<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A TO ___________________________
COMMISSION FILE NUMBER 1-14098
CAL FED BANCORP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------
<TABLE>
<S> <C>
DELAWARE 95-4539347
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5700 WILSHIRE BOULEVARD, 90036
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 932-4200
------------------
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
The number of shares of Common Stock outstanding as of July 31, 1996:
49,396,947
- - --------------------------------------------------------------------------------
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<PAGE> 2
CAL FED BANCORP INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition -- June 30, 1996,
March 31, 1996, December 31, 1995 and June 30, 1995.................. 1
Consolidated Statements of Operations -- For the Three and Six Months
Ended June 30, 1996 and 1995......................................... 2
Consolidated Statements of Cash Flows -- For the Three and Six Months
Ended June 30, 1996 and 1995......................................... 3
Notes to Consolidated Financial Statements............................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................ 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 31
Item 2. Changes in Securities.................................................. 31
Item 3. Defaults Upon Senior Securities........................................ 31
Item 4. Submission of Matters to a Vote of Security Holders.................... 31
Item 5. Other Information...................................................... 31
Item 6. Exhibits (Unaudited) and Reports on Form 8-K (Unaudited)............... 32
</TABLE>
i
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CAL FED BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
1996 1996 1995 1995
--------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Cash...................................... $ 255.0 $ 208.4 $ 273.7 $ 198.4
Short-term liquid investments............. -- 15.0 74.1 203.8
Securities purchased under agreements to
resell.................................. 1,352.9 1,912.9 1,674.6 868.2
Securities available for sale............. 205.5 6.0 200.3 925.4
Securities held to maturity............... 2,140.0 2,242.8 2,366.7 2,655.0
Loans receivable held for sale............ 12.4 14.8 13.6 8.1
Loans receivable held for investment...... 9,656.7 9,440.4 9,290.0 8,936.5
Federal Home Loan Bank stock.............. 152.0 139.5 135.7 137.5
Interest receivable....................... 75.8 76.6 79.5 89.1
Premises and equipment.................... 65.6 69.1 71.2 75.2
Real estate held for sale................. 32.9 46.7 49.5 85.7
Prepaid expenses and other assets......... 96.6 107.9 91.7 136.9
--------- --------- --------- ---------
Total Assets.................... $14,045.4 $14,280.1 $ 14,320.6 $14,319.8
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................. $ 8,844.2 $ 9,497.3 $ 9,476.7 $ 9,368.2
Advances from Federal Home Loan Banks..... 2,996.0 2,746.0 2,671.0 2,376.0
Securities sold under agreements to
repurchase.............................. 932.9 704.7 857.3 1,018.2
Student Loan Marketing Association
advances................................ 200.0 200.0 200.0 475.0
Subordinated debentures................... 57.0 57.0 57.6 58.8
Interest payable.......................... 25.6 27.6 29.4 17.7
Other liabilities......................... 134.0 136.3 141.1 158.4
--------- --------- --------- ---------
Total Liabilities............... 13,189.7 13,368.9 13,433.1 13,472.3
--------- --------- --------- ---------
Preferred stock of subsidiary............. 172.5 266.0 266.0 266.0
Stockholders' equity
Common stock............................ 49.4 49.3 49.2 49.2
Additional paid-in capital.............. 840.3 839.0 838.6 837.6
Net unrealized holding gains on
securities available for sale........ 0.4 -- -- 5.4
Retained earnings (deficit)............. (206.9) (243.1) (266.3) (310.7)
--------- --------- --------- ---------
Total Stockholders' Equity...... 683.2 645.2 621.5 581.5
--------- --------- --------- ---------
Total Liabilities and
Stockholders' Equity.......... $14,045.4 $14,280.1 $ 14,320.6 $14,319.8
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
CAL FED BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable................................ $188.9 $174.0 $376.1 $338.1
Securities held to maturity..................... 36.5 44.2 75.2 84.4
Securities purchased under agreements to
resell....................................... 22.9 11.4 49.5 25.4
Securities available for sale................... 2.9 18.3 5.4 42.0
Short-term liquid investments................... 0.9 4.2 2.8 7.8
------ ------ ------ ------
Total interest income................... 252.1 252.1 509.0 497.7
------ ------ ------ ------
Interest expense:
Deposits........................................ 106.0 110.9 221.5 205.0
Borrowings...................................... 57.3 64.8 113.1 143.5
------ ------ ------ ------
Total interest expense.................. 163.3 175.7 334.6 348.5
------ ------ ------ ------
Net interest income..................... 88.8 76.4 174.4 149.2
Provision for loan losses......................... 10.2 8.6 20.4 16.9
------ ------ ------ ------
Net interest income after provision for
loan losses........................... 78.6 67.8 154.0 132.3
Other income:
Fee income...................................... 15.1 13.2 29.7 26.6
Gain (loss) on sales of loans................... 0.4 -- 0.3 (0.2)
Other........................................... 12.5 1.1 13.7 2.4
------ ------ ------ ------
Total other income...................... 28.0 14.3 43.7 28.8
------ ------ ------ ------
Other expenses:
Compensation.................................... 24.1 23.7 48.0 48.3
Office occupancy................................ 9.3 9.9 18.6 19.6
Other general and administrative................ 19.7 19.2 38.2 38.0
Federal deposit insurance premiums and special
assessments.................................. 5.7 6.6 11.9 13.2
------ ------ ------ ------
Total general and administrative
expenses.............................. 58.8 59.4 116.7 119.1
Operations of real estate held for sale......... 3.7 0.9 7.3 5.5
------ ------ ------ ------
Total other expenses.................... 62.5 60.3 124.0 124.6
------ ------ ------ ------
Earnings before income tax expense................ 44.1 21.8 73.7 36.5
Income tax expense................................ 0.1 0.1 0.1 0.1
------ ------ ------ ------
Earnings before dividends on preferred
stock of subsidiary................... 44.0 21.7 73.6 36.4
Dividends on preferred stock of subsidiary........ 7.9 6.4 14.3 12.8
------ ------ ------ ------
Net earnings available for common stockholders.... $ 36.1 $ 15.3 $ 59.3 $ 23.6
====== ====== ====== ======
Net earnings per common share..................... $ 0.72 $ 0.31 $ 1.18 $ 0.47
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
CAL FED BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE THREE MONTHS MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- ------------------------
1996 1995 1996 1995
------- ------- --------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings before dividends on preferred stock of
subsidiary.......................................... $ 44.0 $ 21.7 $ 73.6 $ 36.4
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization....................... 2.8 3.3 5.8 6.6
Accretion of fees and discounts..................... (0.7) (2.6) (1.2) (11.9)
Provision for losses on loans receivable............ 10.2 8.6 20.4 16.9
Provision for losses on real estate held for sale... 2.0 -- 5.0 --
(Gain) loss on sales of loans....................... (0.4) -- (0.3) 0.2
Loans originated for sale........................... (52.9) (25.1) (114.5) (31.4)
Proceeds from sales of loans receivable held for
sale.............................................. 90.2 39.4 150.7 74.3
Decrease (increase) in other assets................. 12.1 (16.7) (1.2) (15.8)
(Decrease) increase in other liabilities............ (4.2) 5.1 (10.4) (30.3)
Other items......................................... (2.4) (12.7) (7.0) (12.4)
------- ------- --------- --------
Net cash provided by operating activities.... 100.7 21.0 120.9 32.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated for investment..................... (645.4) (440.0) (1,180.3) (987.4)
Purchases of securities available for sale.......... (205.0) -- (211.0) (139.7)
Proceeds from sales of securities available for
sale.............................................. -- -- 50.2 222.9
Purchases of mortgage-backed securities held to
maturity.......................................... -- (63.2) -- (63.2)
Principal collected on loans receivable held for
investment........................................ 360.5 228.1 713.8 442.1
Principal collected on securities held to
maturity.......................................... 102.5 88.9 226.0 174.5
Proceeds from maturities of securities held for
sale.............................................. 6.0 355.0 156.0 755.0
Net increase in FHLB stock.......................... (12.5) (1.5) (16.3) (3.4)
Proceeds from sales of real estate held for sale,
net............................................... 40.3 39.0 67.1 56.7
Net dispositions (additions) of premises and
equipment......................................... 0.8 0.1 (0.1) (0.2)
Net decrease in short-term liquid investments....... 15.0 35.0 74.1 130.0
Net decrease (increase) in securities purchased
under agreements to resell........................ 560.0 (412.9) 321.7 (820.0)
------- ------- --------- --------
Net cash provided (used) by investing
activities................................. 222.2 (171.5) 201.2 (232.7)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in deposits..................... (653.1) 435.3 (632.5) 1,007.3
Proceeds from Federal Home Loan Bank advances....... 910.0 60.0 1,530.0 60.0
Payments on Federal Home Loan Bank advances......... (660.0) (60.0) (1,205.0) (210.0)
Net increase (decrease) in reverse repurchase
agreements........................................ 228.2 (318.6) 75.6 (732.8)
Proceeds from other borrowings...................... -- 0.4 -- 3.0
Payments on other borrowings and subordinated
debentures........................................ -- (1.3) (1.1) (9.0)
Decrease in preferred stock of subsidiary........... (93.5) -- (93.5) --
Payment of dividends on preferred stock of
subsidiary........................................ (7.9) (6.4) (14.3) (12.8)
------- ------- --------- --------
Net cash (used) provided by financing
activities................................. (276.3) 109.4 (340.8) 105.7
------- ------- --------- --------
Net increase (decrease) in cash....................... 46.6 (41.1) (18.7) (94.4)
------- ------- --------- --------
Cash at beginning of period........................... 208.4 239.5 273.7 292.8
------- ------- --------- --------
Cash at end of period................................. $ 255.0 $ 198.4 $ 255.0 $ 198.4
======= ======= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
CAL FED BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(1) PRESENTATION OF FINANCIAL INFORMATION
In the opinion of Cal Fed Bancorp Inc. and its subsidiaries (the
"Company"), the accompanying unaudited consolidated financial statements,
prepared from the Company's books and records, contain all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the Company's financial condition as of June 30, 1996, March 31, 1996,
December 31, 1995 and June 30, 1995, and the results of operations and
statements of cash flows for the three and six months ended June 30, 1996 and
1995.
During the 1995 fourth quarter, California Federal Bank, F.S.B. (the
"Bank") obtained regulatory and shareholder approval to reorganize into a
holding company structure to provide greater flexibility for meeting future
financial and competitive needs. As a result of the reorganization, on January
1, 1996, each share of the Bank's common stock was converted into one share of
Cal Fed Bancorp Inc. common stock and the Bank became a wholly-owned subsidiary
of Cal Fed Bancorp Inc. In order to present comparative financial statements and
other financial information, the Company's financial statements and other
financial information reported herein for periods prior to the reorganization
into a holding company structure reflect the consolidated financial data of the
Bank.
In March 1993, the Bank issued 3,740,000 shares of 7 3/4% noncumulative
convertible preferred stock at a liquidation preference of $25.00 per share (the
"Preferred Stock, Series A"). Effective January 1, 1996, the Preferred Stock,
Series A, was convertible by the holders into the common stock of Cal Fed
Bancorp Inc. at any time at a conversion price of $20.16 per share, subject to
adjustment.
During the second quarter of 1996 the Bank called for redemption all
3,740,000 shares of the Preferred Stock, Series A. Except for the conversion of
18,820 shares into 23,336 shares of the Company's common stock, the Series A
shares were redeemed effective June 14, 1996 at a redemption price of $25.00 per
share, plus a dividend of $0.398264 per share.
