other loans
will not become 90 days or more past due, be placed on nonaccrual status, or
become impaired or restructured loans or OREO in the future.
ALLOWANCE FOR LOAN LOSSES. The Bank has established a formal process for
determining an adequate allowance for loan losses. This process results in an
allowance that consists of two components, allocated and unallocated. The
allocated component includes allowance estimates that result from analyzing
certain individual loans (including impaired loans), and includes the results of
analyzing loans in groups. For loans that are analyzed individually, third party
information, such as appraisals, may be used to supplement management's
analysis. For loans that are analyzed in groups, such as residential mortgage
(one to four family) loans, management's analysis consists of reviewing
delinquency trends, charge-off experience, current economic conditions,
composition of the loan portfolio, regional collateral value trends, and other
factors. The unallocated component of the allowance for loan losses is intended
to compensate for the subjective nature of estimating an adequate allowance for
loan losses, economic uncertainties, and other factors. In addition to the
assessment performed by management, the Bank's loan portfolio is subject to an
internal asset review function and is examined by the Bank's regulators. The
results of these examinations are incorporated into management's assessment of
the allowance for loan losses.
The allowance for loan losses is increased by provisions for loan losses,
which are charged against earnings, and reduced by charge-offs, net of any
recoveries. Loans are charged off when they are classified as loss either
internally or by the Bank's regulators. For any loan that is past due more than
90 days, management will generally charge off the amount by which the recorded
loan amount exceeds the value of the underlying collateral, unless the loan is
both well secured and in the process of collection. Recoveries of amounts that
have previously been charged off are generally recorded only to the extent that
cash is received.
13
<PAGE>
While management uses all available evidence in assessing the adequacy of
the allowance for loan losses, future additions to the allowance for loan losses
will be subject to continuing evaluations of the inherent risk in the portfolio.
If the economy declines or asset quality deteriorates, additional provisions for
loan losses could be required. Additionally, the Bank's regulators review the
adequacy of the allowance for loan losses as part of their examination process
and may require the Bank to record additional provisions for loan losses based
on their judgment or information available to them at the time of their
examinations. Management believes that the allowance for loan losses is adequate
to provide for estimated losses inherent in the Bank's loan portfolio.
The following table sets forth information concerning the Bank's allowance
for loan losses for the dates indicated:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
---------------------------------
2000 1999
------------ --------------
(Dollars in Thousands)
<S> <C> <C>
Balance at beginning of period....................... $ 19,503 $ 14,922
Provision for loan losses............................ 3,706 2,003
Loans charged off.................................... (696) (549)
Recoveries........................................... 8 11
------------ --------------
Balance at end of period............................. $ 22,521 $ 16,387
============ ==============
Allowance for loan losses to loans................... 1.25% 1.03%
Annualized net charge-offs to average loans......... 0.08 0.07
</TABLE>
SECURITIES. Securities (including available-for-sale and held-to-maturity)
decreased during the six months of 2000 by $29.7 million, or 5.8%, to
$482.7 million at June 30, 2000. The decrease in the securities balances
resulted primarily from the amortization and prepayment of loans underlying the
mortgage-backed securities portfolio. This runoff was replaced with new loan
originations.
14
<PAGE>
The following table presents the Bank's securities portfolio on the dates
indicated:
<TABLE>
<CAPTION>
At June 30, 2000 At December 31, 1999
---------------------- ----------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- -------- ----------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Investment securities available for sale:
Trust Preferred Securities..................................... $ 101,810 $ 84,313 $ 103,182 $ 91,270
Other.......................................................... 900 900 - -
---------- -------- ----------- --------
Total investment securities available for sale............. 102,710 85,213 103,182 91,270
---------- -------- ----------- --------
Mortgage-backed securities available for sale:
GNMA........................................................... 97,687 93,319 102,417 97,399
FNMA........................................................... 69,154 65,333 72,698 69,067
Other.......................................................... 67,995 65,573 73,295 70,719
---------- -------- ----------- --------
Total mortgage-backed securities available for sale........ 234,836 224,225 248,410 237,185
---------- -------- ----------- --------
Total investment and mortgage-backed securities available for sale... $ 337,546 $ 309,438 $ 351,592 $ 328,455
========== ======== =========== ========
Investment securities held to maturity:
Municipals..................................................... $ 43,640 $ 40,555 $ 43,633 $ 39,250
---------- -------- ----------- --------
Mortgage-backed securities held to maturity:
FNMA........................................................... 85,442 80,413 91,307 86,395
FHLMC.......................................................... 37,560 35,210 41,848 39,560
Other.......................................................... 6,606 6,340 7,118 6,790
---------- -------- ----------- --------
Total mortgage-backed securities held to maturity.......... 129,608 121,963 140,273 132,745
---------- -------- ----------- --------
Total investment and mortgage-backed securities held to maturity.... $ 173,248 $ 162,518 $ 183,906 $ 171,995
========== ======== =========== ========
</TABLE>
As of June 30, 2000, the carrying value of the securities was $510.8
million and the market value was $472.0 million. The total unrealized loss on
these securities was $38.8 million. Of this total, $28.1 million relates to
securities which are available for sale on which unrealized $28.1 million loss,
net of tax of $11.8 million, is included as a reduction of stockholders' equity.
