<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
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: 0-21231
MATRIX BANCORP, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1233716
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1380 Lawrence Street, Suite 1400
Denver, Colorado 80204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 595-9898
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 ($.0001 par value) outstanding at the close
of business on August 4, 2000 was 6,759,741 shares.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C>
Condensed Consolidated Balance Sheets
June 30, 2000 (unaudited) and December 31, 1999................................. 3
Condensed Consolidated Statements of Income
Quarters and six months ended June 30, 2000 and 1999 (unaudited)................ 4
Condensed Consolidated Statements of Changes in Shareholders' Equity
Six months ended June 30, 2000 and 1999 (unaudited)............................. 5
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999 (unaudited)............................. 6
Notes to Unaudited Condensed Consolidated Financial Statements.................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 11
PART II - Other Information
ITEM 1. Legal Proceedings................................................................. 22
ITEM 4. Submissions of Matters to a Vote of Security Holders.............................. 24
ITEM 6. Exhibits and Reports on Form 8-K.................................................. 24
SIGNATURES.................................................................................. 25
</TABLE>
2
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Matrix Bancorp, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- --------------
Assets (unaudited)
<S> <C> <C>
Cash............................................................................... $ 16,703 $ 13,437
Interest-earning deposits.......................................................... 29,086 13,172
Mortgage-backed securities held for sale........................................... 26,095 -
Loans held for sale, net........................................................... 923,177 977,751
Loans held for investment, net..................................................... 150,453 125,764
Mortgage servicing rights, net..................................................... 58,093 63,479
Other receivables.................................................................. 42,354 44,933
Federal Home Loan Bank of Dallas stock............................................. 23,485 22,414
Premises and equipment, net........................................................ 8,340 10,817
Other assets....................................................................... 15,649 11,979
Income taxes receivable............................................................ 393 -
----------- --------------
Total assets....................................................................... $ 1,293,828 $ 1,283,746
=========== ==============
Liabilities and shareholders' equity
Liabilities:
Deposits.......................................................................... $ 509,679 $ 562,194
Custodial escrow balances......................................................... 92,971 94,206
Drafts payable.................................................................... 5,410 3,070
Federal Home Loan Bank of Dallas borrowings....................................... 437,467 405,000
Borrowed money.................................................................... 137,575 114,601
Guaranteed preferred beneficial interests in company's 10% junior subordinated
debentures....................................................................... 27,500 27,500
Other liabilities................................................................. 20,496 14,919
Income taxes payable.............................................................. - 1,759
----------- --------------
Total liabilities.................................................................. 1,231,098 1,223,249
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.0001; authorized 5,000,000 shares; no shares
outstanding......................................................................
Common stock, par value $.0001; authorized 50,000,000 shares; issued and
outstanding 6,759,741 and 6,759,241 at June 30, 2000 and December 31, 1999,
respectively..................................................................... 1 1
Additional paid in capital........................................................ 22,785 22,780
Retained earnings................................................................. 39,599 37,716
Accumulated other comprehensive income............................................ 345 -
----------- --------------
Total shareholders' equity......................................................... 62,730 60,497
----------- --------------
Total liabilities and shareholders' equity......................................... $ 1,293,828 $ 1,283,746
=========== ==============
</TABLE>
See accompanying notes.
3
<PAGE>
Matrix Bancorp, Inc.
Condensed Consolidated Statements of Income
(dollars in thousands except per share information)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Loans and mortgage-backed securities.................... $ 22,808 $ 16,870 $ 44,712 $ 34,108
Interest-earning deposits............................... 1,109 327 1,770 694
----------- ----------- ----------- -----------
Total interest income................................... 23,917 17,197 46,482 34,802
Interest expense
Deposits................................................ 6,810 5,189 13,466 10,384
Borrowings.............................................. 9,880 4,904 19,071 10,086
----------- ----------- ----------- -----------
Total interest expense.................................. 16,690 10,093 32,537 20,470
----------- ----------- ----------- -----------
Net interest income before provision for loan and
valuation losses..................................... 7,227 7,104 13,945 14,332
Provision for loan and valuation losses................. 985 675 1,670 1,350
----------- ----------- ----------- -----------
Net interest income after provision for loan and
valuation losses..................................... 6,242 6,429 12,275 12,982
Noninterest income
Loan administration..................................... 5,917 5,601 12,221 10,894
Brokerage............................................... 1,234 1,746 2,100 3,417
Trust services.......................................... 1,188 1,210 2,449 2,489
Real estate disposition services........................ 961 893 2,049 1,677
Gain on sale of loans................................... 26 1,157 890 1,690
Loan origination........................................ 1,906 1,751 3,074 3,706
Other................................................... 3,473 3,328 5,699 6,019
----------- ----------- ----------- -----------
Total noninterest income................................ 14,705 15,686 28,482 29,892
Noninterest expense
Compensation and employee benefits...................... 8,106 7,314 16,084 14,183
Amortization of mortgage servicing rights............... 2,521 4,784 4,965 9,510
Occupancy and equipment................................. 1,159 918 2,237 1,756
Postage and communication............................... 650 606 1,363 1,275
Professional fees....................................... 1,249 498 2,583 798
Data processing......................................... 576 378 1,129 703
Other general and administrative........................ 6,201 3,318 9,398 6,450
----------- ----------- ----------- -----------
Total noninterest expense............................... 20,462 17,816 37,759 34,675
----------- ----------- ----------- -----------
Income before income taxes.............................. 485 4,299 2,998 8,199
Provision for income taxes.............................. 151 1,509 1,115 2,904
----------- ----------- ----------- -----------
Net income.............................................. $ 334 $ 2,790 $ 1,883 $ 5,295
=========== =========== =========== ===========
Net income per share.................................... $ .05 $ .41 $ .28 $ .79
=========== =========== =========== ===========
Net income per share assuming dilution.................. $ .05 $ .41 $ .28 $ .77
=========== =========== =========== ===========
Weighted average shares................................. 6,759,741 6,727,889 6,759,631 6,726,300
=========== =========== =========== ===========
Weighted average shares assuming dilution............... 6,787,328 6,835,400 6,803,422 6,842,322
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
Matrix Bancorp, Inc.
Condensed Consolidated Statements of Shareholders' Equity
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
---------------------- Paid In Retained Comprehensive Shareholders' Comprehensive
Shares Amount Capital Earnings Income Equity Income
----------- ---------- ---------- ------------ ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended
June 30, 2000
----------------------------------
Balance at December 31, 1999...... 6,759,241 $ 1 $ 22,780 $ 37,716 $ - $ 60,497
Comprehensive income:
Net income..................... - - - 1,883 - 1,883 $ 1,883
---------------
Net unrealized holding gains... - - - - - - 345
---------------
Other comprehensive income..... - - - - 345 345 345
---------------
Comprehensive income.............. $ 2,228
===============
Exercise of stock options......... 500 - 5 - - 5
----------- ---------- ---------- ------------ ------------- ---------------
Balance at June 30, 2000.......... 6,759,741 $ 1 $ 22,785 $ 39,599 $ 345 $ 62,730
=========== ========== ========== ============ ============= ===============
Six Months Ended
June 30, 1999
----------------------------------
Balance at December 31, 1998...... 6,723,911 $ 1 $ 22,416 $ 26,937 $ - $ 49,354
Net income........................ - - - 5,295 - 5,295
Exercise of stock options......... 6,000 - 65 - - 65
----------- ---------- ---------- ------------ ------------- ---------------
Balance at June 30, 1999.......... 6,729,911 $ 1 $ 22,481 $ 32,232 $ - $ 54,714
=========== ========== ========== ============ ============= ===============
</TABLE>
See accompanying notes.
