<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
---------------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 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 0-20897
PACIFICAMERICA MONEY CENTER, INC.
(Exact name of Registrant as specified in its charter)
California 95-4465729
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
21031 Ventura Boulevard
Woodland Hills, California 91364
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (818) 992-8999
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 __.
<PAGE> 2
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
ASSETS 1997 1996
- ------------------------------------------- ------------ ------------
<S> <C> <C>
Cash & cash equivalents $ 8,736,000 $ 8,640,000
Accounts receivable, net 2,941,000 2,349,000
Receivable for mortgage loans shipped 0 24,310,000
Interest receivable 1,321,000 1,144,000
Premium receivable for loans sold 0 1,195,000
Loans receivable, net (Note 5) 30,049,000 33,515,000
Loans held for sale (Note 6) 48,329,000 18,148,000
Interest-only strip receivable 32,134,000 11,698,000
Real estate acquired in settlement of loans 2,756,000 4,285,000
Property and equipment, net 2,811,000 2,360,000
Deferred income taxes 4,995,000 4,995,000
Refundable income taxes 730,000 730,000
Other assets 1,308,000 1,565,000
------------ ------------
$136,110,000 $114,934,000
============ ============
Liabilities and Stockholders' Equity
Thrift certificates payable
Full-paid certificates $ 64,813,000 $ 56,343,000
Installment certificates 22,310,000 24,659,000
------------ ------------
Total thrift certificates payable 87,123,000 81,002,000
Accounts payable and accrued expenses 11,429,000 2,235,000
Accrued interest payable 217,000 185,000
Mortgage notes payable 742,000 1,557,000
Note payable 2,545,000 3,290,000
Deferred income taxes 4,699,000 4,699,000
------------ ------------
106,755,000 92,968,000
------------ ------------
Stockholders' Equity 29,355,000 21,966,000
------------ ------------
$136,110,000 $114,934,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
2
<PAGE> 3
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- -----------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
--------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans receivable $2,671,000 $2,446,000 $5,321,000 $4,724,000
Interest on investments 90,000 66,000 181,000 196,000
--------------------------------- -----------------------------------
Total interest income 2,761,000 2,512,000 5,502,000 4,920,000
Interest Expense:
Interest on thrift certificates greater than $100,000 - - - -
Interest on other thrift certificates 1,100,000 1,000,000 2,162,000 2,010,000
Interest on notes payable - 190,000 11,000 407,000
--------------------------------- -----------------------------------
Total interest expense 1,100,000 1,190,000 2,173,000 2,417,000
Net interest income 1,661,000 1,322,000 3,329,000 2,503,000
Provision for loan losses 738,000 (469,000) 1,047,000 256,000
--------------------------------- -----------------------------------
Net interest income after provision for loan losses 923,000 1,791,000 2,282,000 2,247,000
--------------------------------- -----------------------------------
Noninterest income:
Other income 8,000 93,000 64,000 194,000
Gain on sale of loans 18,300,000 6,084,000 31,683,000 10,796,000
--------------------------------- -----------------------------------
Total noninterest income 18,308,000 6,177,000 31,747,000 10,990,000
Noninterest expense:
General and administrative 5,540,000 2,946,000 9,530,000 4,828,000
Salaries, employee benefits and personnel services 6,574,000 3,251,000 11,842,000 5,484,000
Amortization of organization costs 46,000 212,000 91,000 238,000
Related party fees - 664,000 - 1,136,000
Depreciation and amortization 121,000 90,000 235,000 191,000
Expenses on real estate acquired in settlement of 170,000 195,000 371,000 255,000
loans
Net (gain) loss on sales of real estate acquired
in settlement of loans (120,000) (66,000) (166,000) 39,000
--------------------------------- -----------------------------------
Total noninterest expense 12,331,000 7,292,000 21,903,000 12,171,000
--------------------------------- -----------------------------------
Net income before tax provision 6,900,000 676,000 12,126,000 1,066,000
Tax provision 2,897,000 727,000 5,094,000 1,075,000
--------------------------------- -----------------------------------
Income (loss) from continuing operations 4,003,000 (51,000) 7,032,000 (9,000)
Income from discontinued operations - 62,000 - 299,000
--------------------------------- -----------------------------------
Net income $4,003,000 $11,000 $7,032,000 $290,000
================================= ===================================
Primary earnings per share $1.70 $0.01 $2.99 $0.16
Fully diluted earnings per share $1.70 $0.01 $2.98 $0.16
Weighted average shares outstanding 2,360,059 1,811,819 2,356,474 1,811,819
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
3
<PAGE> 4
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