In March 1994, the Bank issued 1,725,000 shares of 10.625% noncumulative
perpetual preferred stock at its liquidation preference of $100.00 per share
(the "Preferred Stock, Series B"). The issuance of the Preferred Stock, Series B
is generally not redeemable prior to April 1, 1999. The Preferred Stock, Series
B, is redeemable at the option of the Bank, in whole or in part, at $105.313 per
share on or after April 1, 1999 and prior to April 1, 2000, and at prices
decreasing annually thereafter to the liquidation preference of $100.00 per
share on or after April 1, 2003, plus declared but unpaid dividends. In
addition, the Preferred Stock, Series B, is redeemable at the option of the Bank
or its successor or any acquiring or resulting entity with respect to the Bank
on or after April 1, 1996 and prior to April 1, 1999 in whole, but not in part,
in the event of a change of control of the Bank at $114.50 per share.
The Preferred Stock, Series A and Series B are presented on the Company's
Consolidated Statements of Financial Condition as "Preferred stock of
subsidiary."
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary to present the financial
position, results of operations and statements of cash flows in conformity with
generally accepted accounting principles.
Included in the preparation of such statements are certain material
estimates related to determining the allowances for potential losses on loans,
real estate and the impairment of other assets. Additionally, the Company has
made certain estimates relating to various legal proceedings in which the
Company has been named as a defendant and has established allowances in
accordance with its estimates. In the event that actual
4
<PAGE> 7
CAL FED BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
losses materially exceed the allowances established, the Company may realize a
material adverse impact on its financial condition and results of operations.
The following material under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" is written with the
presumption that the users of the interim financial statements have read or have
access to the most recent report on Form 10-K which contains the latest audited
financial statements and notes thereto, together with the Management's
Discussion and Analysis of Financial Condition and Results of Operations as of
December 31, 1995 and for the year then ended.
(2) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the purposes of the Consolidated Statements of Cash Flows, the Company
defines cash as currency on hand and demand deposits with other financial
institutions.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Cash Paid During the Period for:
Interest expense.......................... $165.3 $176.1 $338.4 $349.3
Income taxes.............................. 1.0 (1.6) 1.0 (1.6)
Non-Cash Investing and Financing Activities:
Additions to real estate acquired in
settlement of loans.................... 36.1 31.3 71.2 73.0
Loans exchanged for mortgage-backed
securities............................. -- -- -- 239.7
Change in unrealized gain on securities
available for sale..................... 0.4 9.1 0.4 24.6
Transfers (from) to loans held for sale
(to) from loans held for investment.... $(34.3) $ 21.2 (34.5) 49.7
</TABLE>
(3) NET EARNINGS PER COMMON SHARE INFORMATION
For the purposes of calculating net earnings per common share, the Company
used the following weighted average number of shares for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary net earnings per common
share........................... 50,143,475 49,822,420 50,083,197 49,738,511
Fully diluted net earnings per
common share.................... 50,157,749 49,874,578 50,121,451 49,874,578
</TABLE>
Please refer to Exhibit 11 for further information on the calculation of
earnings per share.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE
30, 1995
OVERVIEW
Cal Fed Bancorp Inc., a unitary savings and loan holding company, and
subsidiaries (the "Company"), through its wholly-owned subsidiary, California
Federal Bank, F.S.B. (the "Bank") maintains 118 full service branches in
California and Nevada. The Bank is one of the largest savings associations in
the United States with assets of $14.0 billion at June 30, 1996, and offers a
broad range of consumer financial services including demand and term deposits,
mortgage, consumer and small business loans, and insurance and investment
products.
During the 1995 fourth quarter, the Bank obtained regulatory and
shareholder approval to reorganize into a holding company structure. As a result
of the reorganization on January 1, 1996, each share of the Bank's common stock
was converted into one share of Cal Fed Bancorp Inc. common stock. Consequently,
the Bank became a wholly-owned subsidiary of Cal Fed Bancorp Inc. In order to
present comparative financial statements and other financial information, the
Company's financial statements and other financial information reported herein
for periods prior to the reorganization into a holding company structure reflect
the consolidated financial data of the Bank.
During the second quarter of 1996, the Bank called for redemption all of
the 3,740,000 outstanding shares of its 7 3/4 percent Noncumulative Convertible
Preferred Stock, Series A (the "Preferred Stock, Series A"). Except for the
conversion of 18,820 shares into 23,336 shares of the Company's common stock,
all shares of the Preferred Stock, Series A were redeemed effective June 14,
1996 at a redemption price of $25.00 per share, plus a dividend of $0.398264 per
share.
The following is a summary of the Company's financial highlights for the
periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- -----------------------
1996 1995 1996 1995
------ ------ -------- ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net interest income before provision for loan
losses....................................... $ 88.8 $ 76.4 $ 174.4 $149.2
Provisions for losses on loans and operations
of real estate held for sale................. 13.9 9.5 27.7 22.4
General and administrative expenses............ 58.8 59.4 116.7 119.1
Earnings before dividends on preferred stock of
subsidiary................................... 44.0 21.7 73.6 36.4
Net earnings per common share.................. 0.72 0.31 1.18 0.47
Loan originations.............................. 594.9 412.6 1,056.0 927.9
Loan purchases................................. 144.2 72.7 329.8 129.3
Net interest rate spread....................... 2.27% 1.93% 2.21% 1.84%
Net interest rate margin....................... 2.56% 2.20% 2.49% 2.10%
General and administrative expenses as a
percentage of average assets
(annualized)(A).............................. 1.66% 1.67% 1.65% 1.67%
Operating efficiency ratio..................... 55.9% 65.3% 56.5% 66.7%
Return on average assets (annualized)(A)....... 0.99% 0.61% 0.95% 0.51%
Return on average equity (annualized)(A),
(B).......................................... 15.85% 10.39% 15.52% 8.85%
</TABLE>
- - ---------------
(A) Annualized ratios are based upon results for the quarter and six months
ended June 30. Results may vary from quarter to quarter and for the year.
(B) Average equity includes preferred stock of subsidiary totalling $172.5
million and $266.0 million at June 30, 1996 and 1995, respectively.
The Company's earnings before dividends on preferred stock of subsidiary
totaled $44.0 million, or $0.72 per common share for the quarter ended June 30,
1996 and represented a $22.3 million increase from the
6
<PAGE> 9
second quarter of 1995. During the second quarter of 1996, the Company sold six
branches located in San Diego County, California with deposits totalling
approximately $380 million. The sale of the branches resulted in a net gain of
$12.0 million or approximately $0.24 per share. For the six months ended June
30, 1996 earnings before dividends on preferred stock of subsidiary were $73.6
million, or $1.18 per common share compared to $36.4 million, or $0.47 for the
same period of 1995. The improvement in earnings for both the second quarter of
1996 and the first half of 1996 compared to the same periods of 1995 resulted
primarily from an increase in net interest income and the gain of $12.0 million
recorded on the sale of the San Diego County branches. Net interest income was
$88.8 million for the second quarter of 1996, a 16.2% increase from the second
quarter of 1995. Net interest income for the six months ended June 30, 1996 was
$174.4 million compared to $149.2 million for the same period of 1995. The
increase in the level of net interest income is the result of an improvement in
the Company's net interest rate spread. The improvement in the Company's net
interest rate spread for the quarter and six months ended June 30, 1996 compared
to the same periods of 1995 resulted from increases in the yields of the
Company's interest earning assets and a decrease in the cost of interest bearing
liabilities.
The following table presents the primary composition of the Company's gross
income for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------- -------------------------------------
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest
income............. $252.1 90.0% $252.1 94.6% $509.0 92.1% $497.7 94.5%
Total other income... 28.0 10.0 14.3 5.4 43.7 7.9 28.8 5.5
------ ----- ------ ----- ------ ----- ------ -----
Total gross
income... $280.1 100.0% $266.4 100.0% $552.7 100.0% $526.5 100.0%
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
The Company's gross income is primarily derived from interest earned on
loans, mortgage-backed securities, investment securities and other assets that
earn interest ("interest earning assets"). Please refer to Net Interest Income
below for further details of the changes in the Company's interest income. Other
income is primarily comprised of fees and gains from the sale of assets.
The following table compares the Company's financial condition, asset
quality and capital position as of the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
1996 1996 1995 1995
--------- --------- ------------ ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total assets.............................. $14,045.4 $14,280.1 $ 14,320.6 $14,319.8
Interest earning assets................... $13,519.5 $13,771.4 $ 13,755.0 $13.734.5
Deposits.................................. $ 8,844.2 $ 9,497.3 $ 9,476.7 $ 9,368.2
Borrowings................................ $ 4,185.9 $ 3,707.7 $ 3,786.4 $ 3,928.0
Total stockholders' equity................ $ 683.2 $ 645.2 $ 621.5 $ 581.5
Non-performing assets ("NPA's")........... $ 186.7 $ 230.1 $ 231.8 $ 226.2
Non-performing loans ("NPL's")............ $ 170.4 $ 203.9 $ 209.6 $ 179.8
Ratio of NPA's to total assets............ 1.33% 1.61% 1.62% 1.58%
Number of depository branches............. 118 124 125 125
Book value per common share outstanding... $ 13.83 $ 13.08 $ 12.63 $ 11.82
Tangible book value per common share
outstanding............................. $ 13.52 $ 12.75 $ 12.28 $ 11.45
Stockholders' equity as a percentage of
total assets............................ 4.86% 4.52% 4.34% 4.06%
Tangible capital ratio of the Bank........ 5.67% 5.96% 5.91% 5.63%
Core capital ratio of the Bank............ 5.67% 5.96% 5.91% 5.63%
Risk-based capital ratio of the Bank...... 11.74% 12.34% 12.36% 12.06%
Tier 1 risk-based capital ratio of the
Bank.................................... 10.28% 10.89% 10.90% 10.49%
</TABLE>
7
<PAGE> 10
The decrease in the Bank's regulatory capital ratios at June 30, 1996
compared to March 31, 1996 resulted from the $93.5 million redemption of the
Preferred Stock, Series A.
The Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") through the Savings Association Insurance Fund ("SAIF") to
a maximum of $100,000 for each insured depositor. The FDIC administers a
separate Bank Insurance Fund ("BIF") applicable to commercial banks and certain
other non-SAIF insured institutions. Legislation is currently under
consideration by Congress which proposes a one-time assessment for SAIF members
such as the Bank. Should legislation be enacted in its currently contemplated
form, the Bank's one-time assessment would be approximately $80 million, based
upon the Bank's insured deposits at March 31, 1995 and an assumed assessment
rate of 85 basis points. Additionally, once the SAIF has been recapitalized
through the one-time assessment, the Bank's deposit insurance premium
assessments could be reduced from the current rate. The currently proposed
legislation has evolved significantly over time and may continue to change until
final legislation is enacted, if ever. Moreover, there can be no assurance that
a premium reduction will occur.
Assuming the proposed one-time special assessment became law in 1996 and
was immediately charged against results of operations, the one-time assessment
would, most likely, have a material adverse effect on the Company's 1996 results
of operations. However, the Bank believes that it has sufficient regulatory
capital to continue to be classified as "well-capitalized" following such an
assessment. In addition, neither the Company nor the Bank would face any
liquidity issues as a result of such a one-time assessment.
NET INTEREST INCOME
Net interest income is the difference between interest income earned from
interest earning assets and interest expense paid on savings deposits and
borrowings ("interest bearing liabilities").
Net interest income totaled $88.8 million for the quarter ended June 30,
1996, compared to $76.4 million for the second quarter of 1995. For the six
months ended June 30, 1996 net interest income totaled $174.4 million compared
to $149.2 million for the same period of 1995. Net interest income is affected
by (i) the average volume and repricing characteristics of the Company's
interest earning assets and interest bearing liabilities, (ii) the level and
volatility of market interest rates and (iii) the performance of the Company's
loan portfolio and investments. Net interest income also depends upon the excess
of yields earned on interest earning assets over rates paid on interest bearing
liabilities ("interest rate spread").