5
<PAGE>
Matrix Bancorp, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Operating activities
Net income......................................................................... $ 1,883 $ 5,295
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization..................................................... 1,287 2,814
Provision for loan and valuation losses........................................... 1,670 1,350
Amortization of mortgage servicing rights......................................... 4,965 9,510
Gain on sale of loans............................................................. (890) (1,690)
Gain on sale of building and equipment............................................ (1,159) -
Loans originated for sale, net of loans sold...................................... (37,491) 41,823
Loans purchased for sale.......................................................... (106,951) (231,293)
Proceeds from sale of loans purchased for sale.................................... 81,243 98,236
Originated mortgage servicing rights, net......................................... 2,716 (839)
Deferred income taxes............................................................. 174 -
Decrease (increase) in other receivables and other assets......................... 556 (16,581)
Increase (decrease) in other liabilities and income taxes payable................. 5,312 (3,768)
--------------- ---------------
Net cash used by operating activities.............................................. (46,685) (95,143)
Investing activities
Loans originated and purchased for investment...................................... (90,406) (39,211)
Principal repayments on loans...................................................... 156,428 141,443
Purchase of Federal Home Loan Bank of Dallas stock................................. (1,071) (420)
Purchases of premises and equipment................................................ (1,102) (1,541)
Acquisition of mortgage servicing rights........................................... (3,504) (18,048)
Hedging of servicing portfolio, net................................................ (286) (2,674)
Proceeds from sale of building and equipment....................................... 3,664 -
Proceeds from sale of mortgage servicing rights.................................... 100 159
--------------- ---------------
Net cash provided by investing activities.......................................... 63,823 79,708
Financing activities
Net (decrease) increase in deposits................................................ (52,515) 74,071
Net (decrease) increase in custodial escrow balances............................... (1,235) 25,159
Increase (decrease) in revolving lines and repurchase agreements, net.............. 61,352 (83,787)
Payment of notes payable........................................................... (5,874) (14,771)
Proceeds from notes payable........................................................ - 29,320
Payment of financing arrangements.................................................. (36) (70)
Unrealized gain on securities...................................................... 345 -
Proceeds from issuance of common stock related to employee stock option plan....... 5 65
--------------- ---------------
Net cash provided by financing activities.......................................... 2,042 29,987
--------------- ---------------
Increase in cash and cash equivalents.............................................. 19,180 14,552
Cash and cash equivalents at beginning of period................................... 26,609 26,785
--------------- ---------------
Cash and cash equivalents at end of period......................................... $ 45,789 $ 41,337
=============== ===============
Supplemental disclosure of noncash activity
Payable for purchase of mortgage servicing rights.................................. $ 1,669 $ 5,743
=============== ===============
Drafts payable..................................................................... $ 5,410 $ 4,802
=============== ===============
Supplemental disclosure of cash flow information
Cash paid for interest expense..................................................... $ 32,907 $ 20,512
=============== ===============
Cash paid for income taxes......................................................... $ 3,270 $ 2,749
=============== ===============
</TABLE>
See accompanying notes.
6
<PAGE>
Matrix Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Matrix
Bancorp, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes hereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and the
accompanying notes. Actual results could differ from these estimates.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133. This Statement defers the effective date of Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities, to all fiscal quarters of all
fiscal years beginning after June 15, 2000. Statement No. 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by recognition of those items as assets or
liabilities in the statement of financial position and measurement at fair
value. On March 3, 2000, the Financial Accounting Standards Board issued an
exposure draft entitled Accounting for Certain Derivative Instruments and
Certain Hedging Activities - an Amendment of FASB Statement No. 133. The impact
of Statement No. 133 and any related amendments on the Company's financial
position and results of operations has not yet been determined.
2. Net Income Per Share
The following table sets forth the computation of net income per share and net
income per share assuming dilution:
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
--------------- ----------------- ----------------- -----------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Numerator:
Net income available to common
shareholders...................... $ 334 $ 2,790 $ 1,883 $ 5,295
=============== ================= ================= =================
Denominator:
Weighted average shares outstanding. 6,759,741 6,727,889 6,759,631 6,726,300
Effect of dilutive securities:......
Common stock options............ 27,587 98,055 43,790 104,008
Common stock warrants........... - 9,456 - 12,014
--------------- ----------------- ----------------- -----------------
Dilutive potential common shares.... 27,587 107,511 43,790 116,022
--------------- ----------------- ----------------- -----------------
Denominator for net income per
share assuming dilution........... 6,787,328 6,835,400 6,803,422 6,842,322
=============== ================= ================= =================
</TABLE>
7
<PAGE>
Matrix Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(unaudited)
3. Mortgage Servicing Rights
The activity in the mortgage servicing rights is summarized as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended June 30, December 31,
2000 1999
------------------- -------------------
(in thousands)
<S> <C> <C>
Balance at beginning of period, net................ $ 63,479 $ 57,662
Purchases.......................................... 2,010 19,754
Originated, net.................................... (2,717) 1,514
Hedging loss....................................... 286 3,257
Amortization....................................... (4,965) (16,403)
Sales.............................................. - (2,305)
------------------- -------------------
Balance at end of period, net...................... $ 58,093 $ 63,479
=================== ===================
</TABLE>
Accumulated amortization of mortgage servicing rights aggregated approximately
$49.5 million and $45.3 million at June 30, 2000 and December 31, 1999,
respectively. The Company's servicing portfolio (excluding subserviced loans)
was comprised of the following:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
---------------------------------- ------------------------------------------
Principal Principal
Number Balance Number Balance
of Loans Outstanding of Loans Outstanding
------------ ---------------- ----------------- -----------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Freddie Mac............................... 16,593 $ 1,014,312 20,028 $ 1,334,058
Fannie Mae................................ 36,252 2,204,875 38,779 2,427,053
GNMA...................................... 10,574 483,878 11,720 558,086
Other VA, FHA and conventional loans...... 19,748 1,551,663 20,032 1,570,518
------------ ---------------- ----------------- -----------------
83,167 $ 5,254,728 90,559 $ 5,889,715
============ ================ ================= =================
</TABLE>
The Company's custodial escrow balances shown in the accompanying condensed
consolidated balance sheets at June 30, 2000 and December 31, 1999 pertain to
escrowed payments of taxes and insurance and principal and interest on loans
serviced by the Company.
4. Deposits
Deposit account balances are summarized as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------------------------------ -----------------------------------------------
Weighted Weighted
Average Average
Amount Percent Rate Amount Percent Rate
--------------- ----------- -------------- --------------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts........ $ 2,944 0.58% 3.40% 2,793 0.50% 3.48%
NOW accounts............. 52,007 10.20 1.07 42,787 7.61 1.33
Money market accounts.... 126,704 24.86 2.33 141,641 25.19 3.04
--------------- ----------- -------------- --------------- ------------- -------------
181,655 35.64 2.01 187,221 33.30 2.72
Certificate accounts..... 328,024 64.36 5.97 374,973 66.70 5.27
--------------- ----------- -------------- --------------- ------------- -------------
$ 509,679 100.00% 4.69% 562,194 100.00% 4.12%
=============== =========== ============== =============== ============= =============
</TABLE>
8
<PAGE>
Matrix Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(unaudited)
4. Deposits (continued)
At June 30, 2000 and December 31, 1999, brokered deposits accounted for
approximately $148.3 million and $221.5 million, respectively, of the total
certificate accounts shown above.
5. Guaranteed Preferred Beneficial Interests in Company's 10% Junior
Subordinated Debentures
On July 30, 1999, Matrix Bancorp Capital Trust I (the "Trust"), a Delaware
business trust formed by the Company, completed the sale of $27.5 million of 10%
preferred securities. The Trust also issued common securities to the Company
and used the net proceeds from the offering to purchase $28.6 million in
principal amount of 10% junior subordinated debentures of the Company due
September 30, 2029. The junior subordinated debentures are the sole assets of
the Trust and are eliminated, along with the related income statement effects,
in the consolidated financial statements. The preferred securities are
mandatorily redeemable upon the maturity of the junior subordinated debentures
or upon earlier redemption as provided in the indenture. The Company has the
right to redeem the junior subordinated debentures, in whole or in part, on or
after September 30, 2004, at a redemption price specified in the indenture plus
any accrued but unpaid interest to the redemption date.
6. Commitments and Contingencies
At June 30, 2000, the Company had $86.0 million in pipeline and funded loans
offset with mandatory forward commitments of $53.3 million and nonmandatory
forward commitments of $6.6 million.
As of June 30, 2000, the Company had identified and hedged approximately $500.1
million of its mortgage servicing portfolio using a program of exchange-traded
futures and options. At June 30, 2000, the realized deferred losses and the
unrealized deferred gains of the open positions netted to approximately $2.2
million.