(Increase) Decrease in Cash and Cash Equivalents 6-30-97 6-30-96
- --------------------------------------------------- ------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Adjustments to reconcile net income to net
cash used in operating activities:
Net income $ 7,032,000 $ 290,000
Depreciation and amortization 326,000 429,000
Provision for loan losses 1,047,000 256,000
Net (gain) loss on sales of real estate
acquired in settlement of loans (166,000) 39,000
Changes in discontinued operations 63,000
Proceeds from loans originated for sale 302,395,000 143,749,000
Originations of loans held for sale (345,441,000) (142,374,000)
Net change in assets and liabilities
Accounts receivable (592,000) (14,140,000)
Receivable for mortgage loans shipped 24,310,000
Interest receivable (177,000) (6,000)
Premium receivable for loans sold 1,195,000
Interest-only strips receivable (20,436,000) 547,000
Goodwill 60,000
Other assets 166,000 (255,000)
Accounts payable and accrued expenses
and interest payable 9,226,000 (632,000)
------------- -------------
Net cash used in operating activities (21,115,000) (11,974,000)
------------- -------------
Cash flows from investing activities:
Proceeds from sale of real estate loans 10,176,000
(Increase) decrease in loans receivable 1,884,000 (1,899,000)
(Increase) in property and equipment (686,000) (627,000)
Increase (decrease) in mortgages payable
on other real estate 1,073,000 (14,000)
Decrease in other real estate 3,031,000 203,000
------------- -------------
Net cash provided by (used in) investing activities 15,478,000 (2,337,000)
------------- -------------
Cash flow from financing activities:
Increase in thrift certificates 6,121,000 19,663,000
Proceeds from stock issuance 357,000 8,849,000
Paydown on line of credit (745,000) (4,031,000)
Withdrawal of partnership capital (1,120,000)
------------- -------------
Net cash provided by financing activities 5,733,000 23,361,000
------------- -------------
Net increase in cash and cash equivalents 96,000 9,050,000
Cash and cash equivalents at year end 8,640,000 10,489,000
------------- -------------
Cash and cash equivalents at June 30, $ 8,736,000 $ 19,539,000
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
4
<PAGE> 5
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) GENERAL
The unaudited financial information furnished herein, in the opinion of
management, reflects all adjustments (all of which are of a normal recurring
nature) which are necessary to fairly state the Company's financial position,
its cash flows and the results of its operations. The Company presumes that
users of the interim financial information herein have read or have access to
the audited financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the preceding fiscal year and
that the adequacy of additional disclosure needed for a fair presentation,
except in regard to material contingencies, may be determined in that context.
Accordingly, footnote and other disclosures which would substantially duplicate
the disclosure contained in the Company's most recent annual report have been
omitted. The interim financial information herein is not necessarily
representative of operations for a full year for various reasons including
changes in interest rates, volume of loans originated and loans paid off.
2) ADOPTION OF NEW ACCOUNTING POLICIES
On January 1, 1997, the Company adopted Statement of Financial
Accounting Standard No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities" (SFAS 125). This statement provides
guidance for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS 125 supersedes SFAS 76, 77 and 122,
while amending both SFAS 65 and 115. The statement is to be applied
prospectively and earlier implementation was not permitted. The adoption of SFAS
125 did not have a material effect on the Company's results of operations.
A transfer of financial assets in which control is surrendered is
accounted for as a sale to the extent that consideration other than beneficial
interests in the transferred assets is received in the exchange. Liabilities and
derivatives incurred or obtained by the transfer of financial assets are
required to be measured at fair value, if practicable. Also, servicing assets
and other retained interests in the transferred assets must be measured by
allocating the previous carrying value between the asset sold and the interest
retained, if any, based on their relative fair values at the date of transfer.
For each servicing contract in existence before January 1, 1997, previously
recognized servicing rights and excess servicing receivables that do not exceed
contractually specified servicing fees are required to be combined, net of any
previously recognized servings obligations under that contract, as a servicing
asset or liability. Previously recognized servicing receivables that exceed
contractually specified servicing fees are required to be reclassified as
interest-only strip receivables and the allowance for credit losses on loans
sold will be reclassified as a reduction of these receivables.
