<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] 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 0-17224
Doral Financial Corporation
---------------------------
(Exact name of registrant as specified in its charter)
Puerto Rico 66-0312162
----------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification
number)
1159 F.D. Roosevelt Avenue,
Puerto Nuevo
San Juan, Puerto Rico 00920-2998
--------------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (787) 749-7100
including area code --------------
Former name, former address and Not Applicable
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
---- ------
Number of shares of Common Stock outstanding at May 13, 1998 - 20,214,460
===============================================================================
<PAGE> 2
DORAL FINANCIAL CORPORATION
INDEX
PAGE
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet as of March 31, 1998 and December 31,
1997...........................................................................................4
Consolidated Statement of Income and Retained Earnings - Three-
month periods ended March 31, 1998 and March 31, 1997..........................................5
Consolidated Statement of Cash Flows - Three-month periods ended
March 31, 1998 and March 31, 1997..............................................................6
Consolidated Statement of Comprehensive Income.................................................7
Notes to Consolidated Financial Statements.....................................................8
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................................11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.............................................................................18
Item 2 - Changes in Securities.........................................................................18
Item 3 - Defaults Upon Senior Securities...............................................................18
Item 4 - Submission of Matters to a Vote of Security Holders...........................................18
Item 5 - Other Information.............................................................................19
Item 6 - Exhibits and Reports on Form 8-K..............................................................19
SIGNATURES.................................................................................................20
</TABLE>
2
<PAGE> 3
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be",
"will allow", "intends to", "will likely result", "are expected to", "will
continue", "is anticipated", "estimate", "intend", "anticipate", "project", or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates which can
adversely affect the demand for mortgage credit and the value of the Company's
investment securities, credit and other risks of lending and investment
activities, competitive and regulatory factors and legislative changes, could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from those anticipated or
projected.
The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
3
<PAGE> 4
DORAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,906 $ 17,390
Money market investments 145,348 157,404
Mortgage loans held for sale, net 516,168 406,297
Securities held for trading, net 655,084 620,288
Securities held to maturity 137,000 143,534
Securities available for sale 457,073 240,876
Loans receivable, net 132,152 133,055
Accounts receivable and mortgage servicing advances, net 95,829 42,890
Accrued interest receivable 18,738 13,537
Servicing asset 51,065 46,416
Property, leasehold improvements and equipment, net 11,388 10,848
Cost in excess of fair value of net assets acquired 6,021 6,203
Federal Home Loan Bank (FHLB) stock 4,692 4,692
Real estate held for sale, net 2,499 3,025
Prepaid expenses and other assets 8,416 11,334
---------- ----------
Total assets $2,254,379 $1,857,789
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Loans payable $ 329,396 $ 265,306
Securities sold under agreements to repurchase 1,036,151 838,142
Deposit accounts 328,419 300,494
Notes payable 164,542 164,934
Advances from Federal Home Loan Bank of N.Y. 32,000 32,000
Accounts payable and other liabilities 114,807 57,201
Income tax payable 5,162 2,883
Deferred tax liability 7,507 9,874
---------- ----------
Total liabilities $2,017,984 $1,670,834
---------- ----------
Commitments and contingencies ---------- ----------
Stockholders' equity:
Serial Preferred Stock, $1 par value, 2,000,000 shares
authorized; no shares outstanding --- ---
8% Convertible Cumulative Preferred Stock, $1 par value (liquidation
preference $1,000 per share), 20,000 shares authorized;
8,460 shares issued 8 8
Common stock, $1 par value, 50,000,000 shares authorized;
20,242,460 shares issued; 20,242 18,425
Paid-in capital 90,468 51,692
Legal Surplus 1,704 1,704
Retained earnings 123,159 114,253
Unrealized gain on securities available for sale, net of deferred tax 842 901
Treasury stock at par value, 28,000 shares (28) (28)
---------- ----------
Total stockholders' equity 236,395 186,955
---------- ----------
Total liabilities and stockholders' equity $2,254,379 $1,857,789
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED
EARNINGS (IN THOUSANDS OF DOLLARS , EXCEPT FOR
PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Interest income:
Loans .................................................................. $ 10,586 $ 8,230
Mortgage-backed securities ............................................. 12,155 10,833
Investment securities .................................................. 7,219 632
Other interest-earning assets .......................................... 1,084 691
------------ ------------
Total interest income ....................................................... 31,044 20,386
------------ ------------
Interest expense:
Loans payable .......................................................... 5,426 3,978
Securities sold under agreements to repurchase ......................... 11,273 7,007
Deposits ............................................................... 3,597 1,782
Other borrowed funds ................................................... 2,906 1,298
------------ ------------
Total interest expense ...................................................... 23,202 14,065
------------ ------------
Net interest income ......................................................... 7,842 6,321
Provision for loan losses ................................................... 170 165
------------ ------------
Net interest income after provision for Loan Losses ......................... 7,672 6,156
Non-interest income:
Mortgage loan sales and fees ........................................... 9,394 5,316
Servicing income ....................................................... 4,721 3,979
Gain on sale of servicing .............................................. 1,829 0
Other income ........................................................... 526 392
------------ ------------
Total non-interest income ................................................... 16,470 9,687
Non-interest expense:
Compensation and benefits, net (See note g) ............................ 3,883 2,388
Taxes, other than payroll .............................................. 391 317
Professional services .................................................. 878 762
Telephone .............................................................. 604 458
Rent ................................................................... 731 586
Maintenance ............................................................ 227 211
Advertising ............................................................ 1,303 868
Other (See note g) ..................................................... 3,535 1,799
------------ ------------
Total non-interest expense .................................................. 11,552 7,389
------------ ------------
Income before income taxes .................................................. 12,590 8,454
------------ ------------
Income taxes:
Current ................................................................ 3,827 590
Deferred ............................................................... (2,334) 743
------------ ------------
Total income taxes .......................................................... 1,493 1,333
------------ ------------
Net Income .................................................................. 11,097 7,121
============ ============
Retained earnings at beginning of period .................................... 114,253 102,925
Less cash dividends paid:
8% Convertible Cumulative Preferred Stock .............................. 169 --
Common Stock ........................................................... 2,022 1,549