7. Segment Information
<TABLE>
<CAPTION>
Servicing
Traditional Mortgage Brokerage and
Banking Banking Consulting
-------------------- --------------------- ---------------------
(in thousands)
<S> <C> <C> <C>
Quarter ended June 30, 2000:
Revenues from external customers:
Interest income.................... $ 21,533 $ 1,225 $ -
Noninterest income................. 3,267 5,173 2,163
Intersegment revenues................ 163 1,081 113
Segment profit (loss)................ 3,613 (520) 750
Quarter ended June 30, 1999:
Revenues from external customers:
Interest income.................... $ 15,312 $ 1,241 $ -
Noninterest income................. 3,573 6,480 2,631
Intersegment revenues................ 14 361 202
Segment profit (loss)................ 7,647 (1,712) 1,022
</TABLE>
9
<PAGE>
Matrix Bancorp, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(unaudited)
7. Segment Information (continued)
<TABLE>
<CAPTION>
Servicing
Traditional Mortgage Brokerage and
Banking Banking Consulting
----------- --------- -------------
(in thousands)
Six months ended June 30, 2000:
Revenues from external customers:
<S> <C> <C> <C>
Interest income.................... $ 42,490 $ 1,927 $ -
Noninterest income................. 6,492 10,703 3,464
Intersegment revenues................ 168 2,282 179
Segment profit (loss)................ 9,304 (616) 856
Six months ended June 30, 1999:
Revenues from external customers:
Interest income.................... $ 30,954 $ 2,515 $ -
Noninterest income................. 5,599 13,176 5,635
Intersegment revenues................ 78 700 452
Segment profit (loss)................ 14,687 (3,545) 2,200
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Profit:
Total profit for reportable segments............... $ 3,843 $ 6,957 $ 9,544 $ 13,342
Other loss......................................... (3,442) (2,569) (6,624) (4,858)
Adjustment of intersegment loss in consolidation... 84 (89) 78 (285)
---------- ---------- ---------- ----------
Income before income taxes......................... $ 485 $ 4,299 $ 2,998 $ 8,199
========== ========== ========== ==========
</TABLE>
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Matrix Bancorp, Inc. (occasionally referred to in this document, on a
consolidated basis, as "we," "our," "Matrix Bancorp" or the "Company") is a
unitary thrift holding company that, through our subsidiaries, focuses on
traditional banking, mortgage banking and trust activities. Our traditional
banking activities include originating and servicing residential, commercial and
consumer loans and providing a broad range of depository services. Our mortgage
banking activities consist of purchasing and selling residential mortgage loans
and residential mortgage servicing rights; offering brokerage, consulting and
analytical services to financial services companies and financial institutions;
servicing residential mortgage portfolios for investors; originating residential
mortgages; and providing real estate management and disposition services. Our
trust activities focus primarily on the administration of self-directed
individual retirement accounts, qualified business retirement plans and
custodial and directed trust accounts, as well as offering specialized custody
and clearing services to banks, trust companies, broker-dealers, third party
administrators and investment professionals. Our primary operating subsidiaries
are: Matrix Capital Bank; Matrix Financial Services Corporation; Sterling Trust
Company; United Financial, Inc.; United Special Services, Inc.; ABS School
Business Services, L.L.C.; and First Matrix Investment Services Corporation.
The principal components of our revenues consist of:
. net interest income recorded by Matrix Bank;
. loan administration fees generated by Matrix Financial and Matrix Bank;
. brokerage and consulting and real estate disposition services fees realized
by United Financial and United Special Services, respectively;
. loan origination fees and gains on sales of mortgage loans generated by
Matrix Bank and Matrix Financial;
. trust service fees generated by Sterling Trust; and
. administrative school service fees earned by ABS.
Our results of operations are influenced by changes in interest rates and the
effect of these changes on our interest spreads, the volume of loan
originations, mortgage loan prepayments, the value of mortgage servicing
portfolios and brokerage activities.
Effective August 1, 2000, Matrix Bancorp sold the stock of United Capital
Markets, Inc. to the officers of United Capital. The stock was sold at book
value and, as a result, there was no gain or loss realized by Matrix Bancorp
from the sale. As part of the sale, United Financial entered into a perpetual
licensing agreement and revenue sharing agreement with United Capital, which
will allow for United Financial to offer hedging strategies for mortgage
servicing assets to its clients and to share in the fees charged to its clients
by United Capital.
In addition, effective August 1, 2000, Matrix Financial, the Company's mortgage
banking operations, was moved underneath Matrix Bank. See "Liquidity and
Capital Resources" for additional discussion.
Forward-Looking Information
Certain statements contained in this quarterly report that are not historical
facts, including, but not limited to, statements that can be identified by the
use of forward-looking terminology such as "may," "will," "expect,"
"anticipate," "predict," "believe," "plan," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve a number of risks and uncertainties.
The actual results of the future events described in such forward-looking
statements in this quarterly report could differ materially from those stated in
such forward-looking statements. Among the factors that could cause actual
results to differ materially are: third party claims or actions in relation to
the ongoing or future bankruptcies filed by persons or entities such as MCA
Mortgage Corp. or Harbor Financial Mortgage Corporation; interest rate
fluctuations; level of delinquencies; defaults and prepayments; general economic
conditions; competition; government regulation; possible future
11
<PAGE>
litigation; the actions or inactions of third parties, including those that are
parties to the Harbor and MCA Mortgage Corp. bankruptcies or litigation related
thereto; unanticipated developments in connection with the bankruptcy actions or
litigation described above, including judicial variation from existing legal
precedent and the decision by one or more parties to appeal decisions rendered;
the risks and uncertainties discussed elsewhere in this quarterly report and in
our current report on Form 8-K, filed with the Securities and Exchange
Commission on March 23, 2000; and the uncertainties set forth from time to time
in our periodic reports, filings and other public statements.
Comparison of Results of Operations for the Quarters Ended June 30, 2000 and
1999
Net Income; Return on Average Equity. Net income, including non-recurring
charges, decreased $2.5 million, or 88.0%, to $334,000, or $.05 per diluted
share, for the quarter ended June 30, 2000 as compared to $2.8 million, or $.41
per share, for the quarter ended June 30, 1999. Return on average equity
decreased to 2.1% for the quarter ended June 30, 2000 as compared to 21.1% for
the quarter ended June 30, 1999. Excluding non-recurring charges, net income
decreased $556,000, or 19.9%, to $2.2 million for the quarter ended June 30,
2000 and earnings per share and return on average equity were $.33 per diluted
share and 14.3%, respectively.
Non-recurring charges of $.28 per share consisted of, among other items,
expenses, losses and reserves established in connection with the settlement of
our involvement in the previously disclosed bankruptcy proceedings of Harbor
Financial Mortgage Corp. and its affiliated entities (collectively, "Harbor")
and amounts recorded for estimated losses on loans we acquired under a
purchase/repurchase facility. The Harbor settlement, which was approved by the
bankruptcy court on July 28, 2000, involves cash payments of approximately $6.0
million to be made by the Company to the trustee and the consortium of lenders
under Harbor's warehouse credit facility to "globally" settle all existing
issues surrounding the bankruptcy. See additional information pertaining to the
Harbor bankruptcy and related litigation in "Legal Proceedings."
Net Interest Income. Net interest income before provision for loan and
valuation losses increased $123,000, or 1.7%, to $7.2 million for the quarter
ended June 30, 2000 as compared to $7.1 million for the quarter ended June 30,
1999. Our net interest margin decreased 85 basis points to 2.48% for the
quarter ended June 30, 2000 from 3.33% for the quarter ended June 30, 1999 and
interest rate spread decreased to 2.10% for the quarter ended June 30, 2000 from
2.98% for the quarter ended June 30, 1999. The increase in net interest income
before provision for loan and valuation losses was due to a 36.8% increase in
average interest-earning assets between the two comparable quarters, combined
with an increase in the yield on our interest-earning assets to 8.20% for the
quarter ended June 30, 2000 as compared to 8.07% for the quarter ended June 30,
1999. The increase in the yield on interest-earning assets was due primarily to
a special dividend received from the Federal Home Loan Bank on its stock owned
by Matrix Bank. These increases were offset by decreases in net interest margin
and interest rate spread for the second quarter of 2000 that were attributable
to an increase in the cost of interest-bearing liabilities to 6.10% for the
quarter ended June 30, 2000 as compared to 5.09% for the quarter ended June 30,
1999, as well as a 38.1% increase in average interest-bearing liabilities. The
increase in the cost of interest-bearing liabilities was driven by increases in
short-term interest rates, which have significantly affected the rates paid by
Matrix Bank for Federal Home Loan Bank borrowings and certificates of deposit,
including brokered certificates of deposit, the rates paid by Matrix Financial
for its warehouse debt, which fluctuates with the federal funds rate, and has
increased the portion of the holding company debt that is indexed to the prime
rate. Additionally, we have had to replace third party title deposits that were
deposited with Matrix Bank in late 1998 and early 1999 with higher rate
liabilities such as Federal Home Loan Bank borrowings and brokered certificates
of deposit.
Compared to the previous quarter ended March 31, 2000, we are beginning to see
an increase in the yield on our interest-earning assets due to our strategy of
acquiring predominantly adjustable rate loans, as these loans are undergoing
periodic interest rate adjustments. It is anticipated that these periodic rate
adjustments will generally continue to occur over the next 12 months in order to
adjust to the short-term interest rate increases mentioned above. We continue
to acquire adjustable rate loans in favor of fixed rate loans despite the short-
term compression it creates in our margins, as adjustable rate loans generally
have less interest rate risk. For a tabular presentation of the changes in net
interest income due to changes in the volume of interest-earning assets and
interest-bearing liabilities, as well as changes in interest rates, see "--
Analysis of Changes in Net Interest Income Due to Changes in Interest Rates and
Volumes."