The following table presents the primary determinants of the Company's net
interest income for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Average interest earning assets............... $13,870.4 $13,915.3 $13,987.4 $14,229.2
Less: Average non-performing loans (A)........ 187.2 172.9 194.6 176.6
--------- --------- --------- ---------
Average performing interest earning assets.... 13,683.2 13,742.4 13,792.8 14,052.6
Less: Average interest bearing liabilities.... 13,063.8 13,160.9 13,207.5 13,509.8
--------- --------- --------- ---------
Average performing interest earning assets
over average interest bearing liabilities... $ 619.4 $ 581.5 $ 585.3 $ 542.8
========= ========= ========= =========
Yield earned on average interest earning
assets...................................... 7.27% 7.26% 7.28% 6.99%
Rate paid on average interest bearing
liabilities................................. 5.00 5.33 5.07 5.15
--------- --------- --------- ---------
Net interest rate spread...................... 2.27% 1.93% 2.21% 1.84%
========= ========= ========= =========
Net interest rate margin...................... 2.56% 2.20% 2.49% 2.10%
========= ========= ========= =========
Total interest income......................... $ 252.1 $ 252.1 $ 509.0 $ 497.7
Total interest expense........................ 163.3 175.7 334.6 348.5
--------- --------- --------- ---------
Net interest income........................... $ 88.8 $ 76.4 $ 174.4 $ 149.2
========= ========= ========= =========
</TABLE>
- - ---------------
(A) Average NPL's include non-accrual and restructured loans.
8
<PAGE> 11
The decline in average interest earning assets for the first six months of
1996 compared to the same period in 1995 resulted primarily from the sale of
$729.3 million of securities available for sale during the third quarter of
1995. The Company utilized the proceeds from the sales to fund the repayment of
certain borrowings.
As indicated in the table above, net interest income increased by $12.4
million for the quarter ended June 30, 1996 as compared to the same period of
1995 and by $25.2 million for the six months ended June 30, 1996 compared to the
six months ended June 30, 1995. The increase in net interest income was
primarily due to an improvement in the Company's net interest rate spread. The
yields on the Company's interest earning assets have increased during both the
quarter and six months ended June 30, 1996 compared to the same periods of 1995.
During the same periods, the cost of interest bearing liabilities has declined.
The lagging repricing of the Company's adjustable rate loans and mortgage-backed
securities ("MBS's") has led to an improvement in the Company's interest rate
spread at June 30, 1996 as compared to June 30, 1995, as the Company's interest
earning assets have not experienced the decline in yields currently reflected in
the cost of interest bearing liabilities.
The majority of the Company's loans receivable and MBS's, (approximately
54% of the total amount of loans receivable and MBS's) earn interest based upon
the movement of the Eleventh District Cost of Funds Index ("COFI"). Changes in
the COFI have historically lagged other indices and market rates. Additionally,
the extent to which loans and MBS's can reprice upward may be limited by
contractual terms that restrict the frequency of repricing and periodic interest
rate adjustment caps ("periodic caps").
The Company's deposits are its primary funding source. Deposits generally
tend to reprice on a comparable basis with similar term U.S. Treasury securities
and other market rates. The pricing of deposits is based upon competitive demand
and the desirability of increasing or decreasing the Company's level of
deposits.
The following table presents information on the yields earned, rates paid
and interest rate spreads for the Company:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------------------------ ------------------------------
FOR THE FOR THE AT THE FOR THE FOR THE AT THE
QUARTER SIX MONTHS QUARTER QUARTER SIX MONTHS QUARTER
ENDED ENDED ENDED ENDED ENDED ENDED
------- ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Weighted Average Yield Earned:
Loans Receivable........................ 7.76% 7.81% 7.70% 7.71% 7.49% 7.77%
Mortgage-Backed Securities.............. 6.70 6.73 6.72 6.67 6.48 6.80
Repurchase Agreements(A)................ 5.43 5.49 5.51 6.12 6.02 6.27
Other(B)................................ 5.41 5.12 6.02 5.96 5.66 6.15
Total Interest Earning Assets... 7.27 7.28 7.30 7.26 6.99 7.35
Weighted Average Rate Paid:
Deposits................................ 4.73 4.81 4.65 4.87 4.59 4.87
FHLB Advances(C)........................ 5.60 5.69 5.59 6.45 6.38 6.36
Reverse Repurchase Agreements(D)........ 5.31 5.33 5.29 6.08 5.94 6.11
Other Borrowings........................ 6.66 6.78 6.69 6.86 6.87 6.61
Total Interest Bearing
Liabilities................... 5.00 5.07 4.95 5.33 5.15 5.30
Net Interest Rate Spread................ 2.27 2.21 2.35 1.93 1.84 2.05
Net Margin on Average Interest Earning
Assets............................... 2.56% 2.49% 2.53% 2.20% 2.10% 2.23%
</TABLE>
- - ---------------
(A) Securities purchased under agreements to resell ("repurchase agreements").
(B) Consists of U.S. Treasury securities, short-term liquid investments and
other investment securities.
(C) Federal Home Loan Bank Advances ("FHLB advances").
(D) Securities sold under agreements to repurchase ("reverse repurchase
agreements").
9
<PAGE> 12
The table below presents the Company's loans and mortgage-backed securities
and the various indices which dictate their repricing:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
----------------------- -----------------------
MORTGAGE- MORTGAGE-
BACKED BACKED
LOANS SECURITIES LOANS SECURITIES
-------- ---------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Adjustable Rates:
COFI............................................ $5,487.7 $ 1,018.2 $5,330.9 $ 1,172.3
Treasury........................................ 2,638.8 929.4 2,630.9 1,204.4
Prime rate...................................... 129.6 -- 157.5 --
Other adjustable................................ 25.4 -- 25.8 --
-------- -------- -------- --------
8,281.5 1,947.6 8,145.1 2,376.7
-------- -------- -------- --------
Fixed Rates:
Fixed........................................... 568.6 193.0 594.7 267.2
Fixed for 3-5 years converting to ARM........... 978.1 -- 389.7 --
-------- -------- -------- --------
1,546.7 193.0 984.4 267.2
-------- -------- -------- --------
9,828.2 2,140.6 9,129.5 2,643.9
-------- -------- -------- --------
Deferred costs (fees), discounts and other items,
net............................................. 13.7 (0.6) (3.1) (0.4)
Allowance for loan losses......................... (172.8) -- (181.8) --
-------- -------- -------- --------
$9,669.1 $ 2,140.0 $8,944.6 $ 2,643.5
======== ======== ======== ========
</TABLE>
The table below lists representative rates of various indices at the dates
indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
INDEX 1996 1996 1995 1995
- - -------------------------------------------------- -------- --------- ------------ --------
<S> <C> <C> <C> <C>
COFI.............................................. 4.82% 4.98% 5.12% 5.14%
30 year treasury bond............................. 6.90 6.67 5.96 6.63
1 year treasury bill.............................. 5.70 5.41 5.18 5.65
6 month treasury bill............................. 5.23 4.97 5.04 5.34
Prime rate........................................ 8.25 8.25 8.50 9.00
Federal funds..................................... 5.00 5.25 4.73 6.11
1 month LIBOR..................................... 5.43 5.38 5.63 6.06
</TABLE>
10
<PAGE> 13
The table below shows the changes in the Company's total interest income,
total interest expense and net interest income, attributable to changes in
average balances outstanding (volume) and to changes in average interest rates
earned and paid on balances:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1996 SIX MONTHS ENDED JUNE 30, 1996
VERSUS THREE MONTHS ENDED VERSUS SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1995
------------------------------ --------------------------------
AMOUNT OF INCREASE AMOUNT OF INCREASE
(DECREASE) DUE TO CHANGE IN: (DECREASE) DUE TO CHANGE IN:
------------------------------ --------------------------------
VOLUME RATE TOTAL(A) VOLUME RATE TOTAL(A)
------ ------ -------- ------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans receivable............... $ 13.7 $ 1.2 $ 14.9 $ 22.5 $ 15.5 $ 38.0
Other interest earning
assets...................... (11.9) (3.0) (14.9) (25.8) (0.9) (26.7)
------ ------ ------ ------- ------- ------
Total Interest
Income............... 1.8 (1.8) -- (3.3) 14.6 11.3
------ ------ ------ ------- ------- ------
Interest Expense:
Deposits....................... (2.5) (2.4) (4.9) 10.1 6.4 16.5
Borrowings..................... (2.8) (4.7) (7.5) (25.6) (4.8) (30.4)
------ ------ ------ ------- ------- ------
Total Interest
Expense.............. (5.3) (7.1) (12.4) (15.5) 1.6 (13.9)
------ ------ ------ ------- ------- ------
Change in Net Interest Income.... $ 7.1 $ 5.3 $ 12.4 $ 12.2 $ 13.0 $ 25.2
====== ====== ====== ======= ======= ======
</TABLE>
- - ---------------
(A) Changes in rate/volume (change in rate multiplied by the change in average
volume) which cannot be segregated have been allocated to the change in rate
or the change in average volume based upon their respective percentages of
the combined totals.
ASSET/LIABILITY MANAGEMENT
To the extent that yields earned on assets respond to changes in market
interest rates differently from rates paid on liabilities, earnings will be
sensitive to changes in market interest rates. The objective of the Company's
interest rate risk management is to maintain a balance between stable income
growth and its exposure to potential earnings fluctuations resulting from
differences in the amount of interest earning assets and interest bearing
liabilities maturing or repricing in different time periods ("interest rate
sensitivity"). The Company controls its interest rate sensitivity through a
variety of methods including originating loans that reprice monthly or
semi-annually and the use of interest rate exchange agreements. Adjustable rate
loans have interest rates that reprice periodically based upon changes in COFI,
the one year Treasury constant maturity index (the "CMT") and other indices.
However, such repricing characteristics are subject to periodic caps.
Additionally, many of the Company's adjustable loans reprice at periodic
intervals. The contractual limitation of the adjustment period and periodic caps
may limit increases to interest income during periods of increasing market
rates.
The Company's use of derivative financial instruments is primarily limited
to interest rate exchange agreements. The Company utilizes interest rate
exchange agreements as an integral part of its asset/liability management
program.
On a quarterly basis, the Company simulates the level of net interest
income expected to be earned over a twelve month period following the date of
the simulation. The simulation is based on a projection of market interest rates
at varying levels, and estimates the impact of such market rates on the levels
of interest earning assets and interest bearing liabilities during the
measurement period. Also, any periodic or lifetime caps that contractually limit
the repricing of any interest earning asset are considered.
Based upon the outcome of the simulation analysis, the Company may consider
the use of interest rate exchange agreements as a means of reducing the
volatility of projected net interest income within certain ranges of projected
changes in interest rates. The Company evaluates the effectiveness of entering
into any interest rate exchange agreements by measuring the cost of such
agreements in relation to the reduction in net interest income volatility within
an assumed range of interest rates.
11
<PAGE> 14
The Company has historically used interest rate swaps, caps and floors as a
means of controlling the potential negative impact on net interest income from
potential changes in interest rates. The Company was a party to interest rate
swap agreements in the notional amounts of $2.7 billion and $789.9 million at
June 30, 1996 and June 30, 1995, respectively. The Company was a party to
notional amounts of $100.0 million of interest rate floor agreements at both
June 30, 1996 and June 30, 1995. The Company was not a party to interest rate
cap agreements at June 30, 1996 or at June 30, 1995.