SFAS 125 also requires an assessment of interest-only strips, loans,
other receivables and retained interests in securitizations. If these assets can
be contractually prepaid or otherwise settled such that the holder would not
recover substantially all of its recorded investment, the assets will be
measured like available-for-sale securities or trading securities under SFAS
115. This assessment is required for financial assets held on or acquired after
January 1, 1997.
5
<PAGE> 6
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3) REVENUE RECOGNITION
Gain on sale of loans represents the difference between the proceeds
(including premiums) from the sale, net of related transaction costs, and the
allocated carrying amount of the loans sold. The allocated carrying amount is
determined by allocating the original amount of loan between the portion sold
and any retained interests (interest-only strip receivable), based on their
relative fair values at the date of transfer. In addition, gain on sale includes
non-refundable fees on loans sold and gains or losses on certain transactions
structured as an economic hedge.
Gain on sale of loans include the recognition of an unrealized gain
which represents the initial difference between the allocated carrying amount
and the fair market value of the interest-only strip at the date of sale.
The fair value of the interest-only strip receivable is determined by
computing the present value of the difference between the interest income to be
received by the Company over the interest rate to be received by the investor
after giving effect to prepayment assumptions, allowance for potential credit
losses and other transaction costs on loans sold. The interest-only strip
receivable, which is classified as a trading security, is carried at fair market
value and is analyzed quarterly by the Company. Adjustments to the fair market
value will be recognized as unrealized gains or losses and included as part of
gain on sale of loans. Prepayment rates for newer pools of loans sold are not
yet sufficient to provide meaningful data regarding future loan performance. No
market valuation adjustment has been made for the periods ended December 31,
1996, March 31, 1997 or June 30, 1997.
4) RECLASSIFICATIONS
Certain reclassification of balances from prior years have been made to
conform to the current year's reporting format.
5) LOANS RECEIVABLE
The following is a summary of Loans Receivable:
<TABLE>
<CAPTION>
@ 6-30-97 @ 12-31-96
------------------- ------------------
<S> <C> <C>
Interest bearing loans $ 32,340,000 $ 36,573,000
Deferred loan fees, net (414,000) (594,000)
Allowance for loan losses (1,877,000) (2,464,000)
------------------- ------------------
Total $ 30,049,000 $ 33,515,000
=================== ==================
</TABLE>
6
<PAGE> 7
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following is a summary of Allowance for Loan Losses:
<TABLE>
<S> <C>
Balance at 12-31-96 $ 2,464,000
Additions to reserve 1,047,000
Charge off/recoveries (1,634,000)
------------------
Balance at 6-30-97 $ 1,877,000
==================
</TABLE>
6) MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are stated at the lower of aggregated cost
or market with market being equal to the committed loan sales price. Unrealized
gains and losses on forward contracts are deferred to the extent they act as a
hedge used to control interest rate exposure. Such gains and losses are
recognized upon delivery of the underlying mortgage loan and are included in
gains and losses from the sale of the loans.
7) SUBSEQUENT EVENTS
On July 10, 1997, the Board of Directors of the Company declared a
stock split-up in the form of a one-for-one stock dividend to all stock holders
of record as of July 31, 1997. The stock dividend will be paid on or about
August 13, 1997. These financial statements do not reflect the effect of the
stock dividend.
8) COMMITMENTS AND CONTINGENCIES AND CONCENTRATION OF CREDIT RISK
The Company from time to time purchases and sells government securities
at agreed upon prices as an economic hedge. These transactions reported net of
gain on sale of loans amounted to a loss of $.4 million for the six months
ended June 30, 1997.
9) ACCOUNTING DEVELOPMENTS
In March 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128). This pronouncement provides
a different method of calculating earnings per share than is currently used in
accordance with APB 15, "Earnings per Share". SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that could share in the earnings of an entity, similar to fully diluted earnings
per share. This pronouncement is effective for fiscal years and interim periods
ending after December 15, 1997; early adoption is not permitted. The Company has
not determined the effect, if any, of adoption on its earnings per share
computation(s).
In March 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure" (SFAS
129). SFAS 129 lists required disclosures about capital structures that had been
included in a number of previously existing separate statements and opinions.
This statement is effective for financial statements issued for periods ending
after December 15, 1997. The adoption of this statement is not expected to have
a material effect on the Company's financial statements.