12
<PAGE>
Provision for Loan and Valuation Losses. The provision for loan and valuation
losses increased $310,000 to $985,000 for the quarter ended June 30, 2000 as
compared to $675,000 for the quarter ended June 30, 1999. The increases in the
provision for both the quarter and six months ended June 30, 2000 were due to a
loan loss provision recorded at Matrix Financial. For a discussion of the
Company's allowance for loan losses as it relates to nonperforming assets, see
"--Asset Quality--Nonperforming Assets."
Loan Administration. Loan administration income represents service fees earned
from servicing loans for various investors, which are based on a contractual
percentage of the outstanding principal balance plus late fees and other
ancillary charges. Loan administration fees increased $316,000, or 5.6%, to
$5.9 million for the quarter ended June 30, 2000 as compared to $5.6 million for
the quarter ended June 30, 1999. Loan administration fees are affected by
factors that include the size of our residential mortgage loan servicing
portfolio, the servicing spread, the timing of payment collections and the
amount of ancillary fees received. Our mortgage loan servicing portfolio had an
average balance of $5.4 billion for both of the quarters ended June 30, 2000 and
1999, however, there was an increase in the actual service fee rate (including
all ancillary income) to 0.44% for the second quarter of 2000 as compared to
0.42% for the second quarter of 1999.
Brokerage Fees. Brokerage fees represent income earned from brokerage and
consulting services performed pertaining to mortgage servicing rights.
Brokerage fees decreased $512,000, or 29.3%, to $1.2 million for the quarter
ended June 30, 2000 as compared to $1.7 million for the quarter ended June 30,
1999. The decrease in brokerage fees was the result of a decrease in mortgage
servicing rights brokered which, in terms of aggregate unpaid principal balances
on the underlying loans, decreased to $6.5 billion for the quarter ended June
30, 2000 from $13.8 billion for the quarter ended June 30, 1999. The decrease
in mortgage servicing rights brokered was primarily due to decreased
originations in the industry as a result of the higher interest rates in 2000 as
compared to 1999, which resulted in lower amounts of servicing rights being
delivered to purchasers by sellers under flow servicing contracts brokered by
United Financial. Due to current market conditions for mortgage servicing
rights, we are unable to predict the volume of mortgage servicing rights that
United Financial will broker in the future. In addition, brokerage fees vary
from quarter to quarter as the timing of servicing sales is dependent upon the
seller's need to recognize a sale or to receive cash flows.
Trust Services. Trust service fees were consistent between the two comparable
quarters with a $22,000 decrease for the quarter ended June 30, 2000. Trust
accounts under administration at Sterling Trust increased to 38,056 at June 30,
2000 from 37,650 at June 30, 1999 and total assets under administration
increased to almost $3.4 billion at June 30, 2000 from approximately $2.3
billion at June 30, 1999. Most of the growth in accounts and assets under
administration occurred in third party administrator accounts, which relate to
custodial business generated for Sterling Trust by our 50% owned joint venture,
Matrix Settlement & Clearance Services, L.L.C.
Real Estate Disposition Services. Real estate disposition services represents
fees earned by United Special Services for real estate management and
disposition services provided on foreclosed properties owned by third party
financial services companies and financial institutions. Real estate
disposition service income increased $68,000, or 7.6%, to $961,000 for the
quarter ended June 30, 2000 as compared to $893,000 for the quarter ended June
30, 1999.
Gain on Sale of Loans. Gain on sale of loans decreased $1.1 million to $26,000
for the quarter ended June 30, 2000 as compared to $1.2 million for the quarter
ended June 30, 1999. Gain on sale of loans can fluctuate significantly from
quarter to quarter and year to year based on a variety of factors, such as the
current interest rate environment, the supply and mix of loan portfolios
available in the market, the type of loan portfolios we purchase and the
particular loan portfolios we elect to sell.
Loan Origination. Loan origination income includes all mortgage loans fees,
secondary marketing activity on new loan originations and servicing release
premiums on new originations sold, net of origination costs. Loan origination
income increased $155,000, or 8.9%, to $1.9 million for the quarter ended June
30, 2000 as compared to $1.8 million for the quarter ended June 30, 1999. The
increase in loan origination income resulted from increased prepayment penalty
fee income and increased revenues from the sale of the guaranteed portion of
Small Business Administration loans originated by Matrix Bank, which offset the
decrease in wholesale residential mortgage loan production to $96.9 million for
the quarter ended June 30, 2000 as compared to $124.9 million for the quarter
ended June 30, 1999.
13
<PAGE>
Other Income. Other income increased $145,000, or 4.4%, to $3.5 million for the
quarter ended June 30, 2000 as compared to $3.3 million for the quarter ended
June 30, 1999. The increase in other income was primarily due to an $824,000
gain from the sale of a Company-owned building and a $692,000 increase in whole
loan brokerage income. These increases were offset by a $1.2 million decrease
in consulting income earned by UCM, which is a direct result of the current
interest rate environment.
Noninterest Expense. Noninterest expense increased $2.7 million, or 14.9%, to
$20.5 million for the quarter ended June 30, 2000 as compared to $17.8 million
for the quarter ended June 30, 1999. This increase was predominantly due to
increases in other general and administrative expense as a result of the
previously mentioned Harbor settlement and estimated losses on loans acquired
under a purchase/repurchase facility. Additionally, the Company incurred an
increase in compensation and benefits expense and saw the continuation of
increased professional fees from the previous quarter. These increases were
offset by a decrease in the amortization of mortgage servicing rights. The
following table details the major components of noninterest expense for the
periods indicated:
Quarter Ended
June 30,
--------------------
2000 1999
-------- --------
(in thousands)
Compensation and employee benefits.................. $ 8,106 $ 7,314
Amortization of mortgage servicing rights........... 2,521 4,784
Occupancy and equipment............................. 1,159 918
Postage and communication........................... 650 606
Professional fees................................... 1,249 498
Data processing..................................... 576 378
Other general and administrative.................... 6,201 3,318
-------- --------
Total............................................ $ 20,462 $ 17,816
======== ========
Compensation and employee benefits expense increased $792,000, or 10.8%, to $8.1
million for the quarter ended June 30, 2000 as compared to $7.3 million for the
quarter ended June 30, 1999. This increase was primarily the result of growth
and expansion at Matrix Bank and ABS. The Company experienced an increase of 47
employees to 612 employees at June 30, 2000 as compared to 565 employees at June
30, 1999.
Amortization of mortgage servicing rights decreased $2.3 million, or 47.3%, to
$2.5 million for the quarter ended June 30, 2000 as compared to $4.8 million for
the quarter ended June 30, 1999. Amortization of mortgage servicing rights
fluctuates based on the size of our mortgage servicing portfolio and the
prepayment rates experienced with respect to the underlying mortgage loan
portfolio. In response to the higher interest rates prevalent in the market,
prepayment speeds on our servicing portfolio have decreased to an average of
12.7% for the quarter ended June 30, 2000 as compared to 24.7% for the quarter
ended June 30, 1999.
The remainder of noninterest expense, which includes occupancy and equipment
expense, postage and communication expense, professional fees, data processing
costs and other expenses, increased $4.1 million, or 72.0%, to $9.8 million for
the quarter ended June 30, 2000 as compared to $5.7 million for the quarter
ended June 30, 1999. This increase was primarily attributable to the non-
recurring charges mentioned above, which were recorded predominantly in other
general and administrative expense. Included in those non-recurring charges are
the legal fees associated with the Harbor bankruptcy. Additionally, the Company
incurred an additional $320,000 in legal fees related to litigation involving
Sterling Trust. For additional information on the Harbor and Sterling Trust
litigation, see "Legal Proceedings."
Provision for Income Taxes. Our provision for income taxes decreased by $1.4
million to $151,000 for the quarter ended June 30, 2000 as compared to $1.5
million for the quarter ended June 30, 1999.
Comparison of Results of Operations for the Six Months Ended June 30, 2000 and
1999
Net Income; Return on Average Equity. Net income decreased $3.4 million, or
64.4%, to $1.9 million, or $.28 per diluted share, for the six months ended June
30, 2000 as compared to $5.3 million, or $.77 per diluted share, for the six
months ended June 30, 1999. Returns on average equity were 6.1% and 20.5% for
the six months ended
14
<PAGE>
June 30, 2000 and 1999, respectively. The decrease in net income relates
primarily to the $.28 per share of non-recurring charges and legal expenses
related to litigation involving Sterling Trust incurred during the second
quarter of 2000, as well as the $.10 per share of legal expenses incurred during
the first quarter of 2000 related to the Harbor bankruptcy and Sterling Trust
litigation. See additional discussion under "Comparison of Results of Operations
for the Quarters Ended June 30, 2000 and 1999."
Net Interest Income. Net interest income before provision for loan and
valuation losses decreased $387,000, or 2.7%, to $13.9 million for the six
months ended June 30, 2000 as compared to $14.3 million for the six months ended
June 30, 1999. Our net interest margin decreased to 2.40% for the six months
ended June 30, 2000 as compared to 3.33% for the six months ended June 30, 1999.