The Company also monitors the difference between the amount of interest
rate sensitive assets and interest rate sensitive liabilities which reprice
within one year ("one year gap"). At June 30, 1996, the one year gap as a
percentage of total interest earning assets was positive 3.21% as compared to
positive 4.76% at June 30, 1995.
The following table summarizes interest rate sensitive assets and
liabilities for the Bank (exclusive of subsidiaries) at June 30, 1996. In
preparing the table below, assumptions were made regarding estimated prepayments
and maturities of mortgage-backed securities and loans. These assumptions were
based upon the Bank's historical experience of maturities and prepayments for
similar assets. For all other interest earning assets and liabilities,
contractual maturities were used. Additionally, the Bank used the inherent
contractual repricing characteristics of its interest earning assets and
interest bearing liabilities in categorizing the interest rate sensitivity
period.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY PERIOD
-------------------------------------------------------
181 TO
0 TO 91 TO 365 OVER
90 DAYS 180 DAYS DAYS 1 YEAR TOTAL
------- -------- ------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Short-term investments and investment
securities............................ $1,353 $ -- $ -- $ 206 $ 1,559
Mortgage-backed securities............... 1,488 472 130 51 2,141
Loans, net:
Real Estate Mortgage:
Adjustable rate..................... 6,188 1,482 706 665 9,041
Fixed rate.......................... 19 16 33 425 493
Equity................................ 140 11 7 40 198
Consumer.............................. 33 31 5 13 82
Loans to subsidiaries................. 115 -- -- -- 115
------ ------ ------- ------ ------
Impact of hedging........................ -- -- -- -- --
------ ------ ------- ------ ------
Total interest earning assets.... 9,336 2,012 881 1,400 13,629
------ ------ ------- ------ ------
Interest bearing liabilities:
Deposits:
Passbook and demand................... 738 -- -- -- 738
Money market and NOW accounts......... 1,961 -- -- -- 1,961
Certificates of deposit............... 1,564 2,015 1,989 590 6,158
------ ------ ------- ------ ------
Total deposits................... 4,263 2,015 1,989 590 8,857
------ ------ ------- ------ ------
Borrowings:
FHLB advances......................... 2,685 -- -- 311 2,996
Other borrowings...................... 839 300 -- 54 1,193
------ ------ ------- ------ ------
Total borrowings................. 3,524 300 -- 365 4,189
------ ------ ------- ------ ------
Impact of hedging........................ (800 ) 500 -- 300 --
------ ------ ------- ------ ------
Total interest bearing
liabilities.................... 6,987 2,815 1,989 1,255 13,046
------ ------ ------- ------ ------
Total interest earning assets less total
interest bearing liabilities............. $2,349 $ (803) $(1,108) $ 145 $ 583
====== ====== ======= ====== =======
Cumulative total interest earning assets
less total interest bearing
liabilities as a percentage of total
interest earning assets.................. 17.24% 11.34% 3.21% 4.28% 4.28%
====== ====== ======= ====== =======
</TABLE>
12
<PAGE> 15
NON-PERFORMING ASSETS
Net interest income is also affected by the composition, quality and type
of interest earning assets. NPA's totaled $186.7 million or 1.33% of total
assets at June 30, 1996, as compared to $231.8 million or 1.62% of total assets
at December 31, 1995 and $226.2 million or 1.58% of total assets at June 30,
1995. The average amount of NPL's negatively impacted the Company's interest
rate spread by 10 and 8 basis points during the second quarters of 1996 and
1995, respectively. NPL's reduced the Bank's interest rate spread by 11 and 10
basis points for the six months ended June 30, 1996 and 1995, respectively.
The following table presents the Company's total NPA's by type at the dates
indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
TYPE 1996 1996 1995 1995
- - -------------------------------------------------------- -------- --------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
REO, net of allowances.................................. $ 16.3 $ 26.2 $ 22.2 $ 46.4
Non-accrual loans....................................... 166.7 201.5 206.3 179.8
Restructured loans...................................... 3.7 2.4 3.3 --
------ ------ ------ ------
Total NPL's................................... 170.4 203.9 209.6 179.8
------ ------ ------ ------
Total NPA's................................... $186.7 $ 230.1 $231.8 $226.2
====== ====== ====== ======
Performing NPA's (included above)....................... $ 79.0 $ 81.8 $ 81.3 $ 34.7
====== ====== ====== ======
Performing NPA's as a % of total NPA's.................. 42.3% 35.5% 35.1% 15.3%
====== ====== ====== ======
COMPOSITION
- - --------------------------------------------------------
Residential 1-4......................................... $ 88.5 $ 126.7 $122.6 $120.7
Multi-family............................................ 74.7 82.7 88.1 46.3
Commercial real estate.................................. 21.3 18.4 17.6 55.7
Other................................................... 2.2 2.3 3.5 3.5
------ ------ ------ ------
Total NPA's................................... $186.7 $ 230.1 $231.8 $226.2
====== ====== ====== ======
NPA's as a percentage of total assets................... 1.33% 1.61% 1.62% 1.58%
====== ====== ====== ======
</TABLE>
In May 1993, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"). Under SFAS 114, a loan is impaired when it is
"probable" that a creditor will be unable to collect all amounts due (i.e., both
principal and interest) according to the contractual terms of the loan
agreement. The measurement of impairment may be based on (i) the present value
of the expected future cash flows of the impaired loan discounted at the loan's
original effective interest rate, (ii) the observable market price of the
impaired loan, or (iii) the fair value of the collateral of a
collateral-dependent loan. The amount by which the recorded investment of the
loan exceeds the measure of the impaired loan is recognized by recording a
valuation allowance with a corresponding charge to the provision for losses. All
loans designated by the Company as "impaired" are either placed on non-accrual
status or are designated as restructured and are included with those loans
reported as non-performing.
Impaired and Potential Problem Loans. The Company has established a
monitoring system for its loans in order to identify impaired loans, potential
problem loans and to permit periodic evaluation of impairment and the adequacy
of allowances for losses in a timely manner. Total loans include the following
portfolios (i) residential 1-4 loans, (ii) income property loans and (iii)
consumer loans. In analyzing these loans, the Company has established specific
monitoring policies and procedures suitable for the relative risk profile and
other characteristics of the loans within the various portfolios. The Company's
residential 1-4 and consumer loans are relatively homogeneous and no single loan
is individually significant in terms of its size or potential risk of loss.
Therefore, the Company generally reviews its residential 1-4 and consumer
portfolios by analyzing their performance and the composition of their
collateral for the portfolios as a whole. All homogenous loans that are 90 days
or more delinquent or are in foreclosure are automatically placed on
non-performing status. Additionally, homogenous loans that have had a
modification of terms are individually reviewed to determine
13
<PAGE> 16
if they meet the definition of a troubled debt restructuring. The Company
stratifies its income property loan portfolio by size and by type and treats
smaller performing multi-family loans with outstanding principal balances less
than $750,000 and commercial real estate loans with balances less than $500,000
as homogenous portfolios. For income property loans exceeding the homogenous
threshold, the Company conducts a periodic review of each loan in order to test
each loan for impairment. The frequency and type of review is dependent upon the
inherent risk attributed to each loan. The level of risk is measured by a scale
which evaluates each loan on a continuum of multiple grades. The frequency and
intensity of the loan review is directly proportionate to the adversity of the
loan grade. The Company evaluates the risk of default and the risk of loss for
each loan subject to individual monitoring. Income property loans that are below
the homogenous threshold are evaluated for impairment based upon their payment
status and on a pool basis. All loans that are determined to be impaired are
placed on non-accrual status or are designated as troubled debt restructurings.
Loans on which the Company has ceased the accrual of interest ("non-accrual
loans") and loans on which various concessions have been made due to the
inability of the borrower to service the obligation under the original terms of
the agreement ("restructured loans") constitute the primary components of the
portfolio of NPL's. Loans are generally placed on non-accrual status when the
payment of interest is 90 days or more delinquent, or if the loan is in the
process of foreclosure, or earlier if the timely collection of interest and/or
principal appears doubtful. In addition, the Company monitors its loan portfolio
in order to identify performing loans with excessive risk characteristics
indicating that the collection of principal and interest may not be probable. In
the event that the Company believes collection of principal and interest does
not appear probable, the Company will designate the loan as impaired and place
the loan on non-accrual status. The Company's policy allows for loans to be
designated as impaired and placed on non-accrual status even though the loan may
be current as to principal and interest payments and may continue to perform in
accordance with its contractual terms. If a performing loan is placed on
non-accrual status, cash collections of interest are generally applied as a
reduction to the recorded investment of the loan.
The Company restructures a loan when the borrower or the collateral is
experiencing financial or operational problems that are expected to be
relatively short-term in nature with the expectation that the borrower and/or
the collateral will rebuild cash flow over time.
14
<PAGE> 17
The following table presents impaired loans with specific allowances and
impaired loans without specific allowances by property type and by the method
that impairment is determined at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
--------------------------- ---------------------------
GROSS SPECIFIC NET GROSS SPECIFIC NET
AMOUNT ALLOWANCE AMOUNT AMOUNT ALLOWANCE AMOUNT
------ --------- ------ ------ --------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Impairment Measured By Individual Review:
Impaired Loans with Specific Allowances:
Multi-family.............................. $ 53.0 $ (13.5) $ 39.5 $ 42.4 $ (8.6) $ 33.8
Commercial real estate:
Office buildings........................ 9.5 (3.2) 6.3 18.2 (2.0) 16.2
Shopping centers........................ 1.3 (0.2) 1.1 -- -- --
Industrial.............................. 1.2 (0.3) 0.9 1.9 (0.2) 1.7
Other................................... 0.9 (0.3) 0.6 -- -- --
------ ------- ------ ------ ------ ------
Total commercial real estate.............. 12.9 (4.0) 8.9 20.1 (2.2) 17.9
------ ------- ------ ------ ------ ------
Total impaired loans with specific
allowances................................ 65.9 (17.5) 48.4 62.5 (10.8) 51.7
------ ------- ------ ------ ------ ------
Impaired Loans without Specific Allowances:
Residential 1-4........................... 2.1 -- 2.1 -- -- --
Multi-family.............................. 21.1 -- 21.1 0.6 -- 0.6
Commercial real estate.................... 7.6 -- 7.6 21.8 -- 21.8
------ ------- ------ ------ ------ ------
Total impaired loans without specific
allowances................................ 30.8 -- 30.8 22.4 -- 22.4
------ ------- ------ ------ ------ ------
Total impaired loans measured by individual
review.................................... 96.7 (17.5) 79.2 84.9 (10.8) 74.1
------ ------- ------ ------ ------ ------
Impairment Measured on a Pool Basis:
Residential 1-4........................... 71.5 -- 71.5 91.4 -- 91.4
Consumer.................................. 2.2 -- 2.2 3.5 -- 3.5
------ ------- ------ ------ ------ ------
73.7 -- 73.7 94.9 -- 94.9
------ ------- ------ ------ ------ ------
Total impaired loans........................... $170.4 $ (17.5) $152.9 $179.8 $ (10.8) $169.0
====== ======= ====== ====== ====== ======
</TABLE>
The Company has designated all impaired loans at June 30, 1996 and June 30,
1995 as non-accrual or as troubled debt restructuring. For all impaired loans,
the Company evaluates the need for a specific allowance by comparing the fair
value of the related collateral to the net recorded investment of the loan. In
the event that the fair value of the related collateral is less than the net
recorded investment in the loan, the Company allocates a specific allowance
equal to the excess of the net recorded investment in the loan over the fair
value of the related collateral with consideration given to holding and selling
costs. All uncollected interest relating to impaired loans has been fully
reversed from income. At June 30, 1996, the Company had designated $79.0 million
of loans that were performing in accordance with their contractual terms as
impaired. The Company applies cash collections from impaired loans, designated
as non-accrual, as a reduction of the loan's carrying amount. The average
recorded investment in the impaired loans measured by individual review was
$187.1 million for the quarter ended June 30, 1996 and $194.6 million for the
six months ended June 30, 1996. During the quarter and six months ended June 30,
1996, the Company recognized $0.6 million and $1.3 million, respectively, of
interest income on restructured loans designated as impaired loans.