------------ ------------
Retained earnings at the end of period ...................................... $ 123,159 $ 108,497
============ ============
Earnings per Share:
Basic .................................................................. $ 0.57 $ 0.39
============ ============
Diluted ................................................................ $ 0.55 $ 0.375
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three-month Period Ended March 31,
----------------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................................... $ 11,097 $ 7,121
------------ ------------
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of interest-only strip receivable ............................................. 1,048 892
Amortization of cost in excess of fair value of net assets acquired ........................ 182 95
Amortization of servicing asset ............................................................ 1,403 578
Depreciation and amortization .............................................................. 661 498
Gain on sale of servicing rights ........................................................... (1,829) 0
Allowances for losses ...................................................................... 218 213
Origination and purchases of mortgage loans held for sale .................................. (386,862) (152,209)
Principal repayment and sales of loans held for sale ....................................... 144,164 93,344
Purchases of securities held for trading ................................................... (361,367) (103,932)
Principal repayments and sales of securities held for trading .............................. 377,560 186,489
Net increase in interest-only strip ....................................................... (448) (4,707)
Increase in accounts receivable and mortgage servicing advances ............................ (52,939) (5,279)
Increase in servicing asset ................................................................ (6,052) (2,195)
Increase in interest receivable ............................................................ (5,371) (1,642)
Increase (decrease) in loans payable ...................................................... 64,090 (42,276)
Increase in interest payable ............................................................... 1,407 1,337
Increase in securities sold under agreements to repurchase ................................. 198,009 37,081
Increase (decrease) in payables and accrued liabilities .................................... 56,199 (113)
Increase in income tax payable ............................................................. 2,278 368
Deferred tax (benefit) provision ........................................................... (2,366) 743
Amortization of unearned compensation under employment contracts ........................... 0 24
------------ ------------
Total adjustments ....................................................................... 29,985 9,309
------------ ------------
Net cash provided by operating activities .................................................. 41,082 16,430
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities held to maturity ...................................................... 0 (70,639)
Principal repayments of securities held to maturity .......................................... 6,534 5,185
Origination of loans receivable .............................................................. 0 (29,907)
Principal repayments of loans receivable ..................................................... 903 13,572
Purchases of securities available for sale ................................................... (247,706) 0
Principal repayments and sales of securities available for sale .............................. 112,641 4,074
Purchase of property, leasehold improvements and equipments .................................. (1,201) (1,008)
Additions to cost in excess of fair value of net assets acquired ............................. 0 (19)
Real estate held for sale .................................................................... 526 (733)
Proceeds from the sale of servicing assets ................................................... 1,829 0
Decrease in other assets ..................................................................... 2,918 225
------------ ------------
Net cash used by investing activities ...................................................... (123,556) (79,250)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock ................................................................... 40,592 --
Decrease in notes payable .................................................................. (392) (2,140)
Increase in deposits ....................................................................... 27,925 27,893
Dividends declared and paid ................................................................ (2,191) (1,549)
------------ ------------
Net cash provided by financing activities .................................................. 65,934 24,204
------------ ------------
Net decrease in cash and cash equivalents .................................................... (16,540) (38,616)
Cash and cash equivalents at beginning of period ............................................. 174,794 81,213
------------ ------------
Cash and cash equivalents at the end of period ............................................... $ 158,254 $ 42,597
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest .................................................................... $ 10,022 $ 12,728
============ ============
Cash used to pay income taxes ................................................................ $ 88 $ 222
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
DORAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three-Month Period Ended March 31,
----------------------------------
1998 1997
------- ------
<S> <C> <C>
Net income $11,097 $7,121
------- ------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period 469 968
Less: reclassification adjustment for gains (losses)
included in net income 528 (886)
------- ------
Other comprehensive income (loss) (59) 82
------- ------
Comprehensive income $11,038 $7,203
======= ======
</TABLE>
7
<PAGE> 8
DORAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
a. The Consolidated Financial Statements (unaudited) include the accounts of
Doral Financial Corporation ("Doral" or the "Company"), Doral Mortgage
Corporation ("Doral Mortgage"), Centro Hipotecario, Inc., Doral Securities,
Inc. ("Doral Securities") and Doral Bank. References herein to "Doral" or
the "Company" shall be deemed to refer to the Company and its consolidated
subsidiaries, unless otherwise provided. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
Consolidated Financial Statements (unaudited) have been prepared in
conformity with the accounting principles stated in the Company's Annual
Audited Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December, 31, 1997, and should be read in
conjunction with the notes to the Consolidated Financial Statements
appearing in that report. All adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary for
a fair presentation of results for the interim period have been reflected.
b. The results of operations for the three-month period ended March 31, 1998
are not necessarily indicative of the results to be expected for the full
year.
c. Cash dividends per share paid for the three-month period ended March 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three-month Period ended
March 31,
---------------------------
1998 1997
---- ----
<S> <C> <C>
8% Convertible Cumulative Preferred Stock $20.00 --
Common Stock $ 0.10 $0.17
</TABLE>
d. At March 31, 1998, escrow funds include approximately $61.6 million
deposited with Doral Bank. These funds are included in the Company's
financial statements. Escrow funds also include approximately $6.1 million
deposited with other banks which are excluded from the Company's assets
and liabilities.
e. The number of average shares of common stock used for computing the basic
and diluted net income per share was as follows:
<TABLE>
<CAPTION>
Three-month Period Ended
-----------------------------------
March 31, 1998 March 31, 1997
-----------------------------------
<S> <C> <C>
Basic 19,225,204 18,221,460
Diluted 20,192,061 19,364,318
</TABLE>
f. Employee costs and other expenses are shown in the Consolidated Statement
of Income and Retained Earnings net of direct loan origination costs
which, pursuant to SFAS No. 91, are capitalized as part of the carrying
cost of mortgage loans and are offset against mortgage loan sales and fees
when the loans are sold.