Additionally, the interest rate spread decreased to 2.06% for the six months
ended June 30, 2000 from 3.06% for the six months ended June 30, 1999. The
decreases in net interest income before provision for loan and valuation losses,
net interest margin and interest rate spread for the six months ended June 30,
2000 were attributable to the following: a decrease in the yield on our
interest-earning assets to 7.99% for the six months ended June 30, 2000 from
8.10% for the six months ended June 30, 1999, which was primarily driven by a
decrease in our loan portfolio yield to 8.04% for the six months ended June 30,
2000 from 8.23% for the six months ended June 30, 1999, and an increase in the
cost of interest-bearing liabilities to 5.93% for the six months ended June 30,
2000 from 5.04% for the six months ended June 30, 1999. The decrease in the
yield on our loan portfolio has mainly resulted from our acquisition of
predominantly adjustable rate mortgages and the increase in the cost of our
liabilities as a result of short-term interest rate increases which occurred
during the first half of 2000. The adjustable rate mortgages acquired generally
should adjust to higher interest rates over the next 12 to 18 months in the
current interest environment. For additional discussion concerning short-term
interest rate increases and our acquisition of adjustable rate loans, see
"Comparison of Results of Operations for the Quarters Ended June 30, 2000 and
1999--Net Interest Income." For a tabular presentation of the changes in net
interest income due to changes in volume of interest-earning assets and changes
in interest rates, see "--Analysis of Changes in Net Interest Income Due to
Changes in Interest Rates and Volumes."
Provision for Loan and Valuation Losses. Provision for loan and valuation
losses increased $320,000 to $1.7 million for the six months ended June 30, 2000
as compared to $1.4 million for the six months ended June 30, 1999. As
previously mentioned, this increase was primarily attributable to a loan loss
provision recorded at Matrix Financial.
Loan Administration. Loan administration fees increased $1.3 million, or 12.2%,
to $12.2 million for the six months ended June 30, 2000 as compared to $10.9
million for the six months ended June 30, 1999. Loan administration fees are
affected by factors that include the size of our residential mortgage loan
servicing portfolio, the servicing spread, the timing of payment collections and
the amount of ancillary fees received. The mortgage servicing portfolio
increased to an average balance of $5.4 billion for the six months ended June
30, 2000 as compared to an average balance of $5.1 billion for the six months
ended June 30, 1999. The actual service fee rates (including all ancillary
income) were consistent for the comparable six month periods at 0.42%.
Brokerage Fees. Brokerage fees decreased $1.3 million, or 38.5%, to $2.1
million for the six months ended June 30, 2000 as compared to $3.4 million for
the six months ended June 30, 1999. The decrease in brokerage fees was the
result of a decrease in mortgage servicing rights brokered which, in terms of
aggregate unpaid principal balances on the underlying loans, decreased to $13.8
billion during the six months ended June 30, 2000 from $30.6 billion for the six
months ended June 30, 1999. Please see additional discussion regarding the
effect of increased interest rates in 2000 on the volume of mortgage servicing
brokered under "Comparison of Results of Operations for the Quarters Ended June
30, 2000 and 1999--Brokerage Fees."
Trust Services. Trust service fees were consistent between the two comparable
six-month periods with a $40,000 decrease for the six months ended June 30,
2000.
Real Estate Disposition Services. Real estate disposition service income
increased $372,000, or 22.2%, to $2.0 million for the six months ended June 30,
2000 as compared to $1.7 million for the quarter ended June 30, 1999.
Gain on Sale of Loans. Gain on sale of loans decreased $800,000 to $890,000 for
the six months ended June 30, 2000 as compared to $1.7 million for the six
months ended June 30, 1999. Gain on the sale of loans can fluctuate
significantly from quarter to quarter and from year to year based on a variety
of factors, such as the current interest
15
<PAGE>
rate environment, the supply and mix of loan portfolios available in the market,
the type of loan portfolios we purchase and the particular loan portfolios we
elect to sell.
Loan Origination. Loan origination income decreased $632,000, or 17.1%, to $3.1
million for the six months ended June 30, 2000 as compared to $3.7 million for
the six months ended June 30, 1999. The decrease resulted from a decrease in
wholesale production to $170.7 million for the six months ended June 30, 2000 as
compared to $259.7 million for the six months ended June 30, 1999, but was
offset slightly by increased prepayment penalty fee income and increased
revenues on the sale of the guaranteed portions of Small Business Administration
loans originated by Matrix Bank.
Other Income. Other income decreased $320,000, or 5.3%, to $5.7 million for the
six months ended June 30, 2000 as compared to $6.0 million for the six months
ended June 30, 1999. The decrease in other income for the six month period
ended June 30, 2000 was primarily driven by a $1.1 million decrease in revenues
earned by UCM, which is a direct result of the current interest rate
environment, and a decrease of approximately $1.8 million in miscellaneous fee
income from certain financing transactions that were in place in 1999, but for
which there were not any similar transactions in 2000. Offsetting these
decreases, were the following items:
. an $1.2 million gain from the sale of some equipment and a Company-owned
building;
. a $657,000 increase in school services income earned by ABS;
. a $394,000 increase in whole loan brokerage income; and
. a $256,000 increase in bank fees earned by Matrix Bank.
Noninterest Expense. Noninterest expense increased $3.1 million, or 8.9%, to
$37.8 million for the six months ended June 30, 2000 as compared to $34.7
million for the six months ended June 30, 1999. This increase was primarily due
to an increase in other general and administrative expense related to the non-
recurring charges taken in the second quarter of 2000, increased professional
fees due to legal expenses incurred in the first six months of 2000, both of
which were previously discussed, and increased compensation and benefits
expense. These increases were offset by a decrease in the amortization of
mortgage servicing rights. The following table details the major components of
noninterest expense for the periods indicated:
Six Months Ended
June 30,
---------------------
2000 1999
-------- --------
(in thousands)
Compensation and employee benefits.................. $ 16,084 $ 14,183
Amortization of mortgage servicing rights........... 4,965 9,510
Occupancy and equipment............................. 2,237 1,756
Postage and communication........................... 1,363 1,275
Professional fees................................... 2,583 798
Data processing..................................... 1,129 703
Other general and administrative.................... 9,398 6,450
-------- --------
Total............................................ $ 37,759 $ 34,675
======== ========
Compensation and employee benefits increased $1.9 million, or 13.4%, to $16.1
million for the six months ended June 30, 2000 as compared to $14.2 million for
the six months ended June 30, 1999. This increase was primarily the result of
growth at all of the Company's subsidiaries, most predominately, however, was
the growth at ABS, Matrix Bank and Matrix Financial.
Amortization of mortgage servicing rights decreased $4.5 million, or 47.8% to
$5.0 million for the six months ended June 30, 2000 as compared to $9.5 million
for the six months ended June 30, 1999. Amortization of mortgage servicing
rights fluctuates based on the size of our mortgage servicing portfolio and the
prepayment rates experienced with respect to the underlying mortgage loan
portfolio. Our prepayment rates on our servicing
16
<PAGE>
portfolio averaged 11.6% for the six months ended June 30, 2000 as compared to
25.6% for the six months ended June 30, 1999.
The remainder of noninterest expense, which includes occupancy and equipment
expense, postage and communication expense, professional fees, data processing
costs and other general and administrative expenses increased $5.7 million, or
52.2%, to $16.7 million for the six months ended June 30, 2000 as compared to
$11.0 million for the six months ended June 30, 1999. This increase was
primarily attributable to the non-recurring second quarter charges mentioned
above, which were recorded predominantly in other general and administrative
expense, but was also due to the increased legal fees incurred in the first half
of 2000 related to the Harbor bankruptcy and the litigation involving Sterling
Trust. For additional information on litigation, see "Legal Proceedings."
Provision for Income Taxes. The provision for income taxes decreased by $1.8
million to $1.1 million for the six months ended June 30, 2000 as compared to
$2.9 million for the six months ended June 30, 1999.
Average Balance Sheet
The following table sets forth for the periods and as of the dates indicated,
information regarding our average balances of assets and liabilities, as well as
the dollar amounts of interest income from interest-earning assets and interest
expense on interest-bearing liabilities and the resultant yields or costs.
Average interest rate information for the quarters and six months ended June 30,
2000 and 1999 have been annualized. Ratio, yield and rate information is based
on average daily balances where available; otherwise, average monthly balances
have been used. Nonaccrual loans are included in the calculation of average
balances for loans for the periods indicated.