15
<PAGE> 18
The following table summarizes the Company's gross NPL's by type at the
dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
1996 1996 1995 1995
-------- --------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Non-accrual loans:
Real estate
Residential 1-4.............................. $ 71.5 $ 101.2 $ 99.6 $ 91.4
Multi-family................................. 73.8 80.2 86.3 43.0
------ ------ ------ ------
Total residential real estate................... 145.3 181.4 185.9 134.4
------ ------ ------ ------
Commercial real estate
Shopping centers............................. 4.9 1.3 1.3 11.8
Office buildings............................. 9.9 11.6 8.8 18.8
Other........................................ 4.4 4.9 6.8 11.3
------ ------ ------ ------
Total commercial real estate.................... 19.2 17.8 16.9 41.9
------ ------ ------ ------
Total real estate............................... 164.5 199.2 202.8 176.3
Consumer........................................ 2.2 2.3 3.5 3.5
------ ------ ------ ------
Total non-accrual loans........................... $166.7 $ 201.5 $206.3 $179.8
====== ====== ====== ======
Restructured loans:
Real estate
Residential 1-4.............................. $ 2.1 $ 2.1 $ 3.0 $ --
Multi-family................................. 0.3 0.3 0.3 --
------ ------ ------ ------
Total residential real estate................... 2.4 2.4 3.3 --
------ ------ ------ ------
Commercial real estate.......................... 1.3 -- -- --
------ ------ ------ ------
Total real estate............................... 3.7 2.4 3.3 --
------ ------ ------ ------
Total restructured loans.......................... $ 3.7 $ 2.4 $ 3.3 $ --
====== ====== ====== ======
$170.4 $ 203.9 $209.6 $179.8
====== ====== ====== ======
</TABLE>
Changes in the level of non-performing loans are attributable to: (i)
changes in the level of delinquent loans and (ii) changes in the level of
performing loans designated as impaired. Performing loans designated as impaired
typically have one or more of the following attributes: (i) inverted loan to
value ratios, (ii) levels of operating income insufficient to service the
required loan payments, (iii) collateral requiring maintenance expenses in
excess of the borrower's capacity or the funds generated by the collateral,
and/or (iv) other adverse characteristics. The level of performing loans that
are designated as impaired may fluctuate given changes to the factors discussed
above. During the second quarter of 1996, the Company sold $34.7 million of
delinquent residential 1-4 loans that had been placed on non-accrual status. The
Company realized a loss of $6.6 million from the sale of those loans which was
recorded as a charge-off to the Company's allowance for loan losses during the
second quarter of 1996. Please refer to the activity of NPA's by property type
tables for further information on the change in non-accrual loans during the
quarter and six month periods ended June 30, 1996. At June 30, 1996, $79.0
million or 46.4% of the Company's NPL's were performing in accordance with their
contractual terms.
For the quarter ended June 30, 1996, additional interest income of $2.9
million would have been recorded had the non-accrual loans performed in
accordance with their original terms, compared to $2.4 million of additional
interest income which would have been recorded for the quarter ended June 30,
1995. For the six months ended June 30, 1996, additional interest income of $6.1
million would have been recorded had the non-accrual loans performed in
accordance with their original terms, compared to $5.0 million of additional
interest income which would have been recorded for the six months ended June 30,
1995.
16
<PAGE> 19
The following table shows the Company's delinquent loans at the dates
indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
1996 1996 1995 1995
-------- --------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Residential 1-4 loans:
30-59 days delinquent........................... $ 10.8 $ 11.5 $ 24.1 $ 26.8
60-89 days delinquent........................... 3.3 2.6 3.5 2.9
90 or more days delinquent...................... 66.0 101.2 99.6 91.4
------ ------- ------ ------
80.1 115.3 127.2 121.1
------ ------- ------ ------
Multi-family loans:
30-59 days delinquent........................... 0.7 0.1 0.8 0.3
60-89 days delinquent........................... 0.3 -- -- 0.3
90 or more days delinquent...................... 9.6 12.4 18.1 13.5
------ ------- ------ ------
10.6 12.5 18.9 14.1
------ ------- ------ ------
Commercial real estate loans:
30-59 days delinquent........................... 2.6 0.2 0.2 0.1
60-89 days delinquent........................... -- -- -- --
90 or more days delinquent...................... 1.0 3.0 2.6 32.1
------ ------- ------ ------
3.6 3.2 2.8 32.2
------ ------- ------ ------
Consumer loans:
30-59 days delinquent........................... 1.4 2.5 3.5 2.5
60-89 days delinquent........................... 0.6 1.5 1.0 1.1
90 or more days delinquent...................... 2.2 2.3 3.5 3.5
------ ------- ------ ------
4.2 6.3 8.0 7.1
------ ------- ------ ------
Total................................... $ 98.5 $ 137.3 $156.9 $174.5
====== ======= ====== ======
Total delinquent loans:
30-59 days delinquent........................... $ 15.5 $ 14.3 $ 28.6 $ 29.7
60-89 days delinquent........................... 4.2 4.1 4.5 4.3
90 or more days delinquent...................... 78.8 118.9 123.8 140.5
------ ------- ------ ------
$ 98.5 $ 137.3 $156.9 $174.5
====== ======= ====== ======
</TABLE>
The primary factor for the improvement in the level of delinquent loans of
June 30, 1996 as compared to the recent levels of delinquencies, was the sale of
$34.7 million of delinquent residential 1-4 loans during the second quarter of
1996.
17
<PAGE> 20
The following tables present activity of NPA's by property type for the
periods presented:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED JUNE 30, 1996
---------------------------------------------------------------------
PAYOFFS/
BALANCE NEW FORE- CURES/ BALANCE
03/31/96 NPA'S CLOSURES SALES OTHER 06/30/96
-------- ----- -------- -------- ----- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:
Residential 1-4.................. $101.2 $ -- $ (29.3) $ (0.4)(A) $ -- $ 71.5
Multi-family..................... 80.2 20.0 (5.7) (19.3) (1.4) 73.8
Commercial real estate........... 17.8 9.0 (1.1) (6.2) (0.3) 19.2
Consumer......................... 2.3 -- -- (0.1)(A) -- 2.2
------ ----- ------ ------ ----- ------
201.5 29.0 (36.1) (26.0) (1.7) 166.7
------ ----- ------ ------ ----- ------
Restructured loans:
Residential 1-4.................. 2.1 -- -- -- -- 2.1
Multi-family..................... 0.3 -- -- -- -- 0.3
Commercial real estate........... -- 1.3 -- -- -- 1.3
------ ----- ------ ------ ----- ------
2.4 1.3 -- -- -- 3.7
------ ----- ------ ------ ----- ------
REO, net:
Residential 1-4.................. 23.4 -- 23.3 (30.9) (0.9) 14.9
Multi-family..................... 2.2 -- 4.0 (6.2) 0.6 0.6
Commercial real estate........... 0.6 -- 0.6 (0.2) (0.2) 0.8
------ ----- ------ ------ ----- ------
26.2 -- 27.9 (37.3) (0.5) 16.3
------ ----- ------ ------ ----- ------
Total NPA's........................ $230.1 $30.3 $ (8.2) $(63.3) $(2.2) $186.7
====== ===== ====== ====== ===== ======
</TABLE>
- - ---------------
(A) Represents net activity for the period.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------------------------------------
PAYOFFS/
BALANCE NEW FORE- CURES/ BALANCE
12/31/95 NPA'S CLOSURES SALES OTHER 06/30/96
-------- ------ -------- -------- ----- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:
Residential 1-4................ $ 99.6 $ 24.6(A) $ (52.7) $ -- $ -- $ 71.5
Multi-family................... 86.3 38.7 (16.8) (31.6) (2.8) 73.8
Commercial real estate......... 16.9 14.8 (1.7) (10.0) (0.8) 19.2
Consumer....................... 3.5 -- -- (1.3)(A) -- 2.2
------ ------ ------ ------ ------ ------
206.3 78.1 (71.2) (42.9) (3.6) 166.7
------ ------ ------ ------ ------ ------
Restructured loans:
Residential 1-4................ 3.0 (0.4) -- (0.4) (0.1) 2.1
Multi-family................... 0.3 -- -- -- -- 0.3
Commercial real estate......... -- 1.3 -- -- -- 1.3
------ ------ ------ ------ ------ ------
3.3 0.9 -- (0.4) (0.1) 3.7
------ ------ ------ ------ ------ ------
REO, net:
Residential 1-4................ 20.0 -- 42.0 (46.2) (0.9) 14.9
Multi-family................... 1.5 -- 11.4 (12.4) 0.1 0.6
Commercial real estate......... 0.7 -- 0.9 (0.7) (0.1) 0.8
------ ------ ------ ------ ------ ------
22.2 -- 54.3 (59.3) (0.9) 16.3
------ ------ ------ ------ ------ ------
Total NPA's...................... $231.8 $ 79.0 $ (16.9) $ (102.6) $(4.6) $186.7
====== ====== ====== ====== ====== ======
</TABLE>
- - ---------------
(A) Represents net activity for the period.
18
<PAGE> 21
CLASSIFICATION OF ASSETS
As part of the loan monitoring process previously described, the Company
reviews and classifies its loans for regulatory purposes as Pass, Special
Mention, Substandard, Doubtful, or Loss.
The table below presents the Company's total classified and criticized loan
portfolio (which includes classified loans sold or swapped with recourse
retained by the Bank) at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1996 1995 1995 1994
-------- --------- ------------ -------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Special Mention
Residential 1-4..................... $ 19.7 $ 37.3 $ 30.8 $ 55.7 $ 32.7
Multi-family........................ 102.4 119.7 91.9 80.9 61.5
Commercial real estate.............. 29.6 26.0 25.2 13.0 20.8
Consumer............................ 1.4 2.5 3.5 2.5 1.7
------ ------- ------ ------ ------
153.1 185.5 151.4 152.1 116.7
------ ------- ------ ------ ------
Substandard
Residential 1-4..................... 79.6 114.5 116.4 102.2 109.6
Multi-family........................ 107.8 102.3 107.4 101.8 171.2
Commercial real estate.............. 26.3 24.0 21.5 54.4 28.2
Consumer............................ 1.7 2.6 2.7 2.9 1.9
------ ------ ------
215.4 243.4 248.0 261.3 310.9
------ ------- ------ ------ ------
Doubtful
Multi-family........................ -- -- -- -- 0.4
Consumer............................ 1.1 1.2 1.8 1.8 1.0
------ ------ ------
1.1 1.2 1.8 1.8 1.4
------ ------- ------ ------ ------
Loss
Residential 1-4..................... -- -- -- -- 4.1
Multi-family........................ 15.3 19.7 20.7 12.1 28.1
Commercial real estate.............. 4.0 4.5 3.6 2.3 2.3
------ ------- ------ ------ ------
19.3 24.2 24.3 14.4 34.5
------ ------- ------ ------ ------
$388.9 $ 454.3 $425.5 $429.6 $463.5
====== ======= ====== ====== ======
Total classified loans as a percentage
of total gross loans................ 3.95% 4.72% 4.49% 4.71% 5.17%
====== ======= ====== ====== ======
Total allowance for loan losses as a
percentage of total classified
loans............................... 44.43% 39.34% 42.54% 42.32% 45.65%
====== ======= ====== ====== ======
Total general valuation allowance as a
percentage of classified loans
excluding the Loss classification... 41.53% 35.92% 39.06% 40.32% 41.28%
====== ======= ====== ====== ======
</TABLE>
Changes in the amount of classified assets and the classifications assigned
to specific assets can be an indicator of potential problem loans that may
become non-performing in the future. The Company has classified all of its
impaired loans and NPL's as Substandard, Doubtful or Loss. Additionally, the
Company has provided specific valuation allowances for the portion of loans
classified as Loss.