8
<PAGE> 9
Set forth below is a reconciliation of the application of SFAS No. 91 to
employee costs and other expenses:
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-------------------------
1998 1997
---- -----
<S> <C> <C>
Employee costs, gross $11,430 $ 8,304
Deferred costs pursuant to SFAS No. 91 7,547 5,916
------- -------
Employee cost, net $ 3,883 $ 2,388
======= =======
Other expenses, gross $ 5,253 $ 3,310
Deferred costs pursuant to SFAS No. 91 1,718 1,511
------- -------
Other Expenses, net $ 3,535 $ 1,799
======= =======
</TABLE>
9
<PAGE> 10
g. On April 23, 1998, the Board of Directors declared a two-for-one stock
split of the Company's Common Stock, $1.00 par value per share (the "Common
Stock"). The stock split will be effected in the form of a stock dividend
of one additional share of Common Stock to be issued on May 20, 1998 for
each share of Common Stock held of record on May 8, 1998. Prior to the
declaration of the stock split, the Company had 20,192,061 diluted shares
outstanding. Following distribution of the additional shares, the Company
will have 40,384,122 diluted shares outstanding. The stock split will not
dilute shareholders' voting rights or their proportionate interest in the
Company. Pro forma dividends per share data on a post-split basis is
presented below:
<TABLE>
<CAPTION>
Quarter Ended
March 31,
--------------------------
1998 1997
---- -----
<S> <C> <C>
8% Convertible Preferred Stock $20.00 $ 0
Common Stock $ 0.05 $0.085
</TABLE>
Pro forma information on the number of average shares of Common stock used
for computing the primary and fully diluted net income per share on a
post-split basis are provided below:
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-----------------------------
1998 1997
---- -----
<S> <C> <C>
Basic 38,450,408 36,442,920
Diluted 40,384,122 38,728,636
</TABLE>
Pro forma earnings per share data on a post-split basis is provided below:
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
------------------------------
1998 1997
---- -----
<S> <C> <C>
Basic $0.285 $ 0.195
Diluted $0.275 $0.1875
</TABLE>
h. In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of general purpose
financial statements. This Statement requires that an enterprise classify items
of other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statement of financial position.
In Doral's case, unrealized gains and losses on certain investments in debt
securities will be the only other comprehensive income item to be included in
comprehensive income.
This statement is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Doral has been engaged in the mortgage banking business since 1972. Doral
is the leading originator of mortgage loans on single-family residences in
Puerto Rico. The volume of loans originated and purchased by Doral was
approximately $386.9 million for the three-month period ended March 31, 1998, as
compared to $182.1 million for the same period a year ago.
Doral is also the leading institution in Puerto Rico in terms of the size
of its mortgage servicing portfolio. The Company's mortgage servicing portfolio
has increased from approximately $3.2 billion as of March 31, 1997 to
approximately $4.9 billion as of March 31, 1998. While the Company's traditional
strategy to increase the size of its mortgage servicing portfolio has been to
rely principally on internal loan originations, it also intends to purchase
loans and mortgage servicing rights from third parties to the extent it can
identify attractive opportunities. The Company may also engage, from time to
time, in the sale of mortgage servicing rights whenever market conditions seem
favorable. During the first three months of 1998, Doral purchased approximately
$38.9 million in mortgage servicing rights, while it sold approximately $103.0
million of servicing rights, for a gain on sale of $1.8 million. The Company had
no such sales or purchases during the first three months of 1997.
The Company entered the banking business in September 1993 through the
acquisition of a federal savings bank, Doral Bank (formerly Doral Federal
Savings Bank). In October 1997, Doral Bank converted its charter to that of a
Puerto Rico commercial bank and currently operates through six branches in the
San Juan, Puerto Rico metropolitan area. For the three month period ended March
31, 1998 and 1997, Doral Bank's net income was approximately $1.7 million and
$891,000, respectively. The increase in net income reflects a substantial
increase in interest earning assets during Doral Bank's growth expansion
process. Doral Bank increased its assets from $293.2 million as of March 31,
1997 to $458.6 million as of March 31, 1998. This growth was funded largely
through increases in certificate of deposit accounts, advances from the Federal
Home Loan Bank of New York ("FHLB-NY") and the private placement of five year
notes secured by FHLB-NY letters of credit with U.S. Corporations electing the
benefits of Section 936.
The Company is engaged in the securities business through Doral
Securities, a broker-dealer subsidiary that operates from a single branch office
located in San Juan, Puerto Rico.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
GENERAL
Doral's results of operations are primarily influenced by: (i) the
direction of interest rates; (ii) the level of demand for mortgage credit, which
is affected by such external factors as the level of interest rates and the
strength of the economy in Puerto Rico; and (iii) the relationship between
interest rates on its interest-earning assets and the costs of funds with
respect to its interest bearing liabilities.
The principal components of Doral's revenues are: (i) net interest income;
(ii) mortgage loan sales and fees; (iii) servicing income; (iv) gain on sale of
servicing rights; and (v) other income.