17
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
June 30,
-----------------------------------------------------------------------------------
2000 1999
--------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
Assets (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net...................... $1,088,121 $22,326 8.21% $ 822,798 $16,870 8.20%
Mortgage-backed securities...... 26,814 482 7.19 - - -
Interest-earning deposits....... 28,228 380 5.38 13,725 120 3.50
Federal Home Loan Bank stock.... 23,012 729 12.67 15,857 207 5.22
---------- ------- ------ ---------- ------- ------
Total interest-earning
assets...................... 1,166,175 23,917 8.20 852,380 17,197 8.07
Noninterest-earning assets:
Cash............................ 15,272 22,384
Allowance for loan and valuation
losses........................ (6,923) (4,195)
Premises and equipment.......... 10,802 10,778
Other assets.................... 116,521 133,590
---------- ----------
Total noninterest-earning
assets...................... 135,672 162,557
---------- ----------
Total assets.................. $1,301,847 $1,014,937
========== ==========
Liabilities & Shareholders' Equity
Interest-bearing liabilities:
Passbook accounts............... $ 2,925 25 3.42 $ 2,728 24 3.52
Money market and NOW accounts... 151,706 882 2.33 235,827 1,781 3.02
Certificates of deposit......... 387,955 5,903 6.09 264,009 3,384 5.13
Federal Home Loan Bank
borrowings.................... 389,083 6,000 6.17 121,001 1,490 4.93
Borrowed money.................. 162,412 3,880 9.56 168,911 3,414 8.09
---------- ------- ------ ---------- ------- ------
Total interest-bearing
liabilities................. 1,094,081 16,690 6.10 792,476 10,093 5.09
---------- ------- ------ ---------- ------- ------
Noninterest-bearing liabilities:
Demand deposits (including
custodial escrow balances).... 129,292 150,989
Other liabilities............... 15,937 18,579
---------- ----------
Total noninterest-bearing
liabilities................. 145,229 169,568
Shareholders' equity.............. 62,537 52,893
---------- ----------
Total liabilities and
shareholders' equity............. $1,301,847 $1,014,937
========== ==========
Net interest income before provision
for loan and valuation losses... $ 7,227 $ 7,104
======= =======
Interest rate spread.............. 2.10% 2.98%
====== ======
Net interest margin............... 2.48% 3.33%
====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities.................... 106.59% 107.56%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------------------------------------------------
2000 1999
--------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
Assets (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net...................... $1,096,071 $44,067 8.04% $ 828,429 $34,108 8.23%
Mortgage-backed securities...... 18,001 645 7.17 - - -
Interest-earning deposits....... 27,399 699 5.10 15,608 274 3.51
Federal Home Loan Bank stock.... 22,715 1,071 9.43 15,752 420 5.33
---------- ------- ------ ---------- ------- ------
Total interest-earning
assets...................... 1,164,186 46,482 7.99 859,789 34,802 8.10
Noninterest-earning assets:
Cash............................ 14,443 20,146
Allowance for loan and valuation
losses........................ (6,686) (3,839)
Premises and equipment.......... 10,865 10,667
Other assets.................... 118,141 130,468
---------- ----------
Total noninterest-earning
assets...................... 136,763 157,442
---------- ----------
Total assets.................. $1,300,949 $1,017,231
========== ==========
Liabilities & Shareholders' Equity
Interest-bearing liabilities:
Passbook accounts............... $ 2,884 49 3.40 $ 2,760 48 3.48
Money market and NOW accounts... 156,496 1,824 2.33 252,370 3,944 3.13
Certificates of deposit......... 388,278 11,593 5.97 248,009 6,392 5.16
Federal Home Loan Bank
borrowings.................... 396,235 11,866 5.99 138,136 3,388 4.91
Borrowed money.................. 152,589 7,205 9.44 170,727 6,698 7.85
---------- ------- ------ ---------- ------- ------
Total interest-bearing
liabilities................. 1,096,482 32,537 5.93 812,002 20,470 5.04
---------- ------- ------ ---------- ------- ------
Noninterest-bearing liabilities:
Demand deposits (including
custodial escrow balances).... 126,367 132,192
Other liabilities............... 16,352 21,319
---------- ----------
Total noninterest-bearing
liabilities................. 142,719 153,511
Shareholders' equity.............. 61,748 51,718
---------- ----------
Total liabilities and
shareholders' equity............. $1,300,949 $1,017,231
========== ==========
Net interest income before provision
for loan and valuation losses... $13,945 $14,332
======= =======
Interest rate spread.............. 2.06% 3.06%
====== ======
Net interest margin............... 2.40% 3.33%
====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities.................... 106.17% 105.89%
====== ======
</TABLE>
18
<PAGE>
Analysis of Changes in Net Interest Income Due to Changes in Interest Rates and
Volumes
The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-
bearing liabilities. It distinguishes between the increase or decrease related
to changes in balances and changes in interest rates. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to:
. changes in volume, in other words, changes in volume multiplied by old rate;
and
. changes in rate, in other words, changes in rate multiplied by old volume.
For purposes of this table, changes attributable to both rate and volume, which
cannot be segregated, have been allocated proportionately to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
2000 vs 1999 2000 vs 1999
---------------------------------- ----------------------------------
Increase (Decrease) Due to Change in
-------------------------------------------------------------------------
Volume Rate Total Volume Rate Total
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net.......................................... $ 5,438 $ 18 $ 5,456 $ 10,781 $ (822) $ 9,959
Mortgage-backed securities.......................... 482 - 482 645 - 645
Interest-earning deposits........................... 172 88 260 266 159 425
FHLB stock.......................................... 125 397 522 238 413 651
-------- -------- -------- -------- -------- --------
Total interest-earning assets.................... 6,217 503 6,720 11,930 (250) 11,680
Interest-bearing liabilities:
Passbook accounts................................... 2 (1) 1 2 (1) 1
Money market and NOW accounts....................... (548) (351) (899) (1,269) (851) (2,120)
Certificates of deposit............................. 1,799 720 2,519 4,071 1,130 5,201
FHLB borrowings..................................... 4,049 461 4,510 7,581 897 8,478
Borrowed money...................................... (135) 601 466 (760) 1,267 507
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities............... 5,167 1,430 6,597 9,625 2,442 12,067
-------- -------- -------- -------- -------- --------
Change in net interest income before provision
for loan and valuation losses....................... $ 1,050 $ (927) $ 123 $ 2,305 $ (2,692) $ (387)
======== ======== ======== ======== ======== ========
</TABLE>
Asset Quality
Nonperforming Assets
As part of asset and liability management, we monitor nonperforming assets on a
monthly basis. Nonperforming assets consist primarily of nonaccrual loans and
foreclosed real estate. Loans are placed on nonaccrual when full payment of
principal or interest is in doubt or when they are past due 90 days as to either
principal or interest. Foreclosed real estate arises primarily through
foreclosure on mortgage loans owned.
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual mortgage loans......................... $ 18,257 $ 20,185 $ 6,888
Nonaccrual commercial loans and direct financing
leases........................................... 4,072 5,301 6,972
Nonaccrual consumer loans......................... 131 155 164
------------ ------------ ------------
Total nonperforming loans........................ 22,460 25,641 14,024
Foreclosed real estate............................ 2,315 800 1,571
------------ ------------ ------------
Total nonperforming assets....................... $ 24,775 $ 26,441 $ 15,595
============ ============ ============
</TABLE>
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<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Total nonperforming loans to total loans.......... 2.08% 2.31% 1.67%
============ ============ ============
Total nonperforming assets to total assets........ 1.91% 2.06% 1.51%
============ ============ ============
Ratio of allowance for loan and valuation losses
to total nonperforming loans..................... 33.30% 24.78% 32.16%
============ ============ ============
</TABLE>
As of June 30, 2000, we had approximately $190,000 of non-government accruing
loans that were contractually past due 90 days or more. We accrue interest on
government-sponsored loans such as Federal Housing Administration insured and
Veteran's Administration guaranteed loans which are past due 90 or more days, as
the interest on these loans is insured by the federal government. The aggregate
unpaid principal balance of government-sponsored accruing loans that were past
due 90 or more days was $127.4 million, $147.9 million and $170.7 million at
June 30, 2000, December 31, 1999 and June 30, 1999, respectively. Nonaccrual
mortgage loans as a percentage of total loans were 1.7% at June 30, 2000, 1.8%
at December 31, 1999 and 0.8% at June 30, 1999. The increases in late 1999 and
2000 can be primarily attributed to a sub-prime residential portfolio that we
acquired on a scheduled interest and scheduled principal remittance with full
recourse to the seller/servicer. In October 1999, however, the seller/servicer
declared bankruptcy and the servicing was transferred to us. The total
principal balance of the portfolio was $14.6 million at June 30, 2000, and
approximately $2.7 million was 90 or more days delinquent at that time. We
believe that a portion of these delinquencies are a result of the servicing
transfer. Associated with these loans, we have a $458,000 reserve, which is not
reflected in the general valuation reserve.