The difference between the carrying value and market value aggregating $10.7
million of securities which are held to maturity has not been recognized in the
financial statements as of June 30, 2000. The unrealized losses are primarily
the result of movements in market interest rates.
DEPOSITS. Deposits are the Bank's primary source of funds to use in lending
and investment activities. Deposit balances were $1.76 billion at June 30, 2000,
which represented an increase of $82.6 million, or 4.9%, from $1.68 billion at
December 31, 1999. Core deposit balances increased by $76.2 million, or 16.6%,
during this period reflecting management's continued focus on the generation of
core deposits, and time deposits increased by $6.4 million, or 0.5%, during this
period. Core deposits include NOW, demand deposit, money market and savings
accounts. At June 30, 2000, 69.6% of our deposits were time deposits, 17.7% were
savings accounts, and 12.7% were NOW, demand deposit and money market accounts.
By comparison, at December 31, 1999, 72.7% of our deposits were time deposits,
15.7% were savings accounts, and 11.6% were NOW, demand deposits and money
market accounts. The Bank's overall cost of deposits rose from 3.80% at December
31, 1999 to 4.33% at June 30, 2000 as a result of increases in market interest
rates.
15
<PAGE>
The Bank obtains deposits primarily from the communities it serves. No
material portion of its deposits are from or are dependent on any one person or
industry. At June 30, 2000, less than 2% of the Bank's deposits were held by
customers with addresses located outside the United States. Additionally, at
that date, the 100 depositors with the largest aggregate average deposit
balances comprised less than 15% of the Bank's total deposits. The Bank accepts
deposits in excess of $100,000 from customers. Included in time deposits as of
June 30, 2000, is $439.0 million of deposits of $100,000 or greater. Such
deposits make up 25.0% of total deposits. At June 30, 2000, the Bank had no
brokered deposits. Substantially all of the time deposits as of June 30, 2000
mature in one year or less.
The following table presents the balances and rates paid for categories of
deposits at the dates indicated:
<TABLE>
<CAPTION>
At June 30, 2000 At December 31, 1999
------------------------- -------------------------
Weighted Weighted
Balance Average Rate Balance Average Rate
--------- ------------- ---------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
NOW, demand deposits and money market accounts....... $ 223,635 1.34% $ 193,995 1.14%
Savings accounts..................................... 310,685 2.21 264,138 1.92
Time deposits:
Less than $100,000.............................. 785,470 5.21 821,355 4.50
$100,000 or greater............................. 438,961 5.79 396,660 4.91
--------- ----------
Total time deposits............................. 1,224,431 5.42 1,218,015 4.64
--------- ----------
Total deposits....................................... $1,758,751 4.33 $ 1,676,148 3.80
========= ==========
</TABLE>
OTHER BORROWINGS. At June 30, 2000, the Bank had $451.8 million of
borrowings outstanding compared with $449.6 million outstanding at December 31,
1999, an increase of $2.2 million, or 0.5%. Advances are obtained from the
Federal Home Loan Bank ("FHLB") of San Francisco to supplement our supply of
lendable funds. Advances from the FHLB of San Francisco are typically secured by
a pledge of the Bank's stock in the FHLB of San Francisco and mortgage loans and
securities with a market value of at least equal to outstanding advances. At
June 30, 2000, the Bank had $441.8 million of advances outstanding from the FHLB
of San Francisco, compared with $421.5 million outstanding at December 31, 1999.
Included in the $441.8 million of FHLB advances as of June 30, 2000 were $17.0
million of fixed-rate advances for ten years. An additional $216.0 million of
the advances had ten-year terms but contained provisions that the FHLB could, at
its option, terminate the advances at quarterly intervals at specified periods
ranging from three to five years beyond the advance dates.
The Bank also participates in the Treasury Investment Program with the
Federal Reserve Bank of San Francisco ("FRB"), which allows the Bank to utilize
deposits made to the U.S. Treasury for federal tax payments until the Treasury
needs the funds. Borrowings outstanding at June 30, 2000 under this line were
$10.0 million.