Net Income. The Company's net income for the three month period ended
March 31, 1998 increased to $11.1 million compared to $7.1 million for the same
period a year ago, an increase of 56%, and net income per diluted share was
$0.55 and $0.375, for such periods. Consolidated results include the operations
of Doral Bank, which contributed approximately $1.7 million to the Company's
consolidated net earnings during the first quarter of 1998, compared to $891,000
for the same period of 1997.
11
<PAGE> 12
Net Interest Income. Net interest income is the difference between the
interest earned by Doral on its interest earning assets and the interest paid by
Doral on its interest bearing liabilities. The conditions that affect net
interest income from period to period include the relationship between interest
income earned by Doral on its interest earnings assets and interest expense paid
by Doral on its interest bearing liabilities, the amount of interest earning
assets held by Doral and the average holding period between the time mortgage
loans (including mortgage-backed securities) are originated and sold as part of
Doral's mortgage banking activities
Doral's net interest income increased by approximately 24% for the three
month period ended March 31, 1998 as compared to March 31, 1997, from $6.3
million to $7.8 million. This increase in net interest income is primarily due
to an increase in Doral's total interest income as a result of an increase in
its interest earning assets, resulting from increased loan originations and
purchases of mortgage-backed securities and U.S. agency securities. Doral Bank
contributed approximately $2.9 million or 37% of the consolidated net interest
income of the Company for the quarter ended March 31, 1998, compared to $2.3
million or 36% of the consolidated net interest income for the quarter ended
March 31, 1997.
Interest Income. Doral's total interest income increased from
approximately $20.4 million during the first three months of 1997 to $31.0
million during the same period of 1998. The increase in interest income is
primarily related to the increase in the Company's total interest earning assets
of approximately $997 million from March 31, 1997 to March 31, 1998.
Interest income on loans increased by $2.4 million or 29% during the first
three months of 1998, as compared to the same period a year ago. The increase
during 1998 reflects the increase on interest income on loans as a result of
increased loan production.
Interest income on mortgage-backed securities was approximately $12.2
million for the three-month period ended March 31, 1998, as compared to $10.8
million for the same period of 1997, an increase of approximately 12%. This
increase reflected an increase in the Company's mortgage-backed securities held
for trading, which increased from $431.9 million as of March 31, 1997 to $655.1
million as of March 31, 1998.
Interest income with respect to investment securities increased by $6.6
million during the first quarter of 1998 as compared to the same period of 1997,
from $632,000 for the period ended March 31, 1997 to $7.2 million for the three
months ended March 31, 1998. The increase in interest income reflected the
strategy of Doral to increase its tax exempt interest income by investing in
U.S. treasury and agency securities, the interest on which is tax exempt under
Puerto Rico law and is not subject to U.S. income taxation in the case of Doral
because of its status as a foreign corporation for U.S. income tax purposes.
Doral's investment securities were approximately $465.7 million as of March 31,
1998, compared to approximately $73.5 million as of March 31, 1997.
Interest income with respect to other interest-earning assets was
approximately $1.1 million for the first three months of 1998 as compared to
approximately $700,000 for the same period of 1997, which represents an increase
of 57%. Other interest-earning assets consist primarily of overnight deposits,
term deposits and reverse repurchase agreements. The increase during this period
was due primarily to higher liquidity in the banking and broker-dealer
subsidiaries of the Company and the investment of such liquidity in reverse
repurchase agreements and term deposits. The increase in interest income from
other interest-earning assets reflects Doral's strategy to diversify its sources
of interest income by entering into new business segments.
Interest Expense. Doral's total interest expense increased to $23.2 million
during the quarter ended March 31, 1998 from $14.1 million for the comparable
period of 1997, an increase of 65%. The increase in
12
<PAGE> 13
interest expense for the period was due primarily to the increase in the amount
Doral's interest-bearing liabilities used to fund the increase in the Company's
interest earning assets. Interest bearing liabilities increased to $1.9 billion
at an average cost of 5.94% for the quarter ended March 31, 1998, compared to
$936.4 million at an average cost of 5.77% for the three month period ended
March 31, 1997.
Interest expense related to loans payable increased by $1.4 million or 36%
for the first three months of 1998, as compared to the same period of 1997. The
increase reflected increased borrowings required to fund the increase in loan
originations. The weighted-average interest rate cost for borrowings under the
Company's warehouse lines of credit was 7.05% for the first quarter of 1998, as
compared to 6.77% for the same period a year ago.
Interest expense related to securities sold under agreements to repurchase
for the quarters ended March 31, 1998 and 1997, amounted to approximately $11.3
million and $7.0 million respectively, an increase of 61%. The increase during
such period reflected increased borrowings to finance mortgage-backed securities
and other investment securities. The weighted average interest rate of Doral's
borrowings under repurchase agreements was 5.81% for the first quarter of 1998
and 5.61% for the same period of 1997.
Interest expense on deposits increased by $1.8 million to approximately
$3.6 million for the first quarter of 1998, from $1.8 million for the first
quarter of 1997, an increase of almost 100%. The increase in interest expense on
deposits reflects the increase in deposits held at Doral Bank which increased
from $186.8 million as of March 31, 1997 to $328.4 million as of March 31, 1998.
The growth in deposits reflects the opening of additional branches by Doral
Bank, which now operates through six branches, and the offering of competitive
rates. Doral Bank intends to continue its branch expansion program during 1998.
Doral Bank's average interest cost on deposits was 4.53% for the first quarter
of 1998, compared to 4.31% for the same period a year ago. As of March 31, 1998,
approximately $61.6 million ($6.1 million of such deposits are not reflected in
Doral's Consolidated Financial Statements because of inter-company eliminations)
or 18.8% of total deposits held at Doral Bank consisted of non-interest bearing
accounts comprised primarily of servicing accounts and corporate deposit
accounts maintained by Doral and its affiliates.