The decrease in nonaccrual commercial loans and direct financing leases at June
30, 2000 is primarily related to our origination of tax-exempt lease financing
for charter schools for the purchase of real estate and equipment. Several of
the charter schools for which we have provided financing encountered enrollment
and/or state funding delays, which caused them to become delinquent on their
lease obligations to us. However, due to the ever closer start of a new fiscal
year for the schools, which begins on July 1, and through the efforts of ABS
employees who have worked with several of the schools on their cash flow issues,
we were able to remove several schools from nonaccrual status during the second
quarter of 2000.
At June 30, 2000, $16.1 million, or 71.5%, of the nonaccrual loans were loans
that were residential loans purchased in bulk loan portfolios and remain
classified as "held for sale." Total loans held for sale at June 30, 2000 were
$949.3 million, of which $18.1 million, or 1.9%, were nonaccrual loans.
The percentage of the allowance for loan losses to nonaccrual loans varies
widely due to the nature of our portfolio of loans. We analyze the collateral
for each nonperforming loan to determine potential loss exposure. In
conjunction with other factors, this loss exposure contributes to the overall
assessment of the adequacy of the allowance for loan and valuation losses. See
"--Comparison of Results of Operations for the Quarters Ended June 30, 2000 and
1999."
Liquidity and Capital Resources
Liquidity is our ability to generate funds to support asset growth, satisfy
disbursement needs, maintain reserve requirements and otherwise operate on an
ongoing basis.
The trend of net cash used by our operating activities for the six months ended
June 30, 2000 results primarily from growth at Matrix Bank. We anticipate the
trend of a net use of cash from operations to continue for the foreseeable
future. This anticipation results from the expected growth, albeit less than
our historical growth, at Matrix Bank, which we believe, will consist primarily
of increased activity in the purchasing of loan and mortgage servicing
portfolios. However, due to liquidity and capital availability, we do not
anticipate growth to be as significant as in prior periods.
The Company has a bank stock loan agreement, which consists of two components, a
$10.0 million term loan and a revolving line of credit of $10.0 million. As of
June 30, 2000, the balance of the term loan was $8.6 million and the balance of
the revolving line of credit was $2.5 million.
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<PAGE>
Matrix Bank's future growth is expected to be achieved through deposit growth,
brokered deposits, borrowings from the Federal Home Loan Bank and custodial
deposits from affiliates. We anticipate that such growth will require additional
capital. The capital requirements related to the anticipated growth will in part
be fulfilled through retention of earnings, potentially increasing our bank
stock loan and future possible debt or equity offerings. Contractual loan
payments and net deposit inflows are a generally predictable source of funds,
while loan prepayments and loan sales are significantly influenced by general
market interest rates and economic conditions. Borrowings on a short-term basis
are used as a cash management vehicle to compensate for seasonal or other
reductions in normal sources of funds. Matrix Bank utilizes advances from the
Federal Home Loan Bank as its primary source for borrowings. At June 30, 2000,
Matrix Bank had overnight and term borrowings from the Federal Home Loan Bank of
$437.5 million. To increase its available liquidity, Matrix Bank created a
security with approximately $27.2 million of residential loans during the first
quarter of 2000, which have a current balance of $26.1 million at June 30, 2000.
Matrix Bank is able to pledge these securities with the Federal Home Loan Bank
with less of a haircut. Additionally, the market for securities is more liquid
than the market for whole loans. The custodial escrow balances held by Matrix
Bank fluctuate based upon the mix and size of the related mortgage servicing
portfolios and the timing of payments for taxes and insurance, as well as the
level of prepayments which occur.
Matrix Bank, a well capitalized institution, had a leverage capital ratio of
6.2% at June 30, 2000. This exceeded the well capitalized leverage capital
requirement of 5.0% of adjusted assets by $14.1 million. Matrix Bank's risk-
based capital ratio was 11.4% at June 30, 2000, which currently exceeds the well
capitalized risk-based capital requirement of 10.0% of risk weighted assets by
$9.4 million.
Our principal source of funding for our servicing acquisition activities
consists of a line of credit facility provided to Matrix Financial by an
unaffiliated financial institution. As of June 30, 2000, Matrix Financial's
servicing acquisition facility aggregated $45.0 million, of which $17.6 million
was available to be utilized after deducting drawn amounts.
Our principal source of funding for our loan origination business consists of a
warehouse line of credit provided to Matrix Financial and a sale/repurchase
facility provided to Matrix Financial and ABS by unaffiliated financial
institutions. As of June 30, 2000, Matrix Financial's warehouse line of credit
facility aggregated $120.0 million, of which $78.4 million was available to be
utilized. As of June 30, 2000, the sale/repurchase facility was $25.0 million of
which $7.3 million was available to be utilized.
Our principal source of funding for the working capital needs of Matrix
Financial consists of working capital facilities provided to Matrix Financial by
an unaffiliated financial institution. As of June 30, 2000, Matrix Financial's
working capital facilities aggregated $10.0 million, of which $9.1 million was
available.
As noted earlier, effective August 1, 2000, Matrix Financial has moved
underneath Matrix Bank as a wholly owned subsidiary. The contribution of Matrix
Financial increased the capital of Matrix Bank by approximately $25 million,
which will provide capital for future growth at Matrix Bank. In addition,
effective August 1, through financing provided by Matrix Bank, Matrix Financial
paid off its line of credit for the financing on its servicing acquisitions. In
addition, Matrix Financial paid off approximately $4 million of higher costing
borrowings under its purchase/repurchase facilities.
Effective June 30, 2000, Matrix Financial entered into a 90-day extension of its
warehouse agreement. As a result of moving Matrix Financial underneath Matrix
Bank, it is anticipated that the terms of the anticipated new warehouse
agreement will include significant changes. Generally, it is anticipated that
the warehouse agreement will provide financing for its wholesale lending without
sub-limits for such items as servicing acquisitions or working lines of credit.
Our principal source of funding for direct financing leases are internal
capital, a line of credit facility and a partnership trust with an unaffiliated
financial institution. Amounts available under the line of credit facility and
the partnership trust are at the lender's sole discretion.
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In the ordinary course of business, we make commitments to originate residential
mortgage loans and hold originated loans until delivery to an investor.
Inherent in this business are risks associated with changes in interest rates
and the resulting change in the market value of the loans being held for
delivery. We mitigate this risk through the use of mandatory and nonmandatory
forward commitments to sell loans. As of June 30, 2000, we had $86.0 million in
pipeline and funded loans offset with mandatory forward commitments of $53.3
million and nonmandatory forward commitments of $6.6 million. The inherent
value of the forward commitments is considered in the determination of the lower
of cost or market for such loans.
Part II - Other Information
Item 1. Legal Proceedings
Sterling Trust has been named as a defendant in a lawsuit entitled Roderick
Adderley, et al. v. Advanced Financial Services, Inc., et al. in the District
Court for the 236th Judicial District, Tarrant County, Texas ("Adderley I"). In
this matter, Sterling Trust served as custodian for the self-directed IRAs of
thirty-five of sixty-nine plaintiffs. The plaintiffs claim to have lost a total
of approximately $12 million as a result of the various defendants' activity,
including the broker and brokerage firm which allegedly recommended to the
plaintiffs how to invest their IRA funds. We believe that Sterling Trust
processed each customer's investment directions accurately and appropriately
disclosed to each plaintiff who was a Sterling Trust customer that Sterling
Trust, acting in its capacity as custodian of a self-directed IRA, has no
responsibility for a customer's investment decision. The jury returned an
adverse verdict against Sterling Trust with respect to 2 of approximately 12
theories of liability proposed by the plaintiffs in the matter, and the court
has signed a judgment for certain of the plaintiffs in the amount of
approximately $6.4 million. Sterling Trust believes it has meritorious defenses
and intends to vigorously appeal the jury's verdict against which no accrual for
loss has been made. The ultimate resolution of the matter, which is expected to
occur in 18 to 24 months, could result in a loss up to the $6.4 million plus
post-judgment interest. The ultimate legal and financial liability, if any, of
Sterling Trust in connection with this matter cannot be estimated with certainty
at this time.
Before the verdict in Adderley I, the plaintiffs instituted a lawsuit styled
Roderick Adderley, et al. v. Guy A. Gibson, et al. in the District Court of
Tarrant County, Texas, seeking to impose joint and several liability on Matrix
Bancorp, Inc., The Vintage Group, Inc., Vintage Delaware Holdings, Inc., Guy A.
Gibson, D. Mark Spencer and Richard V. Schmitz for the potential liability of
Sterling Trust in Adderley I. The defendants have removed the case to federal
district court in Fort Worth. Plaintiffs have filed a motion to remand the case
to state court, which has yet to be ruled upon by the federal district court.