19
<PAGE> 22
The following table presents a reconciliation of assets and off-balance
sheet recourse arrangements classified by the Company to the Company's NPA's at
June 30, 1996:
<TABLE>
<CAPTION>
SPECIAL
MENTION SUBSTANDARD DOUBTFUL LOSS TOTAL
------- ----------- -------- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans.................. $ -- $ 148.1 $1.1 $17.5 $166.7
Restructured loans................. -- 3.7 -- -- 3.7
------ ------ ---- ----- ------
NPL's.............................. -- 151.8 1.1 17.5 170.4
Real estate owned.................. -- 27.3 -- 4.2 31.5
------ ------ ---- ----- ------
Total classified NPA's............. -- 179.1 1.1 21.7 201.9
Other classified loans currently
performing....................... 87.1 24.5 -- -- 111.6
REI................................ -- 16.6 -- 22.7 39.3
Off balance sheet recourse
arrangements..................... 20.9 15.7 -- 1.8 38.4
Securitized loans.................. 45.1 23.4 -- -- 68.5
------ ------ ---- ----- ------
Total.............................. $153.1 $ 259.3 $1.1 $46.2(A) $459.7
====== ====== ==== ===== ======
</TABLE>
- - ---------------
(A) The Company has provided a specific allowance for the portion of any asset
classified as loss.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses during the first six months of 1996
totaled $20.4 million, of which $10.2 million was provided during the second
quarter. Comparatively, provisions for loan losses totaled $16.9 million during
the first six months of 1995, of which $8.6 million was provided during the
second quarter. Loan loss provisions during the second quarter of 1996 were
recorded to partially replenish the general valuation allowance for net
charge-offs of $11.4 million. The Company's charge-offs during the second
quarter of 1996 were primarily related to residential 1-4 and multi-family
loans. Charge-offs on residential 1-4 loans totaled $10.5 million during the
second quarter of 1996 as compared to $3.8 million during the same period of
1995. During the second quarter of 1996, the Bank recorded a charge-off of $6.6
million from the sale of $34.7 million of delinquent residential 1-4 loans.
The Company's general valuation allowance declined to $153.5 million at
June 30, 1996 from $156.7 million at December 31, 1995 and from $167.4 million
at June 30, 1995. The total allowance for loan losses has decreased to $172.8
million at June 30, 1996 from $181.0 million at December 31, 1995 and from
$181.8 million at June 30, 1995. The Company evaluates the allowance for losses
by estimating a range of losses inherent in the portfolio. The Company then
performs an evaluation to determine what level in the range of inherent losses
is most appropriately given: (i) the level of non-performing and classified
loans, (ii) the composition of the loan portfolio, (iii) prevailing and
forecasted economic conditions, (iv) other credit factors, and (v) the Company's
judgment.
Should any of the aforementioned factors vary materially in the near term
the Company could experience the need to increase its allowance for loan losses
which could result in a higher level of provisions for loan losses. The
percentage of general valuation allowances to classified loans, excluding the
Loss classification, was 41.53% at June 30, 1996, 39.06% at December 31, 1995
and 40.32% at June 30, 1995.
20
<PAGE> 23
The following table presents the activity in the specific and general
allowances for loan losses for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
ENDED JUNE 30, 1996 JUNE 30, 1996
--------------------------- ---------------------------
SPECIFIC GENERAL TOTAL SPECIFIC GENERAL TOTAL
-------- ------- ------ -------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period................... $ 24.2 $ 154.5 $178.7 $ 24.3 $ 156.7 $181.0
Provision for losses......................... -- 10.2 10.2 -- 20.4 20.4
Allocations to/from general allowances....... (0.2) 0.2 -- 5.2 (5.2) --
Charge-offs, net............................. (4.7) (11.4) (16.1) (10.2) (18.4) (28.6)
------ ------- ------ ------- ------- ------
Balance, end of period......................... $ 19.3 $ 153.5 $172.8 $ 19.3 $ 153.5 $172.8
====== ======= ====== ======= ======= ======
</TABLE>
The net charge-offs by loan category for the periods presented are
summarized as follows:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
--------------- ---------------
1996 1995 1996 1995
----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Real estate:
Residential 1-4.................................. $10.5 $ 3.8 $15.3 $10.6
Income property
Multi-family.................................. 3.8 12.4 8.7 26.0
Office buildings.............................. 0.9 2.5 1.3 3.5
Other......................................... -- 4.0 0.2 4.5
----- ----- ----- -----
Total income property............................ 4.7 18.9 10.2 34.0
----- ----- ----- -----
Total real estate.................................. 15.2 22.7 25.5 44.6
Consumer........................................... 0.9 1.3 3.1 2.1
----- ----- ----- -----
$16.1 $24.0 $28.6 $46.7
===== ===== ===== =====
As a percentage of average net loans............... 0.67% 1.08% 0.60% 1.06%
===== ===== ===== =====
</TABLE>
The table below presents certain key ratios for NPL's and the allowances
for loan losses at the dates presented:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
1996 1996 1995 1995
-------- --------- ------------ --------
<S> <C> <C> <C> <C>
NPL's as a % of gross loans receivable........ 1.73% 2.12% 2.21% 1.97%
Total allowances for loan losses as a % of
NPL's...................................... 101.41 87.64 86.35 101.11
General allowances as a % of NPL's............ 90.08 75.77 74.76 93.10
General allowances as a % of gross loans
receivable................................. 1.56 1.60 1.65 1.83
Total allowances for loan losses as a % of
gross loans receivable..................... 1.76 1.85 1.91 1.99
Ratio of NPA's to total assets................ 1.33 1.61 1.62 1.58
Total allowance for loan losses as a % of
total classified loans..................... 44.43 39.34 42.54 42.32
Total general valuation allowance as a % of
classified loans excluding the Loss
classification............................. 41.53% 35.92% 39.06% 40.32%
</TABLE>
OTHER INCOME
For the second quarter of 1996, total other income increased to $28.0
million from $14.3 million for the same period of 1995. For the six months ended
June 30, 1996 and 1995 total other income was $43.7 million and $28.8 million,
respectively. The increase in other income for the quarter and six months ended
June 30, 1996 compared to the same periods in 1995 was primarily due to the gain
on the sale of the San Diego County
21
<PAGE> 24
branches of $12.0 million. Other income is primarily comprised of fee income and
gains from the sales of assets.
Fee Income. Fee income primarily includes fees charged to depositors for
services rendered, fees from loan servicing and fees earned from the sales of
alternative investment products. Total fee income is affected by the level and
type of savings deposits, the level of loan servicing and the sales of
alternative investment products. The following table presents the Company's
sources of fee income for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
--------------- ---------------
SOURCE OF FEES 1996 1995 1996 1995
--------------------------------------------------- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Savings deposits................................... $ 7.2 $ 5.9 $14.5 $12.2
Loan servicing..................................... 2.8 3.1 5.6 6.4
Sales of alternative investment products........... 5.0 3.5 9.4 7.2
Other.............................................. 0.1 0.7 0.2 0.8
----- ----- ----- -----
$15.1 $13.2 $29.7 $26.6
===== ===== ===== =====
</TABLE>
The increase in savings deposit fees for the first half of 1996 compared to
the same period of 1995 resulted from increases in rates charged for depository
services and improvements in effectiveness of the fee collection process.
Loans serviced for others totaled $3.7 billion and $4.2 billion at June 30,
1996 and June 30, 1995, respectively. Loans serviced for others are loans that
have been sold with the servicing thereof retained by the Company. The level of
loans serviced for others is determined by the volume of loan sales and loan
prepayments. The decrease in the portfolio of loans serviced for others
primarily resulted from the excess of loan payoffs over new loan sales. The
Company's sale of loans since 1994 has declined because of the low volume of
fixed rate loan originations and as part of its decision to retain more of its
originations in its portfolio of assets. The reduced volume of loans originated
for sale and the level of payoffs contributed to a reduction in the level of
loans serviced for others which has resulted in a decline in servicing fee
income.
The Company offers its customers the opportunity to purchase investment
products as an alternative to traditional savings deposits. The Company offers
these products, including annuities, mutual funds and other investments, through
its branch network. The Company earns a fee from the sale of these products.
Sales of alternative investment products totaled $126.8 million and $84.5
million for the second quarter of 1996 and 1995, respectively. Sales of
alternative investment products totaled $239.1 million for the first six months
of 1996 compared to $165.6 million for the same period of 1995. The increase in
the volume of sales has led to an increase in the level of fees earned by the
Company.
Gain (Loss) on Sales of Loans. The Company engages in mortgage banking
activities for several reasons, including providing liquidity and managing asset
size. The Company's originations of conforming fixed rate residential 1-4 loans
are generally held for sale. Originations of adjustable rate loans are generally
held for investment. The Company has established desired ranges for loan
portfolio composition and asset growth based upon numerous factors. These
factors include (i) origination volume and mix, (ii) portfolio repayments and
payoffs, (iii) interest rate risk considerations, (iv) desired servicing
portfolio levels, (v) anticipated deposit flows and (vi) regulatory capital
requirements. Collectively, these factors enter into the determination of the
amount of loans originated for sale. At June 30, 1996, $12.4 million of loans
were held for sale with a market value of $12.4 million.
For the quarter ended June 30, 1996, gains on sales of loans were $0.4
million. Loan sales for the quarters ended June 30, 1996 and 1995 totaled $90.0
million and $39.2 million, respectively. For the six months ended June 30, 1996
and 1995 gains/(losses) on sales of loans were $0.3 million and $(0.2) million,
respectively. Loan sales for the six months ended June 30, 1996 and 1995 were
$150.7 million and $74.3 million, respectively.
22
<PAGE> 25
During the first quarter of 1996 the Company implemented Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS 122"). SFAS 122 removes the distinction in accounting for
mortgage servicing rights resulting from originated and purchased loans. The
Company did not experience a material impact to its results of operations or
financial condition from the implementation of SFAS 122.
Available for Sale Securities. The Company determines which securities are
available for sale by evaluating whether such securities would be sold in
response to liquidity needs, asset/liability management, regulatory capital
requirements and other factors. Generally accepted accounting principles require
the variance between the market value of available for sale securities and the
recorded investment in such securities to be reflected as an unrealized holding
gain or loss and presented as an adjustment to stockholders' equity. At June 30,
1996, the adjustment was a gain of $0.4 million. The after tax unrealized
holding gain from available for sale securities totaled $5.4 million at June 30,
1995. At June 30, 1996, all U.S. treasury securities held by the Company were
included as available for sale securities. Securities available for sale totaled
$205.5 million and $925.4 million at June 30, 1996 and 1995, respectively.
OTHER EXPENSES
Total other expenses are primarily comprised of general and administrative
expenses and operations of real estate held for sale. For the quarter ended June
30, 1996, other expenses increased to $62.5 million compared to $60.3 million
for the quarter ended June 30, 1995. Other expenses for the six months ended
June 30, 1996 decreased to $124.0 million compared to $124.6 million for the six
months ended June 30, 1995.