Interest expense on other borrowed funds was $2.9 million for the quarter
ended March 31, 1998, as compared to $1.3 million for the same period a year
ago, an increase of approximately 238%. Interest expense on other borrowed funds
includes various term notes issued by Doral Bank, the Company's $75 million
senior notes due October 10, 2006 and Doral Bank's advances from the Federal
Home Loan Bank of New York as well as various other borrowings.
Provision for Loan Losses. The provision for loan losses is charged to
earnings to bring the total allowance for loan losses to a level considered
appropriate by management based on the Company's loss experience, current
delinquency dates, known and inherent risk in the loan portfolio, the estimated
value of any underlying collateral and an assessment of current economic
conditions. While management believes that the current provision for loan losses
is sufficient, future additions to the allowance for loan losses could be
necessary if economic conditions change substantially from the assumptions used
by the Company in determining the allowance for loan losses. The Company made
provisions to its allowance for loan losses for the quarters ended March 31,
1998 and 1997 of approximately $170,000 and $165,000 respectively. The provision
was $5,000 less during the first quarter of 1998 versus the first quarter of
1997 because of a small but steady improvement in delinquency ratios in loans
receivable held by Doral Bank experienced between such periods.
Revenues from Mortgage Loan Sales and Fees. Revenues from Mortgage Loan
Sales and Fees consist of the following components: (i) gains on sales of loans
and origination fees (net of direct loan origination costs), (ii) net gains or
losses on hedging instruments and (iii) unrealized gains or losses on securities
held for trading.
13
<PAGE> 14
Revenues from mortgage loan sales and fees increased by 77% during the
three month period ended March 31, 1998, as compared to the same period a year
ago, from approximately $5.3 million in 1997 to $9.4 million in 1998. The
increase in 1998 was primarily the result of increased loan originations and
increased profitability on sales of various loans products, including the
creation of interest only strips ("IOs") in connection with bulk sales of
mortgage loans to corporate investors.
The Company creates IOs (previously classified as excess servicing fees
receivable) as a result of the sale of loans in bulk or securitization
transactions. IOs are created on the sale of loans by computing the present
value of the excess of the weighted-average coupon on the loans sold over the
sum of: (i) the pass-through interest paid to the investor and (ii) a basic
servicing fee, based on the servicing fee permitted by FNMA and FHLMC, and
adjusting such amount for expected losses and prepayments. The amount of the IO
is recognized at the time of sale of the related loans as an adjustment to the
resulting gain or loss on sale of loan and is recorded at such time as a
component of "Mortgage Loan Sales and Fees" on the Company's Consolidated
Statement of Income even though the cash is received over the life of the loans
sold. Sales of mortgage loans made during the first three months of 1998
resulted in a net increase of approximately $448,000 of IOs compared to $4.7
million for the same period of 1997. The unamortized balances of IOs are
reflected in the Company's Consolidated Balance Sheet as a component of
"Securities held for trading." See "Amortization of IOs and MSRs." While a
liquid market for IOs does not currently exist, the Company has in the past sold
IOs to third parties.
Beginning with the second quarter of 1995, following the implementation by
the Company of SFAS No. 122 (later superseded by SFAS 125), whenever the Company
originates a mortgage loan it assigns a fair value to the related mortgage
servicing right (the "servicing asset") associated with such mortgage loan. The
servicing asset represents the discounted present value of the servicing fees
expected to be received on the loan over the expected term of the loan. The
amount of the servicing asset is recognized at the time of sale of the related
loan as an adjustment to the resulting gain or loss on sale of loan and is
recorded as a component of "Mortgage Loan Sales and Fees" on the Company's
Consolidated Statement of Income. During the first three months of 1998, the
Company capitalized approximately $3.6 million in servicing assets arising from
internal loan originations, as compared to $1.6 million for the same period of
1997. During the first quarter of 1998, the Company also recorded $2.5 in
servicing assets related to purchases of loans and servicing rights compared to
$600,000 for the first quarter of 1997. This increase is due to increased
wholesale loan purchases by the Company and to the continuous purchase of
mortgage servicing rights under an agreement with a commercial bank pursuant to
which the Company has agreed to purchase the mortgage servicing rights related
to the mortgage loan production of such bank. The unamortized balance of
servicing asset is reflected on the Consolidated Balance Sheet of the Company.
See "Amortization of IOs and MSRs".
Pursuant to SFAS 115, the Company includes in earnings as a component of
Mortgage Loan Sales and Fees any unrealized gains or losses in the market value
of its securities held for trading. For the quarters ended March 31, 1998 and
1997, revenues from mortgage loan sales and fees included $1.7 million and $1.6
million, respectively, of unrealized gains on the value of its securities held
for trading.
Servicing Income. Servicing income represents revenues earned by Doral for
administering mortgage loans. Doral's loan servicing fees depend on the type of
mortgage loan being serviced and range from 0.25% to 0.50% of the declining
outstanding principal amount of such loan. The size of Doral's loan servicing
portfolio and the amount of its servicing fees have increased substantially
since Doral's inception as a result of increases in loan originations and in the
size of its servicing portfolio. While the Company relies primarily on internal
mortgage loan originations to increase the size of its servicing portfolio, it
complements such internal originations with the purchase of mortgage servicing
rights and loans from third parties. During the first quarter of 1998, the
Company purchased mortgage servicing rights aggregating approximately $38.9
million, and sold approximately $103 million in servicing rights. The sales
resulted in a gain to the Company of approximately $1.8 million. Doral had no
such sales or purchases during the first quarter of 1997. The
14
<PAGE> 15
Company anticipates that it will continue to make bulk purchases of mortgage
servicing rights in the future to the extent it can identify attractive
opportunities.