7
<PAGE> 8
PACIFICAMERICA MONEY CENTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income" (SFAS 130). This statement
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 all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
SFAS 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company has not determined the effect, if
any, of adoption on the reporting and display of comprehensive income and its
components.
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). This statement establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This statement supersedes FASB
Statement No. 14 "Financial Reporting for a Business Enterprise", but retains
the requirement to report information about major customers. It amends FASB
Statement No, 94 "Consolidation of All Majority-Owned Subsidiaries" to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
This statement does not apply to nonpublic business enterprises or to
not-for-profit organizations.
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. This statement need not be
applied to interim financial statements in the initial year of application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. The adoption of this statement is not expected to have a
material effect on the Company's financial statements.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND
On June 27, 1996, PacificAmerica Money Center, Inc. (the "Company") and
Presidential Mortgage Company, a California limited partnership (the
"Partnership") completed a restructuring plan dated May 1, 1996 (the
"Restructuring"), whereby all of the assets and liabilities of the Partnership
were transferred to the Company in exchange for common stock of the Company (the
"Common Stock"). Pursuant to the Restructuring Plan, 603,234 shares of Common
Stock were issued to partners of the Partnership (other than limited partners
electing a "cash out option") for their interests in the Partnership and
$2,855,600 was paid by the Company to partners electing a "cash out option."
Concurrently with the solicitation of consent pursuant to the Proxy
Statement/Prospectus dated May 14, 1996, the Company made a rights offering (the
"Rights Offering"), pursuant to which a total of 324,628 shares were subscribed
for and issued. Pursuant to a Prospectus dated June 24, 1996, the Company also
conducted a public offering of additional shares of Common Stock at $10 per
share (the "Public Offering"). A total of 878,210 shares were issued in the
Public Offering, including 114,549 shares in connection with the exercise of an
over-allotment option by the underwriter of the Public Offering. The shares of
Common Stock are listed for trading on the Nasdaq National Market under the
symbol "PAMM."
The Restructuring has been accounted for as a change in legal
organization but not in the enterprise formerly engaged in by the Partnership.
Therefore, the financial statements of the Company give effect to the
Restructuring as a recapitalization of the Partnership into the Company.
References to the Company in this Management's Discussion and Analysis of
Financial Condition and Results of Operations refer to the financial condition
and results of operations of the Partnership on a consolidated basis for all
periods prior to June 27, 1996.
The unaudited interim consolidated financial statements should be read
in conjunction with the historical consolidated financial statements and the
related notes thereto of the Company filed with its Annual Report on Form 10-K
for the year ended December 31, 1996.
On July 10, 1997, the Board of Directors of the Company declared a
stock split-up in the form of a one-for-one stock dividend to all stockholders
of record as of July 31, 1997. The stock dividend will be paid on or about
August 13, 1997. These financial statements do not reflect the effect of the
stock dividend.
FINANCIAL CONDITION
Total consolidated assets of the Company increased $21.2 million
(18.5%) to $136.1 million at June 30, 1997 from $114.9 million at December 31,
1996. The increase resulted primarily from increases in loans held for sale and
interest-only strip receivable, partially offset by decreases in receivable for
mortgage loans shipped, loans receivable and real estate acquired in settlement
of loans. Interest-only strip receivable increased $20.4 million, or 174.4%, to
$32.1 million at June 30, 1997 from $11.7 million at December 31, 1996,
reflecting the Company's retained interest in excess spread on loans sold for
securitization under the current terms of its loan sales agreements with Aames
Capital Corporation ("Aames") and Advanta Mortgage Corp. USA ("Advanta"). The
Company did not begin retaining an interest in excess spread on loans sold until
the fourth quarter of 1996, and the increase in interest-strip receivable
represents the buildup of this asset from all loans sold to Aames and Advanta
since the respective dates of the current agreements entered with these
purchasers. Loans held for sale increased $30.2 million, or 166.9%, to $48.3
million at June 30, 1997 from $18.1 million at December 31, 1996, representing
the buildup of the Company's inventory of loans held for sale. The only loans
included in the inventory of loans held for sale are loans anticipated to be
sold in subsequent securitizations. The Company plans to increase the inventory
of loans held for sale at the end of each quarter as part of its business
strategy for sustained earnings growth. The receivable for mortgage loans sold
decreased $24.3 million, or 100%, to 0 at June 30, 1997 from $24.3 million at
December 31, 1996, reflecting that all amounts payable for loans sold as of June
30, 1997 had been paid. Real estate acquired in settlement of loans decreased
$1.5 million, or 34.9% to $2.8 million at June 30, 1997 from $4.3 million at
December 31, 1996.