General and Administrative Expenses. General and administrative expenses
are comprised of compensation, office occupancy, federal deposit insurance
premiums and special assessments and other general and administrative expenses.
General and administrative expenses were $58.8 million for the quarter ended
June 30, 1996, compared to $59.4 million for the quarter ended June 30, 1995 and
$116.7 million for the six months ended June 30, 1996, compared to $119.1
million for the six months ended June 30, 1995. The improvement in general and
administrative expenses is due to a reduction in federal deposit insurance and a
reduction in office occupancy expense. The reduction in federal deposit
insurance premiums is due to a reduction in the cost of the Bank's premiums from
0.26% to 0.23%. The reduction in office occupancy is due to consolidations of
the Company's operational facilities and a reduction in the number of employees.
At June 30, 1996 the Company had 2,060 employees as compared to 2,100 at
December 31, 1995 and 2,260 at June 30, 1995.
Operations of Real Estate Held for Sale. Operations of real estate held for
sale consists of operations of real estate held for investment ("REI") and
operations of REO. Operations of real estate held for sale include (i)
provisions for losses, (ii) the net effect of rental income and related
operating expenses and (iii) gains or losses resulting from the sale of
properties. Operations of real estate held for sale resulted in losses of $3.7
million and $0.9 million for the quarters ended June 30, 1996 and 1995,
respectively. For the six months ended June 30, 1996 and June 30, 1995,
operations of real estate held for sale resulted in losses of $7.3 million and
$5.5 million, respectively. During 1996, the Company recorded $5.0 million in
provisions for losses on REI, in order to reflect its portfolio at a value that
would represent the expected proceeds from an accelerated disposition of the
property. The Company began to actively market its remaining REI during the
second quarter of 1996 and anticipates a sale of its REI to close during the
second half of 1996.
The Company determines its level of allowance for losses on REO by
comparing the net investment in the property to its fair value as determined by
a current appraisal, less cost of disposition. In the event that prices
indicated by the current market for similar REO properties ("market price") are
less than those indicated by appraisals, the Company will utilize the market
price in evaluating the carrying value of its REO. The Company has provided
specific allowances for all known declines in value and has utilized the most
readily available market price for each property in the REO portfolio.
Additionally, the Company maintains general allowances relating to real estate
held for sale. There can be no assurance that real estate market values or the
market prices for REO will not decline. In the event such declines occur,
further provisions for losses may be required.
23
<PAGE> 26
The following table presents the composition of real estate held for sale,
net of allowances, at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, JUNE 30,
PROPERTY TYPE 1996 1996 1995 1995
------------- -------- --------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Residential 1-4........................... $ 31.5 $43.9 $ 47.3 $ 68.6
Multi-family.............................. 0.6 2.2 1.5 3.3
Office buildings.......................... 0.2 0.2 0.3 3.6
Hotels.................................... -- -- -- 9.7
Other..................................... 0.6 0.4 0.4 0.5
------ ----- ------ ------
$ 32.9 $46.7 $ 49.5 $ 85.7
====== ===== ====== ======
REO....................................... $ 16.3 $26.2 $ 22.2 $ 46.4
REI....................................... 16.6 20.5 27.3 39.3
------ ----- ------ ------
$ 32.9 $46.7 $ 49.5 $ 85.7
====== ===== ====== ======
</TABLE>
Please see the NPA's activity tables in the Non-Performing Assets section
for a comprehensive analysis of the change in REO.
INCOME TAXES
Income tax expense (benefit) is computed upon, and generally varies
proportionately with, earnings (loss) before income tax expense (benefit)
adjusted for nontaxable items of income and expense and certain changes in the
components of its net deferred tax asset and related valuation allowance.
Although the Company had earnings before income tax expense (benefit) for the
quarter ended June 30, 1996, there was minimal income tax expense because of the
availability of unbenefitted net operating loss carryforwards. Because of the
uncertainty regarding the realizability of the Company's net operating loss
carryforwards and other deferred tax assets, the Company has recorded a
valuation allowance approximately equal to its net deductible temporary
difference at June 30, 1996 and 1995.
CONTINGENCIES
The Company is involved as a defendant in certain legal proceedings
incidental to its business. The Company does not believe that the legal
proceedings to which it is a party, if adversely decided, in the aggregate would
have a material adverse effect upon its financial condition. The Company has
established allowances in connection with these legal proceedings for its
current estimate of the potential related liabilities. It is possible that the
Company could be found liable for an amount in excess of the allowance the
Company has established. Adverse decisions in such matters could have a material
adverse effect upon the Company's results of operations for the relevant period
or periods in which they occur.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are derived from the results of its operating
activities, investing activities and financing activities. The Company's cash
flows from investing activities include: making and collecting loans, and
disposing of investment securities. The Company's cash flows from financing
activities include: the Company's deposit gathering systems, borrowing money and
repaying amounts borrowed, obtaining and paying for other resources obtained
from creditors, and the dividend return of their investment. The Company's cash
flows from operating activities generally involve the cash effects of
transactions and other events that enter into the determination of net earnings.
Operating Activities. The Company's net cash flows from operating
activities totaled $100.7 million and $120.9 million for the quarter and six
months ended June 30, 1996 compared to $21.0 million and $32.6 million,
respectively, for the same periods of 1995. The primary sources of cash flows
from operating activities include (i) sales of loans held for sale and (ii) the
excess of net interest income and fee income over general and administrative
expenses.
24
<PAGE> 27
Investing Activities. The Company's net cash flows provided (used) by
investing activities totalled $222.2 million and $201.2 million for the quarter
and six months ended June 30, 1996 compared to $(171.5) million and $(232.7)
million, respectively, for the same periods of 1995. The Company's cash flows
from investing activities are primarily derived from the payments, originations
and purchases of loans, and the acquisition and maturity of investment
securities.
Payments on loans and securities held to maturity represent other
significant sources of funds for the Company. Principal payments, including
payoffs, on loans produced $713.8 million and $442.1 million of funds for the
Company during the first six months of 1996 and 1995, respectively. The increase
in the level of payments from loans receivable is primarily due to an increase
in the level of loan prepayments. Payments from securities held to maturity
totaled $226.0 million and $174.5 million during the first six months of 1996
and 1995, respectively. Proceeds from maturities of securities during the six
months ended June 30, 1996 and 1995 were $156.0 million and $755.0 million,
respectively.
Financing Activities. The Company's net cash flows (used) provided by
financing activities totaled $(276.3) million and $(340.8) million for the
quarter and six months ended June 30, 1996 compared to $109.4 million and $105.7
million, respectively, for the same periods of 1995. The Company's cash flows
from financing activities represent the major source of funds for the Company
consisting of retail deposits, FHLB advances, reverse repurchase agreements and
other borrowings. The Company also has access to brokered deposits and capital
markets as alternative sources of funds. The mix of these funding sources is
changed from time to time, in light of market conditions, liquidity needs,
capital requirements and interest rate sensitivity concerns in order to obtain
the appropriate balance between maturities and costs of funds.
Total deposits of the Company were $8.8 billion, $9.5 billion, $9.5 billion
and $9.4 billion at June 30, 1996, March 31, 1996, December 31, 1995 and June
30, 1995, respectively. Total brokered deposits of the Company were $169.0
million at June 30, 1996, $220.8 million at March 31, 1996, $273.8 million at
December 31, 1995 and $271.3 million at June 30, 1995.
During the second quarter of 1996, the Company sold six branches located in
San Diego with deposits totalling approximately $380 million. The premium on the
sale of deposits was 4.17% and the Company recorded a gain of approximately $12
million from the sale. The Company does not anticipate that the sale of these
branches will adversely impact its liquidity.
The following table presents the weighted average interest rates and the
amounts of deposits for the Company at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
---------------------- ----------------------
AVG. RATE BALANCE AVG. RATE BALANCE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
COMPOSITION OF DEPOSITS:
No minimum term -- checking:
Money market checking........................................ 1.17% $ 696.0 1.24% $ 790.9
Non-interest bearing commercial.............................. -- 265.9 -- 203.2
No minimum term -- savings:
Passbook..................................................... 2.21 459.3 2.22 535.3
Tiered savings............................................... 4.44 268.8 -- --
Money market savings......................................... 3.45 996.1 3.49 1,261.5
Term:
Less than 3 months........................................... 4.41 118.4 4.04 92.6
3 months to 6 months......................................... 4.93 557.5 5.03 419.0
7 months to 1 year........................................... 5.28 2,371.0 5.94 2,890.7
13 months to 2 years......................................... 6.05 2,563.0 5.93 2,427.7
25 months to 3 years......................................... 5.65 63.7 6.53 125.4
37 months to 4 years......................................... 5.72 28.4 6.51 73.9
49 months to 5 years......................................... 6.32 179.7 6.79 215.1
Over 5 years................................................. 7.11% 276.4 7.13% 332.9
-------- --------
Total consolidated deposits.................................... $8,844.2 $9,368.2
======== ========
</TABLE>
25
<PAGE> 28
The Company's outstanding balance of FHLB advances at June 30, 1996, March
31, 1996, December 31, 1995 and June 30, 1995 totaled $3.0 billion, $2.7
billion, $2.7 billion and $2.4 billion, respectively. The weighted average
remaining maturity of these advances at June 30, 1996 was 12 months. Reverse
repurchase agreements had carrying values of $932.9 million, $704.7 million,
$857.3 million and $1.0 billion at June 30, 1996, March 31, 1996, December 31,
1995 and June 30, 1995, respectively.
During the second quarter of 1996 the Bank called for redemption all of the
3,740,000 outstanding shares of the Preferred Stock, Series A. Except for 18,820
shares which elected to convert into 23,336 shares of the Company's common
stock, all of the Series A shares were redeemed effective June 14, 1996 at a
redemption price of $25.00 per share, plus a dividend of $0.398264 per share.
During the quarter ended June 30, 1996 and 1995, the Bank declared and paid
dividends totaling $7.9 million and $6.4 million, respectively, on its preferred
stock, Series A and Series B. The dividends declared and paid during the second
quarter of 1996 included dividends related to the redemption of the Preferred
Stock, Series A totaling $1.5 million.