16
<PAGE>
The following table sets forth certain information regarding borrowings of
the Bank at or for the dates indicated:
<TABLE>
<CAPTION>
At or For the Six Months Ended
June 30,
------------------------
2000 1999
----------- -----------
(Dollars in Thousands)
<S> <C> <C>
FHLB of San Francisco advances:
Average balance outstanding .............................................. $451,281 $355,662
Maximum amount outstanding at any month end .............................. 472,000 429,000
Balance outstanding at end of period ..................................... 441,800 429,000
Weighted average interest rate during the period ......................... 5.80% 5.26%
Weighted average interest rate at end of period .......................... 6.03% 5.33%
Weighted average remaining term to maturity at end of period (in years)... 4 5
FRB direct investment borrowings:
Average balance outstanding .............................................. $ 7,548 $ 32,725
Maximum amount outstanding at any month end .............................. 10,000 83,739
Balance outstanding at end of period ..................................... 10,000 45,039
Weighted average interest rate during the period ......................... 5.65% 4.53%
Weighted average interest rate at end of period .......................... 6.86% 4.95%
Weighted average remaining term to maturity at end of period (in years)... - -
Securities sold under agreements to repurchase:
Average balance outstanding .............................................. $ - $ 218
Maximum amount outstanding at any month end .............................. - 1,500
Balance outstanding at end of period ..................................... - -
Weighted average interest rate during the period ......................... - 5.40%
Weighted average interest rate at end of period .......................... - -
Weighted average remaining term to maturity at end of period ............. - -
</TABLE>
REGULATORY CAPITAL. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines as calculated under regulatory accounting practices. As of June 30,
2000, the Bank met the "Well Capitalized" requirements under these guidelines.
The total risk-based capital ratio of the Bank at June 30, 2000 was 11.12%, as
compared with 11.29% at December 31, 1999. The ratio of Tier I capital (as
defined in the regulations) to average assets (as defined) of the Bank at June
30, 2000 was 6.75% compared with 6.58% at December 31, 1999. The Company's
capital ratios are approximately those of the Bank, and similarly the Company is
categorized as "Well Capitalized."
YEAR 2000 COMPLIANCE
As of June 30, 2000, all Y2K-sensitive systems were functioning within
normal parameters. Total expenditures on the project were less than $500,000.
Although the Company has not encountered any significant problems nor incurred
significant additional expense in conjunction with the Y2K issue, there can be
no assurance that the Company and the Bank will not encounter significant
Y2K-related problems and/or cost during the course of 2000 or beyond.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk
since the information disclosed in the Company's Annual Report dated December
31, 1999 on file with the Securities and Exchange Commission (SEC File No.
0-24947).
17
<PAGE>
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's wholly-owned subsidiary, United Commercial Bank, has been a
party to ordinary routine litigation incidental to various aspects of its
operations.
Management is not currently aware of any litigation that will have a
material adverse impact on the Company's consolidated financial condition, or
the results of operations.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 27, 2000, the Company held its annual meeting of stockholders
for the purpose of the election of directors of the Company and for the
ratification of PricewaterhouseCoopers LLP as the Company's independent
accountants.
<TABLE>
<CAPTION>
Number Number
of Votes of Votes Broker
For Withheld Non-Votes
-------------- -------------- ---------------
<S> <C> <C> <C>
1. Election of Directors of the Company
For a two-year term:
Li-Lin Ko 7,330,554 10,600 -
For three-year terms:
Jonathan H. Downing 6,809,173 531,981 -
Sau-wing Lam 7,319,854 21,300 -
</TABLE>
Messrs. Lam and Downing were elected for terms which expire in 2003.
Ms. Ko was appointed by the Board of Directors to fill the vacancy on the
Board resulting from the retirement of Mr. Robert Fell, effective December
31, 1999, and was elected for a term which expires in 2002. The continuing
directors on the Board consist of Mr. Thomas S. Wu and Dr. Godwin Wong, whose
terms expire in 2001, and Mr. Ronald McMeekin, whose term expires in 2002.
<TABLE>
<CAPTION>
Number of Number Number of
Votes of Votes Votes Broker
For Against Abstaining Non-Votes
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
2. Ratification of PricewaterhouseCoopers LLP
as the Company's independent accountants 7,334,559 3,150 3,445 -
</TABLE>
18
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits (Filed herewith unless otherwise noted)
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of UCBH Holdings, Inc.*
3.2 Bylaws of UCBH Holdings, Inc.*
4.0 Form of Stock Certificate of UCBH Holdings, Inc.*
10.1 Employment Agreement between United Commercial Bank and Thomas S. Wu*
10.2 Employment Agreement between UCBH Holdings, Inc. and Thomas S. Wu*
10.3 Form of Termination and Change in Control Agreement between United Commercial Bank and certain
executive officers*
10.4 Form of Termination and Change in Control Agreement between UCBH Holdings, Inc. and certain
executive officers*
10.5 Amended UCBH Holdings, Inc. 1998 Stock Option Plan**
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
----------------------
* Incorporated by reference to the exhibit of the same number from the
Company's Registration Statement on Form S-1, filed with the Securities and
Exchange Commission on July 1, 1998 (SEC File No. 333-58325).
** Incorporated by reference to the exhibit of the same number from the
Company's Form 10-Q for the quarter ended June 30, 1999, filed with the
Securities and Exchange Commission on August 6, 1999 (SEC File
No. 0-24947).
19
<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.
UCBH HOLDINGS, INC.
Date: August 3, 2000 /S/ THOMAS S. WU
--------------------------------------------
Thomas S. Wu
President and Chief Executive Officer
(principal executive officer)
Date: August 3, 2000 /S/ JONATHAN H. DOWNING
--------------------------------------------
Jonathan H. Downing
Senior Vice President and
Chief Financial Officer
(principal financial officer)
20