Total liabilities increased $13.8 million, or 14.8%, to $106.8 million
at June 30, 1997 from $93.0 million at December 31, 1996, due to increases in
thrift certificates outstanding, accounts payable and accrued expenses,
partially offset by a decrease in notes payable. Thrift certificates increased
$6.1 million, or 7.5%, to $87.1 million at June 30, 1997 from $81.0 million at
December 31, 1996. Management of Pacific Thrift and Loan Company ("Pacific
Thrift"), the Company's primary operating subsidiary, adjusts rates on thrift
certificates on a regular basis in order to control the increase or decrease in
the total outstanding certificates, as management deems necessary to support
Pacific Thrift's cash flow requirements. Accounts payable and accrued expenses
increased $9.2 million, or 418.2%, to $11.4 million at June 30, 1997 from $2.2
million at December 31, 1996,
9
<PAGE> 10
reflecting an increase of $5.1 million in income taxes payable based on the
first six months pre-tax income, $1.2 million in bonuses and the balance of $2.9
million from other general accruals. Notes payable decreased $.8 million, or
24.2%, to $2.5 million at June 30, 1997 from $3.3 million at December 31, 1996,
reflecting the final payoff of a bank loan to Fleet Bank, N.A. in January 1997.
Total stockholders' equity increased by $7.4 million, or 33.6%, to
$29.4 million at June 30, 1997 from $22.0 million at December 31, 1996,
reflecting primarily the net income from operations of $7.0 million in the first
six months of 1997.
RESULTS OF OPERATIONS
GENERAL
The Company reported net income of $4.0 million, or $1.70 for primary
and fully diluted earnings per share, for the quarter ended June 30, 1997 and
$7.0 million or $2.99 and $2.98 for primary and fully diluted earnings per
share, respectively, for the six months ended June 30, 1997. These results are
not necessarily indicative of results for any other interim period or for the
full year.
For the comparable period of 1996, the Company reported net income of
$11 thousand or $.01 primary and fully diluted earnings per share for the
quarter ended June 30, 1996 and $290 thousand or $.16 primary and fully diluted
earnings per share for the six months ended June 30, 1996. The increase in net
income was primarily due to the $12.2 million increase in gain on sale of loans
in the quarter ended June 30, 1997 and $20.9 million increase in the six months
ended June 30, 1997 compared to the June 30, 1996 periods, reflecting a
substantial increase in the Company's loan production over the past twelve
months, as well as the improved margins on sale of loans under the Company's
current agreements with Aames and Advanta, which has applied to all loan sales
by the Company since the fourth quarter of 1996. Loans originated for sale
increased $121.3 million, or 149.2%, to $202.6 million for the quarter ended
June 30, 1997, from $81.3 million for the quarter ended June 30, 1996, and
increased $203.1 million, or 142.6%, to $345.5 million for the six months ended
June 30, 1997, from $142.4 million for the six months ended June 30, 1996. Gain
on sale of loans increased by $12.2 million, or 200%, to $18.3 million for the
second quarter of 1997, from $6.1 million for the second quarter of 1996 and
increased $20.9 million, or 193.5%, to $31.7 million for the six months ended
June 30, 1997 from $10.8 million for the six months ended June 30, 1996.
INTEREST INCOME
Total interest income increased $.3 million, or 12%, to $2.8 million
for the second quarter of 1997 from $2.5 million for the second quarter of 1996
and increased $.6 million, or 12.2%, to $5.5 million for the six months ended
June 30, 1997 from $4.9 million for the six months ended June 30, 1996, due to
the increase in loans originated for sale. Total interest expense decreased $.1
million, or 8.3%, to $1.1 million for the second quarter of 1997 from $1.2
million for the second quarter of 1996 and decreased $.2 million, or 8.3%, to
$2.2 million for the six months ended June 30, 1997 from $2.4 million for the
six months ended June 30, 1996, due primarily to a decrease in interest paid on
the Company's bank loan, which was paid off in January 1997. Net interest income
before provision for loan losses increased $.4 million, or 30.8%, for the second
quarter, to $1.7 million for the second quarter of 1997 from $1.3 million for
the second quarter of 1996 and increased $.8 million, or 32.0%, to $3.3 million
for the six months ended June 30, 1997, from $2.5 million for the six months
ended June 30, 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $1.2 million for the quarter
ended June 30, 1997 to $.7 million for the second quarter of 1997, from $(.5)
million from the second quarter of 1996 and increased $.7 million or 233.3% to
$1.0 million for the six months ended June 30, 1997 from $.3 million for the six
months ended June 30, 1996, due primarily to an increase in specific reserves in
1997 combined with a decrease in the general reserve which occurred in the
second quarter of 1996, after the restructuring.