Servicing fees for the three month period ended March 31, 1998 were
approximately $4.7 million, as compared to $4.0 million for the 1997 period ,
for an increase of 18% for the quarter. The increase in the amount of loan
servicing fees for the first quarter of 1998 was primarily due to an increase in
the principal amount of loans serviced as compared to prior periods. The
mortgage servicing portfolio was approximately $4.9 billion at March 31, 1998,
compared to $3.2 billion as of the same date a year ago. At March 31, 1998, less
than 1% of the Company's servicing portfolio was related to mortgages originated
outside Puerto Rico (substantially all of which were originated in Florida).
The amount of principal prepayments on mortgage loans serviced by the
Company as of March 31, 1998 and 1997 was $115.5 million and $25.8 million,
respectively. This represented approximately 2.4% and 1.3% of the aggregate
principal amount of mortgage loans serviced during such periods and the average
size of the loans prepaid was $45,047 and $31,200, respectively. The increase in
prepayments was due to a decrease in prevailing mortgage interest rates. The
primary means used by the Company to reduce the sensitivity of its servicing
income to increases in prepayment rates is the maintenance of a strong retail
origination network that has allowed it to increase or maintain the size of its
servicing portfolio even during periods of high prepayments.
Amortization of IOs and MSRs. IOs are amortized over the expected life of
the asset and such amortization is recorded as a reduction of interest income.
The amortization of IOs is based on the amount and timing of estimated future
cash flows to be received with respect to the IOs. Amortization of such IOs for
the quarters ended March 31, 1998 and 1997 was approximately $1.0 million and
$892,000, respectively.
The Company's servicing assets are amortized in proportion to, and over
the period of, estimated servicing income. Amortization of servicing assets is
included as a component of "Other Expenses" in the Company's Consolidated
Financial Statements. During the first three months of 1998, total amortization
of servicing assets amounted to $1.4 million versus $578,000 for the comparable
1997 period.
Increases in prepayment rates or credit loss rates over anticipated levels
used in calculating the value of IOs and servicing assets can adversely affect
the Company's revenues and liquidity by increasing the amortization rates for
servicing assets and IOs as well as requiring the Company to recognize an
impairment against income over and above scheduled amortization. The portion of
the Company's mortgage servicing portfolio consisting of MSRs that were
originated by the Company prior to the adoption of SFAS No. 122 is not reflected
as an asset on the Company's Consolidated Financial Statements, and is not
subject to amortization or impairment.
Non-Interest Income and Non-Interest Expense. Total non-interest income
increased 70% during the first quarter of 1998 as compared to the same period a
year ago, from $16.5 million to $9.7 million for such periods. The increase
during this period was due primarily to the sale of mortgage servicing rights
and to increased commissions and fees earned by Doral Bank and Doral Securities.
Total non-interest expense increased $4.2 million for the quarter ended
March 31, 1998, as compared to the same period of 1997, an increase of 56%,
reflecting additional costs associated with expanding the Company's customer
base and loan origination and mortgage servicing capacity.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
The Company has an ongoing need for capital to finance its lending
activities. The Company's cash requirements arise from loan originations and
purchases, repayments of debt upon maturity, payments of operating and interest
expenses and servicing advances and loan repurchases. The Company's primary
sources of liquidity are sales in the secondary mortgage market of the loans it
originates and purchases, short term borrowings under warehouse, gestation and
repurchase agreement lines of credit secured by pledges of its loans and
mortgage-backed securities and revenues from operations. In the past, the
Company has also relied on privately-placed and publicly offered debt financing
and public offerings of preferred and common stock. Doral Bank, the Company's
bank subsidiary, also relies on deposits, borrowings from the FHLB-NY as well as
term notes backed by letters of credit of the FHLB-NY.
The Company is dependent upon its ability to access warehouse, gestation
and repurchase facilities in addition to its ability to continue to pool and
sell loans in the secondary market. Doral borrows money under warehousing lines
of credit to fund its mortgage loan originations and repays the borrowing as the
mortgages are sold. The warehousing lines of credit then become available for
additional borrowings. Included among Doral's warehousing line of credit
facilities are gestation or pre-sale facilities that permit the Company to
obtain more favorable rates once mortgage loans are in the process of
securitization but prior to actual issuance of the mortgage-backed securities as
well as to finance such mortgage-backed securities upon their issuance. Doral's
warehousing lines of credit are generally subject to termination at the
discretion of the lender. The Company has several warehousing and gestation
facilities totaling $702 million as of March 31, 1998.
The Company also had available repurchase agreements lines of credit
(excluding the gestation lines referred to above) of approximately $1.2 billion
at March 31, 1998. Under these agreements, Doral sells GNMA, FNMA or
FHLMC-guaranteed mortgage-backed securities or collateralized mortgage
obligations and simultaneously agrees to repurchase them at a future date at a
fixed price. Doral uses the proceeds of such sales to repay borrowings under its
warehousing lines of credit and to finance the cost of carrying its
mortgage-backed securities and other investment securities. The effective costs
of funds under repurchase agreements is typically lower than the cost of funds
borrowed under Doral's warehousing lines of credit. Doral's continued use of
repurchase agreements will depend on the cost of repurchase agreements relative
to the cost of borrowing under its warehousing lines of credit with banks and
other financial institutions. Doral's repurchase lines of credit are generally
subject to termination at the discretion of the counterparty.