Defendants believe they have adequate defenses and intend to vigorously defend
this action, but no assurances can be given that an adverse judgment will not
ultimately be rendered or that any adverse judgment would not have a material
adverse effect on our consolidated financial condition, results of operations or
cash flows.
Sterling Trust and Matrix Bancorp, Inc. have been named as defendants in an
action styled Victor Doroski v. David M. Mobley, et al., that was commenced in
March of 2000 in the United States District Court for the Southern District of
California. The complaint seeks to certify a class action on behalf of
approximately 170 investors who purportedly invested $140 million in funds with
David M. Mobley and several entities related to Mr. Mobley (the "Mobley Funds"),
and alleges that Sterling Trust and Matrix Bancorp violated various provisions
of the Commodity Exchange Act. Of the purported approximate 170 investors,
Sterling Trust acted as self-directed custodian or self-directed trustee with
respect to only approximately 10 account holders in relation to the Mobley
Funds, representing a total of approximately $1.5 million in funds invested in
the Mobley Funds. Matrix Bancorp never had any dealings with Mobley, the Mobley
Funds or the purported class of plaintiffs. Matrix Bancorp and Sterling Trust
believe they each have adequate defenses to this action and intend to defend
this action vigorously, but no assurances can be given that an adverse judgment
will not ultimately be rendered or that any adverse judgment would not have a
material adverse effect on our consolidated financial condition, results of
operations or cash flows. Matrix Bancorp and Sterling Trust filed a motion to
compel arbitration based upon the specific provisions in the contracts Sterling
Trust executed with each account holder, including Mr. Doroski. In July 2000,
the court granted Sterling Trust's motion to stay the proceedings and granted
Sterling Trust's motion to compel Mr. Doroski to arbitrate his claim.
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<PAGE>
Sterling Trust is named a defendant in an action styled John A. Redin, et al. v.
Sterling Trust Company and Does 1-10 in the Superior Court of the State of
California for the County of Los Angeles. The plaintiffs seek to certify a
class action on behalf of persons who invested approximately $5,000,000 in
promissory notes issued by Personal Choice Opportunities ("PCO"). Sterling
Trust, which acted as self-directed custodian of the plaintiffs' IRAs, is
alleged to, among other things, have breached its fiduciary duty to the
plaintiffs. As of June 30, 2000, the receiver for PCO had made distributions to
investors in PCO of approximately 66% of their investment, with another
distribution expected in the Fall of 2000. Sterling Trust believes it has
adequate defenses and intends to defend this action vigorously, but no
assurances can be given that an adverse judgment will not ultimately be rendered
or that any adverse judgment would not have a material adverse effect on our
consolidated financial condition, results of operations or cash flows.
On September 24, 1999, Matrix Bank commenced a lawsuit entitled Matrix Capital
Bank and Superior Federal Bank, F.S.B. v. Harbor Financial Mortgage Corporation
and Guaranty Federal Bank, F.S.B. in the United States District Court for the
Northern District of Texas. On October 14, 1999, Harbor Financial Mortgage
Corporation and several affiliated entities (collectively referred to as
"Harbor" elsewhere in this document) each filed voluntary petitions under
Chapter 11 of the Bankruptcy Code, which resulted in this lawsuit being moved to
the United States Bankruptcy Court for the Northern District of Texas. The
Harbor Bankruptcy proceedings were subsequently converted to Chapter 7, and a
permanent Chapter 7 Trustee has been appointed. Guaranty Federal Bank, F.S.B.
is the administrative agent for a consortium of lenders to Harbor under Harbor's
warehouse facility that was entered into between the lenders and Harbor in late
May of 1999. The lawsuit sought a declaration from the court of the rights of
the parties in and to certain Department of Housing and Urban Development
insurance/guaranty proceeds relating to several pools of Federal Housing
Administration/Veteran's Administration mortgage loans acquired from Harbor by
Matrix Bank on a servicing retained basis. In its answer and counterclaim,
Guaranty alleged prior rights in and to such Department of Housing and Urban
Development insurance/guaranty proceeds and claimed that Matrix Bank has
converted such proceeds. In August 2000, this action was settled by payment of
approximately $2.3 million to the consortium of lenders and assignment of Matrix
Bank's unsecured claim to the consortium of lenders.
In July 1999, Matrix Bank's monthly remittance from Harbor, as servicer, related
to the above transactions was shorted approximately $5.9 million. As a result,
Matrix Bank purchased loans from Harbor in lieu of the payment of the remittance
shortfall. Based on management's estimates, Matrix Bank will collect sufficient
value from the purchased loans to cover the remittance shortfall. As previously
mentioned, on October 14, 1999, within 90 days of the July transaction, Harbor
filed bankruptcy. Due to the timing of the bankruptcy, the Chapter 7 trustee
might have challenged the July loan purchase under his avoidance powers pursuant
to applicable bankruptcy laws. Accordingly, Matrix Bank and the trustee have
settled the potential claims by the trustee. In connection with the settlement,
Matrix Bank purchased approximately $4.5 million in principal amount in mortgage
loans owned by the Harbor estate for 64% of par and, in addition to such
purchase price, Matrix Bank paid the trustee approximately $3.8 million.
Prior to Harbor's bankruptcy, Matrix Bank had also purchased approximately $2
million in servicing receivables from Harbor. Approximately $1 million of the
servicing receivables should have been remitted to Matrix Bank by Bank United on
or about September 10, 1999. Bank United acknowledged that the funds were due,
but decided to hold the funds for an undetermined period without giving a
specific reason for doing so. As a result, Matrix Bank brought suit against
Bank United for the funds in Texas state court. As a result of the Harbor
bankruptcy proceedings, the lawsuit was removed to the United States Bankruptcy
Court for the Northern District of Texas. This action has been settled by
payment from Bank United to Matrix Bank of approximately $880,000. Matrix Bank
is also pursuing funds owed by Chase Mortgage for the servicing receivables as
well. Matrix Bank believes it is entitled to collect these receivables from
Chase Mortgage; however, no assurance can be given that these receivables will
in fact be collected.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On May 28, 2000, we held our Annual Meeting of Shareholders. At the Annual
Meeting, the shareholders re-elected Mssrs. Piercy and Skiba as directors;
Mssrs. Schmitz, Spencer, Gibson, Kloos and Frank continued in office as
directors of the Company. Several other motions were voted upon at the meeting.
The other motions and the voting results for those motions were:
. To increase the number of authorized shares under the Matrix Bancorp, Inc.
Employee Stock Purchase Plan. With regard to this motion, 5,066,261 of the
shares entitled to vote were in favor of this motion, with 55,158 against and
4,375 abstentions.
. To increase the number of authorized shares under the 1996 Amended and
Restated Employee Stock Option Plan. With regard to this motion, 4,699,658 of
the shares entitled to vote were in favor of this motion, with 420,760
against and 5,376 abstentions.
. To ratify the appointment of Ernst & Young LLP as independent auditors for
the Company for the 2000 fiscal year. With regard to this motion, 6,309,254
of the shares entitled to vote were in favor of this motion, with 3,901
against and 100 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*10.1 First Amendment to Second Amended and Restated Loan Agreement, dated as
of December 28, 1999, but effective as of September 30, 1999, between
Matrix Financial Services Corporation, as borrower, Bank One, Texas,
N.A., as agent, and certain lenders, as lenders
*10.2 Ninth Amendment to Credit Agreement, dated as of June 30, 2000, between
Matrix Bancorp, Inc., as borrower, and U.S. Bank National Association,
as agent, and certain lenders, as lenders
*10.3 Second Amendment to Second Amended and Restated Loan Agreement, dated as
of June 30, 2000, between Matrix Financial Services Corporation, as
borrower, Bank One, Texas, N.A., as agent, and certain lenders, as
lenders
*10.4 Promissory Note, dated as of April 19, 2000, from Thomas M. Piercy, as
maker, to the Registrant, as payee
*10.5 Promissory Note, dated as of June 21, 2000, from Thomas M. Piercy, as
maker, to the Registrant, as payee
*10.6 Executive Employment Agreement, dated as of April 20, 2000, by and
between United Financial, Inc. and Carl G. de Rozario.
* 27 Financial Data Schedule
(b) Reports on Form 8-K
. See Form 8-K filed by the Company with the Securities and Exchange Commission
on June 30, 2000, reporting various information under Items 5 and 7 thereof
. See Form 8-K filed by the Company with the Securities and Exchange Commission
on July 26, 2000, reporting various information under Items 5 and 7 thereof
______________________
* Filed herewith.
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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.
MATRIX BANCORP, INC.
Dated: August 11, 2000 /s/ Guy A. Gibson
----------------------- ------------------------------------
Guy A. Gibson
President and
Chief Executive Officer
(Principal Executive Officer)
Dated: August 11, 2000 /s/ David W. Kloos
----------------------- ------------------------------------
David W. Kloos
Senior Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
25