The total allowance for loan losses was $1.9 million at June 30, 1997,
compared to $2.5 million at December 31, 1996. The adequacy of the allowance for
loan losses is based on a variety of factors, including the size of the
Company's loan portfolio, which does not include loans held for sale, loan
classifications and underlying loan collateral values, and is not directly
proportional to the level of nonperforming portfolio loans. The ratio of
nonaccrual portfolio loans past due 90 days or more ($2.0 million) to total
portfolio loans ($32.3 million) was 6.2% at June 30, 1997, compared to a ratio
of 3.8% of nonaccrual loans past due 90 days or more ($1.4 million) to total
portfolio loans ($36.6 million) at December 31, 1996. The increase in the ratio
was caused by a decreasing loan portfolio due to the Company's focus on
originating loans for sale, not for portfolio.
10
<PAGE> 11
NONINTEREST INCOME
Total noninterest income increased $12.1 million, or 195.2%, to $18.3
million for the second quarter 1997 from $6.2 million for the second quarter
1996 and increased $20.7 million, or 188.2%, to $31.7 for the six months ended
June 30, 1997 from $11.0 million for the six months ended June 30, 1996. The
primary source of noninterest income is gain on sale of loans originated for
sale, which increased $12.2 million, or 200%, to $18.3 million for the second
quarter 1997 from $6.1 million for the second quarter 1996 and increased $20.9
million, or 193.5%, to $31.7 million for the six months ended June 30, 1997 from
$10.8 million for the six months ended June 30, 1996.
NONINTEREST EXPENSE
Noninterest expense increased by $5.0 million, or 68.5%, to $12.3
million for the second quarter 1997 from $7.3 million for the second quarter
1996, and increased $9.7 million, or 79.5%, to $21.9 million for the six months
ended June 30, 1997 from $12.2 million for the six months ended June 30, 1996,
due primarily to increases in salaries, employee benefits and personnel services
and general and administrative expenses. Salaries, employee benefits and
personnel services increased $3.3 million, or 100%, to $6.6 million for the
second quarter 1997 from $3.3 million for the second quarter 1996 and increased
$6.3 million, or 114.5%, to $11.8 million for the six months ended June 30, 1997
from $5.5 million for the six months ended June 30, 1996, representing increases
in loan representative commissions and the hiring of additional support
personnel related to increased loan volume. General and administrative expenses
increased $2.6 million, or 89.7%, to $5.5 million for the second quarter 1997
from $2.9 million for the second quarter 1996, and increased $4.7 million, or
97.9%, to $9.5 million for the six months ended June 30, 1997 from $4.8 million
for the six months ended June 30, 1996, also related to increased loan volume.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of the Company's liquidity are cash and cash
equivalents maintained by Pacific Thrift in connection with its deposit-taking
and lending activities and proceeds from sale of loans. At June 30 , 1997, cash
and cash equivalent assets totaled $8.7 million compared to $8.6 million at
December 31, 1996. Under the terms of the Company's agreement with Advanta, the
Company also receives an advance on its excess spread interest in each
securitization pool. The Company received advances of $11.9 million from Advanta
for the six months ended June 30, 1997. These advances are repaid from all
future payments of excess spread due from Advanta to the Company, and bear
interest at a rate equal to LIBOR plus 1.00% (resulting in an effective rate of
6.72% at June 30, 1997).
Management of Pacific Thrift is able to regulate the inflow of funds
from thrift certificates by adjusting interest rates to amounts slightly above
or below prevailing rates. In the second quarter of 1997, Pacific Thrift
adjusted its rates slightly upward to increase the inflow of funds from thrift
certificates, thereby resulting in a $6.1 million increase in outstanding thrift
certificates to $87.1 million at June 30, 1997 from $81.0 million at December
31, 1996.