Servicing agreements relating to the mortgage-backed securities programs
of FNMA, FHLMC and GNMA and certain other investors and mortgage loans sold to
certain other purchasers, require Doral to advance funds to make scheduled
payments of principal, interest, taxes and insurance, if such payments have not
been received from the borrowers. Doral generally recovers funds advanced
pursuant to these arrangements within 30 days. During the three month period
ended March 31, 1998, the monthly average amount of funds advanced by the
Company under such servicing agreements was approximately $8.7 million.
Doral Bank obtains funding for its lending activities through the receipt
of deposits, FHLB-NY advances and from other borrowings, such as term notes
backed by FHLB-NY letters of credit. As of March 31, 1998, Doral Bank held
approximately $328.4 million in deposits (excluding $6.1 million in deposits
from affiliates that are eliminated in the preparation of the Company's
Consolidated Financial Statements) at a weighted-average interest rate of 4.53%.
Doral Bank, as a member of FHLB-NY, has access to collateralized borrowing from
the FHLB-NY up to a maximum of 30% of its total assets. Advances and
reimbursement obligations with respect to letters of credit must be secured by
qualifying assets with a market value of 110% of the advances or reimbursement
obligations. At March 31, 1998, Doral Bank had $32 million in outstanding
advances from the FHLB-NY at a weighted average interest rate cost of 6.28%. In
addition, as of March 31, 1998, Doral Bank had $53.1 million outstanding in term
notes secured by FHLB-NY letters of credit at an average interest rate cost of
6.54%.
16
<PAGE> 17
As of March 31, 1998, the Company and Doral Bank were in compliance with
all the regulatory capital requirements that were applicable to them as a bank
holding company and state non-member bank, respectively (i.e. total capital and
Tier 1 capital to risk weighted assets of at least 8% and 4%, respectively, and
Tier 1 capital to average assets of at least 3%). Set forth below are the
Company's and Doral Bank's regulatory capital ratios as of March 31, 1998, based
on existing Federal Reserve and FDIC guidelines.
<TABLE>
<CAPTION>
THE
COMPANY DORAL BANK
------- ----------
<S> <C> <C>
Tier 1 Capital Ratio (Tier 1 capital
to risk weighted assets).................. 20.6% 18.3%
Total Capital (total capital to risk
weighted assets).......................... 20.7% 18.8%
Leverage Ratio (Tier 1 capital to
average assets)........................... 11.1% 7.3%
</TABLE>
As of March 31, 1998, Doral Bank was considered a well-capitalized bank
for purposes of the prompt corrective action regulations adopted by the FDIC
pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991.
To be considered a well capitalized institution under the FDIC's regulations, an
institution must maintain a Leverage Ratio of at least 5%, Tier 1 Capital Ratio
of at least 6% and a Total Capital Ratio of at least 10% and not be subject to
any written agreement or directive to meet a specific capital ratio.
On February 19, 1998, the Company completed the sale of 1,817,000 shares
of Common Stock at a price to the public of $24.00 per share, resulting in net
proceeds to the Company of approximately $41.0 million before deducting expenses
of the offering.
Doral expects that it will continue to have adequate liquidity financing
arrangements and capital resources to finance its operations. The Company will
continue to explore alternative and supplementary methods of financing its
operations, including both debt and equity financing. There can be no assurance,
however, that the Company will be successful in consummating any such
transactions.
ASSETS AND LIABILITIES
At March 31, 1998, the Company's total assets were $2.25 billion compared
to $1.86 billion at December 31, 1997. The increase in assets was due primarily
to net increases of $216.2 million, $109.9 million and $52.9 million in
securities available for sale, mortgage loans held for sale and accounts
receivable, respectively. Total liabilities were $2.02 billion at March 31,
1998, compared to $1.67 billion at December 31, 1997. The increase in
liabilities was largely the result of an increase in securities sold under
agreements to repurchase and deposit accounts held at Doral Bank. The additional
leverage was used to finance the increase in the Company's interest earning
assets. At March 31, 1998, deposit accounts totaled $328.4 million, compared to
$300.5 million at December 31, 1997. Deposit accounts include $61.6 million in
non-interest bearing demand deposits representing escrow funds from the
servicing operations of the Company's mortgage banking units. As of March 31,
1998, Doral Bank had $458.6 million in assets, compared to $428.1 million at
December 31, 1997.
YEAR 2000 ISSUES
The Company has established a corporate-wide task group to oversee the
identification, correction, reprogramming and testing of the Company's systems
and software applications for year 2000 compliance as well as to identify other
possible risks associated with the year 2000 problem. The task group reports
directly to the Board of Directors. The year 2000 problem refers to the fact
that many software applications and operational programs written in the past
were not designed to recognize calendar dates beginning in the year
17
<PAGE> 18
2000. The failure of such applications or systems to properly recognize the
dates beginning in the year 2000 could result in miscalculations or system
failures. The Company is working closely with HRU, Inc., the company that
provides data processing services for the Company's mortgage servicing
operation, as well as with third party vendors of computer hardware and software
applications to ensure that the systems used by HRU, Inc. and the computer
hardware and software provided by such other vendors will be year 2000 compliant
by the end of 1998.
The Company intends to devote the resources, which may include external
resources, such as consultants, it deems necessary to address this issue and has
established the goal of having substantially all its systems and software
applications year 2000 compliant by the end of 1998. While the Company has not
yet completed the process of quantifying the expenses related to achieving year
2000 compliance, to date expenses related to year 2000 compliance have not been
material and, management, based on existing information, does not anticipate
that such expenses will have a material impact on the Company's results of
operations or financial condition during the next two years.
RECENT DEVELOPMENTS
Sale of Common Stock. On February 19, 1998 the Company completed the sale
of 1,817,000 shares of Common Stock at a price to the public of $24.00 per
share. This transaction resulted in net proceeds to the Company of approximately
$41.0 million before deducting expenses of the offering.
Expansion into Mainland United States. During the first quarter of 1998,
the Company organized a new mortgage banking subsidiary, Doral Money, Inc. The
Company intends to use Doral Money as a vehicle to explore expansion
possibilities in the United States. On May 8, 1998, the Company also filed an
application with the Office of Thrift Supervision to organize a federal savings
bank in the New York City metropolitan area.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the opinion of the Company's management, the pending and threatened
legal proceedings of which management is aware will not have a material adverse
effect on the financial condition of the Company.
ITEM 2 - CHANGES IN SECURITIES
Not Applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Stockholders Meeting of the Company was held on April 23, 1998.
A quorum was obtained with 16,747,110 votes represented in person or by proxy,
which represented approximately 83% of all votes eligible to be cast at the
meeting. Eight directors of the Company, Salomon Levis, Zoila Levis, Richard F.
Bonini, Edgar M. Cullman, Jr., Frederick M. Danziger, John L. Ernst, A. Brean
Murray and Victor M. Pons, Jr., were reelected for additional one-year terms.
The selection of Price Waterhouse as the Company's independent accountants for
the year ended December 31, 1998 was also approved. The voting results for the
meeting are set forth below:
18
<PAGE> 19
Proposal 1: Election of Directors
<TABLE>
<CAPTION>
NOMINEES FOR ONE-YEAR TERM VOTES FOR VOTES WITHHELD
- -------------------------- --------- --------------
<S> <C> <C>
Salomon Levis 16,480,874 266,236
Richard F. Bonini 16,666,552 80,558
Edgar M. Cullman, Jr. 15,373,659 1,373,451
Frederick M. Danziger 16,510,074 273,036
John L. Ernst 16,509,974 237,136
Zoila Levis 16,481,174 265,936
A. Brean Murray 16,460,672 286,438
Victor M. Pons, Jr. 16,479,680 267,430
</TABLE>
Proposal 2: Ratification of the Appointment of Price Waterhouse as the
Company's Independent Accountants for 1998.
For: 16,701,548
Against: 21,932
Abstain: 23,630
Broker non-votes: 0
ITEM 5 - OTHER INFORMATION
On April 23, 1998, the Board of Directors declared a two-for-one stock
split of the Company's Common Stock, $1.00 par value (the "Common Stock"). The
stock split will be effected in the form of a stock dividend of one additional
share of Common Stock to be issued on May 20, 1998 for each share of Common
Stock held of record on May 8, 1998. Prior to the declaration of the stock
split, the Company had 20,192,061 diluted shares outstanding. Following
distribution of the additional shares, the Company will have 40,384,122 diluted
shares outstanding. The stock split will not dilute shareholders' voting rights
or their proportionate interest in the Company.
On April 23, 1998, the Board of Directors of the Company voted to
increase the quarterly cash dividend from $0.05 per share to $0.06 per share as
adjusted for the stock split (the equivalent of an increase from $0.10 to $0.12
per share prior to giving effect to the stock split). The cash dividend is
payable June 5, 1998 to shareholders of record on May 22, 1998.
On April 1, 1998, options to acquire approximately 225,000 shares of
Common Stock were awarded to employees pursuant to the Company's 1997 Employee
Stock Option Plan.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
Not Applicable.
19
<PAGE> 20
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.
DORAL FINANCIAL CORPORATION
(Registrant)
Date: May 14, 1998 /s/ Salomon Levis
--------------------------------
Salomon Levis
Chairman of the Board
and Chief Executive Officer
Date: May 14, 1998 /s/ Richard F. Bonini
--------------------------------
Richard F. Bonini
Senior Executive Vice President
and Chief Financial Officer
Date: May 14, 1998 /s/ Ricardo Melendez
-------------------------------
Ricardo Melendez
Vice President and
Principal Accounting Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C>
27 - Financial Data Schedule (for SEC use only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DORAL FINANCIAL CORPORATION FOR THE THREE MONTHS ENDED
MARCH 31, 1998, AND IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,906
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 143,348
<TRADING-ASSETS> 655,084
<INVESTMENTS-HELD-FOR-SALE> 457,073
<INVESTMENTS-CARRYING> 137,000
<INVESTMENTS-MARKET> 137,135
<LOANS> 648,320
<ALLOWANCE> 1,334
<TOTAL-ASSETS> 2,254,379
<DEPOSITS> 328,419
<SHORT-TERM> 1,365,547
<LIABILITIES-OTHER> 127,476
<LONG-TERM> 196,542
0
8
<COMMON> 20,242
<OTHER-SE> 216,145
<TOTAL-LIABILITIES-AND-EQUITY> 2,254,379
<INTEREST-LOAN> 10,586
<INTEREST-INVEST> 19,374
<INTEREST-OTHER> 1,084
<INTEREST-TOTAL> 31,044
<INTEREST-DEPOSIT> 3,597
<INTEREST-EXPENSE> 23,202
<INTEREST-INCOME-NET> 7,672
<LOAN-LOSSES> 170
<SECURITIES-GAINS> 9,394
<EXPENSE-OTHER> 11,552
<INCOME-PRETAX> 12,590
<INCOME-PRE-EXTRAORDINARY> 12,590
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,097
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.55
<YIELD-ACTUAL> 7.24
<LOANS-NON> 2,932
<LOANS-PAST> 32,348
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,432
<ALLOWANCE-OPEN> 1,241
<CHARGE-OFFS> 0
<RECOVERIES> 23
<ALLOWANCE-CLOSE> 1,434
<ALLOWANCE-DOMESTIC> 170
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