Pacific Thrift is subject to certain leverage and risk-based capital
adequacy standards applicable to FDIC-insured institutions. At June 30, 1997,
Pacific Thrift met the FDIC regulatory definition of "adequately capitalized."
See the Company's Annual Report on Form 10-K for the year ended December 31,
1996, Item 1. "Business - Supervision and Regulation -- Regulatory Actions."
As indicated in the Statements of Cash Flows, the Company used $21.1
million in cash from operating activities, primarily for the origination of
loans held for sale, from January 1, 1997 through June 30, 1997. The Company
realized $15.5 million from investing activities, primarily from the proceeds
from the sale of real estate loans, and realized $5.7 million from financing
activities, primarily from the increase in thrift certificates, from January 1,
1997 through June 30, 1997.
11
<PAGE> 12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
CRC and LPPC, along with all other defendants in the action brought by
Consumer Action and two consumers alleging excessive trustee publication fees,
have entered into a global settlement with the plaintiffs in this action, and
the action was dismissed on July 28, 1997. The settlement amount paid by CRC
under the terms of the settlement agreement was immaterial to the Company as a
whole.
With respect to the class action filed against CRC (as one of over 50
defendants) alleging overpayments for trustee sale guarantee fees, the
California Court of Appeal has stayed the action pending the negotiation of a
global settlement agreement. Management believes, based upon consultation with
its counsel in this action, that any liability that may be incurred by CRC in
this action would be immaterial to the Company as a whole.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On July 10, 1997, the Company held its Annual Meeting of
Stockholders. Stockholders voted upon the election of two directors and upon the
approval of an amended employment agreement of Joel R. Schultz, the approval of
an amendment to the Company's 1995 Stock Option Plan to provide for an increase
in the number of options granted annually to non-employee directors of the
Company and its subsidiaries, and the ratification of BDO Seidman, LLP, as the
Company's independent public accountants for the fiscal year ending December 31,
1997. Richard D. Young and Alan J. Siebler, each of whom was a director prior to
the Annual Meeting and was nominated by management for re-election, were
re-elected at the meeting. The following votes were cast for each nominee:
Name For Authority Withheld
- ---- --- ------------------
Richard D. Young 1,602,827 11,728
Alan J. Siebler 1,606,481 8,074
The following votes were cast for each of the other proposals voted
upon by the stockholders at the Annual Meeting:
<TABLE>
<CAPTION>
Broker
Proposal For Against Abstain Non-Vote
- -------- --- ------- ------- --------
<S> <C> <C> <C> <C>
Approval of Amended
Employment Agreement
of Joel R. Schultz 1,474,852 112,458 17,671 9,574
Approval of Amendment
to 1995 Stock Option
Plan 1,471,606 124,821 18,128 --
Ratification of
Appointment of
BDO Seidman, LLP 1,596,296 6,908 11,351 --
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 12, 1997.
PACIFICAMERICA MONEY CENTER, INC.
(Registrant)
August 12, 1997 JOEL R. SCHULTZ
Joel R. Schultz,
President
August 12, 1997 CHARLES J. SIEGEL
Charles J. Siegel,
Chief Financial and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,999
<INT-BEARING-DEPOSITS> 237
<FED-FUNDS-SOLD> 3500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 80,255
<ALLOWANCE> 1,877
<TOTAL-ASSETS> 136,110
<DEPOSITS> 87,123
<SHORT-TERM> 0
<LIABILITIES-OTHER> 16,345
<LONG-TERM> 3,287
0
0
<COMMON> 19
<OTHER-SE> 29,336
<TOTAL-LIABILITIES-AND-EQUITY> 136,110
<INTEREST-LOAN> 5,321
<INTEREST-INVEST> 181
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,502
<INTEREST-DEPOSIT> 2,162
<INTEREST-EXPENSE> 2,173
<INTEREST-INCOME-NET> 3329
<LOAN-LOSSES> 1,047
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 21,903
<INCOME-PRETAX> 12,126
<INCOME-PRE-EXTRAORDINARY> 12,126
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,032
<EPS-PRIMARY> 2.99
<EPS-DILUTED> 2.98
<YIELD-ACTUAL> 7.75
<LOANS-NON> 1,973
<LOANS-PAST> 2,830
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,464
<CHARGE-OFFS> 1,634
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<ALLOWANCE-CLOSE> 1,877
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</TABLE>