26
<PAGE> 29
LENDING ACTIVITIES
The table below shows the number and dollar amount of loans originated and
purchased by the Company. Adjustable rate loan originations and purchases are
presented by rate adjustment index.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------------------- ----------------------------------------------
1996 1995 1996 1995
---------------------- ----------------------- ---------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
LOANS AMOUNTS LOANS AMOUNTS LOANS AMOUNT LOANS AMOUNT
--------- ----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN (DOLLARS IN (DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS) MILLIONS) MILLIONS)
Loans Originated:
Residential 1-4
Wholesale
Fixed.............. 78 $ 14.8 4 $ 0.5 257 $ 71.6 4 $ 0.5
3 or 5 year
fixed --
Treasury........ 383 111.1 100 27.4 767 231.2 109 30.5
1 year Treasury.... 224 87.4 3 0.6 272 106.6 12 4.1
11th District
COFI............ 635 179.0 687 186.0 859 246.8 1,814 528.7
----- ------- ----- ------- ----- --------- ----- ---------
Residential 1-4 --
Wholesale.......... 1,320 392.3 794 214.5 2,155 656.2 1,939 563.8
----- ------- ----- ------- ----- --------- ----- ---------
Retail
Fixed.............. 422 46.1 411 27.4 966 117.5 549 33.9
3 or 5 year
fixed --
Treasury........ 258 57.3 41 8.2 517 113.7 50 9.6
1 year Treasury.... 18 4.1 3 .2 34 6.2 5 0.5
11th District
COFI............ 281 65.3 620 129.6 444 104.7 1,265 257.8
----- ------- ----- ------- ----- --------- ----- ---------
Residential 1-4 --
Retail............. 979 172.8 1,075 165.4 1,961 342.1 1,869 301.8
----- ------- ----- ------- ----- --------- ----- ---------
Total Residential
1-4.................. 2,299 565.1 1,869 379.9 4,116 998.3 3,808 865.6
Multi-family........... 16 5.1 11 5.5 29 9.1 24 11.5
Commercial real
estate............... 1 0.3 1 0.2 2 0.5 1 0.2
Business banking....... 18 2.4 -- -- 18 2.4 -- --
Consumer............... 404 22.0 796 27.0 1,066 45.7 1,621 50.6
----- ------- ----- ------- ----- --------- ----- ---------
Total loans originated... 2,738 $ 594.9 2,677 $ 412.6 5,231 $ 1,056.0 5,454 $ 927.9
===== ======= ===== ======= ===== ========= ===== =========
Loans Purchased:
Residential 1-4
3 or 5 year
fixed --
Treasury........ 65 $ 18.5 -- $ -- 65 $ 18.5 -- $ --
Fixed.............. 3 0.1 19 0.4 6 0.2 22 0.5
1 year Treasury.... 320 96.5 217 54.1 909 261.7 247 59.9
11th District
COFI............ 112 27.1 81 16.1 181 43.9 321 61.2
Other.............. -- -- 1 0.2 -- -- 1 0.2
----- ------- ----- ------- ----- --------- ----- ---------
Total Residential
1-4................ 500 142.2 318 70.8 1,161 324.3 591 121.8
Multi-family......... 6 0.8 11 1.9 9 4.3 29 7.3
Commercial real
estate............. -- -- -- -- -- -- 1 0.2
Business banking..... 1 1.2 -- -- 1 1.2 -- --
----- ------- ----- ------- ----- --------- ----- ---------
Total loans purchased.... 507 144.2 329 72.7 1,171 329.8 621 129.3
===== ======= ===== ======= ===== ========= ===== =========
Total loans originated
and purchased.......... 3,245 $ 739.1 3,006 $ 485.3 6,402 $ 1,385.8 6,075 $ 1,057.2
===== ======= ===== ======= ===== ========= ===== =========
</TABLE>
Commercial real estate loans and multi-family loans are originated solely
to facilitate the sales of REO. The Company originates loans through its loan
representatives and its branch offices ("retail lending") primarily located in
California. Additionally, the Company utilizes mortgage brokers who offer the
Company's various loan programs ("wholesale lending"). During the second quarter
of 1996, the Company's wholesale lending generated $392.3 million, or 55.5% of
total residential loans originated and purchased compared to $214.5 million, or
47.6% for the second quarter of 1995. The Company's retail lending originated
and purchased $315.0 million and $236.2 million, or 44.5% and 52.4% of
residential loans during the second quarter of 1996 and 1995, respectively.
The Company has pledged certain of its assets as collateral for certain
borrowings, interest rate swap agreements and letters of credit. By utilizing
collateralized funding sources, the Company is able to access a variety of cost
effective sources of funds. The assets pledged consist of loans, mortgage-backed
securities and
27
<PAGE> 30
U.S. treasury securities. The Company's process for monitoring its liquidity
requirements incorporates an assessment of assets pledged, the level of assets
held for sale, additional borrowing capacity and other factors. The Company does
not anticipate any negative impact to its liquidity from its pledging
activities. The total amount of the Company's assets pledged was $5.5 billion at
June 30, 1996 as compared with $5.2 billion at June 30, 1995.
The following table presents assets pledged at June 30, 1996 for the
Company:
<TABLE>
<CAPTION>
SUMMARY OF PLEDGED COLLATERAL
-----------------------------------------------------
MORTGAGE-
BACKED TOTAL
MORTGAGES SECURITIES SECURITIES COLLATERAL
--------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Borrowings:
FHLB advances.................................... $3,800.6 $ -- $ 421.2 $ 4,221.8
Reverse repurchase agreements.................... -- -- 931.4 931.4
SLMA advances.................................... -- 126.7 106.5 233.2
Other Obligations:
Interest rate swaps.............................. -- -- 7.6 7.6
Revenue bond standby letters of credit........... -- -- 21.7 21.7
FHLB letters of credit/lines of credit........... 55.5 -- -- 55.5
Other miscellaneous obligations.................. 7.1 51.4 0.2 58.7
-------- ------ -------- ---------
Total pledged collateral......................... $3,863.2 $178.1 $1,488.6 $ 5,529.9
======== ====== ======== =========
</TABLE>
The Bank also invested in short-term liquid investments as a means of
maximizing its return on its liquid investments and to comply with the liquidity
requirements of the Office of Thrift Supervision ("OTS").
The liquidity of the Bank, as measured by the ratio of cash and cash
equivalents to the sum of withdrawable savings and borrowings payable within one
year, averaged 15.6% and 17.3% for the quarter and six months ended June 30,
1996, respectively, compared to 9.9% and 10.7% for the quarter and six months
ended June 30, 1995, respectively. The Bank is required by the OTS to maintain
its liquidity level in excess of 5.0%.
CAPITAL REQUIREMENTS
As a savings institution regulated by the OTS with deposits insured by the
Federal Deposit Insurance Corporation ("FDIC"), the Bank is required to comply
with the capital requirements of the OTS. The regulations of the OTS require
savings institutions to maintain certain minimum levels of regulatory capital.
An institution that fails to comply with its regulatory capital requirements
must obtain OTS approval of a capital plan and can be subject to a capital
directive and certain restrictions on its operations. An institution that fails
to obtain OTS approval of its capital plan is deemed to be in an unsafe and
unsound condition and could be the subject of the appointment of a conservator
or a receiver. The OTS has adopted prompt corrective action requirements ("PCA
requirements") pursuant to the FDIC Improvement Act of 1991. At June 30, 1996,
the industry-wide minimum regulatory capital requirements were:
- Tangible capital of 1.50 percent consisting generally of shareholders'
equity, but excluding intangible assets such as goodwill.
- A leverage ratio requiring core capital (i.e., Tier I capital) of 3.00
percent consisting of tangible capital plus qualifying supervisory
goodwill (certain goodwill arising as a result of the acquisition of
troubled institutions and regulatory assisted acquisitions).
- Risk-based capital, consisting of core capital plus certain subordinated
debt and other capital instruments and general valuation allowances on
loans receivable, equal to 8.00 percent of the value of risk-weighted
assets plus off-balance sheet items.
28
<PAGE> 31
In addition, the PCA requirements provide that, a savings association is
deemed to be "well capitalized" if the savings association has: (i) a total
risk-based capital ratio of 10.00 percent or greater, (ii) a Tier I risk-based
capital ratio (defined as Tier I capital as a percentage of risk-weighted
assets) of 6.00 percent or greater, and (iii) a leverage ratio of 5.00 percent
or greater. At June 30, 1996, (i) the Bank's total risk-based capital ratio was
11.74 percent, $134.8 million in excess of "well-capitalized" requirements, (ii)
the Bank's Tier I risk-based capital ratio was 10.28 percent, $332.2 million in
excess of "well-capitalized" requirements, and (iii) the Bank's leverage ratio
was 5.67 percent, $94.9 million in excess of "well-capitalized" requirements.
Therefore, at June 30, 1996, the Bank met and exceeded all of the requirements
of a well capitalized institution.
The table below presents the Bank's regulatory capital position compared to
industry-wide capital requirements at June 30, 1996:
<TABLE>
<CAPTION>
TANGIBLE RISK-BASED
CAPITAL CORE CAPITAL CAPITAL
--------------- --------------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Regulatory capital of the Bank............ $798.0 5.67% $798.0 5.67% $913.7 11.74%
Bank's minimum regulatory capital
requirements............................ 210.9 1.50 421.9 3.00 623.6 8.00
------ ---- ------ ---- ------ ----
Excess over minimum regulatory capital
requirements............................ $587.1 4.17% $376.1 2.67% $290.1 3.74%
====== ==== ====== ==== ====== ====
</TABLE>
Following is a reconciliation of the Bank's shareholder's equity to
regulatory capital as of June 30, 1996:
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
-------- ------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Shareholder's Equity of the Bank............................... $832.7 $832.7 $832.7
Net unrealized holding (gains) losses on securities available
for sale..................................................... (0.4) (0.4) (0.4)
Non-allowable capital:
Intangible assets............................................ (15.4) (15.4) (15.4)
Investment in non-permissible subsidiaries................... (18.9) (18.9) (18.9)
Tier II capital items:
Allowable subordinated debt............................... -- -- 18.6
Allowable general valuation allowance on loans receivable
(limited to 1.25% of risk-weighted assets).............. -- -- 97.1
------ ------ ------
Regulatory capital of the Bank................................. $798.0 $798.0 $913.7
====== ====== ======
</TABLE>
During the second quarter of 1996 the Bank called for redemption all
3,740,000 shares of the Preferred Stock, Series A. Except for the conversion of
18,820 shares into 23,336 shares of the Company's common stock, the Series A
shares were redeemed effective June 14, 1996 at a redemption price of $25.00 per
share, plus a dividend of $0.398264 per share.
The Company's investments in and extensions of credit to any subsidiary
engaged in activities not permissible for a national bank ("investments in
non-permissible subsidiaries") must be deducted from capital over the following
phase out period:
<TABLE>
<CAPTION>
AMOUNT WHICH MAY
PERIOD BE INCLUDED IN CAPITAL
------ ----------------------
<S> <C>
July 1, 1995 to June 30, 1996............. 40%
After June 30, 1996....................... 0%
</TABLE>
At June 30, 1996, the Bank had included $12.6 million of such investments
in its regulatory capital computations which, effective July 1, 1996, will not
be eligible for inclusion. The phase out of investments in non-permissible
subsidiaries will not have a material impact on the Bank's regulatory capital.
The Bank's deposits are insured by the SAIF to a maximum of $100,000 for
each insured depositor. The FDIC administers a separate BIF applicable to
commercial banks and certain other non-SAIF insured institutions. Legislation is
currently under consideration by Congress which includes a one-time assessment
for
29
<PAGE> 32
SAIF members such as the Bank. Should legislation be enacted in its currently
contemplated form, the Bank's one-time assessment would be approximately $80
million, based upon the Bank's insured deposits at March 31, 1995 and an assumed
assessment rate of 85 basis points. Additionally, once the SAIF has been
recapitalized through the one-time assessment, the Bank's deposit insurance
premium assessments could be reduced from the current rate. The currently
proposed legislation has evolved significantly over recent months and may
continue to change until final legislation is enacted, if ever. Moreover, there
can be no assurance that a premium reduction will occur.
Assuming the proposed one-time special assessment became law in 1996 and
was immediately charged against results of operations, the one-time assessment
would, most likely, have a material adverse effect on the Bank's 1996 results of
operations. However, the Company believes that the Bank has sufficient
regulatory capital to continue to be classified as "well-capitalized" following
such an assessment. In addition, neither the Company nor the Bank would face any
liquidity issues as a result of such a one-time assessment.
GOODWILL LITIGATION
In February 1992, the Bank commenced litigation against the United States
in the U.S. Court of Claims (now the U.S. Court of Federal Claims, the "Claims
Court") seeking to recover the value of its supervisory goodwill. The suit
alleges that the treatment of such goodwill mandated by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") constitutes
a breach of contract between the Bank and the United States and an unlawful
taking of property by the United States without just compensation or due process
in violation of the U.S. Constitution.
During the third quarter of 1995, the Bank distributed to its common
shareholders its Contingent Litigation Recovery Participation Interests,
entitling the holders thereof to receive an amount equal to up to 25.377745
percent of the cash payment, if any, actually received by the Bank pursuant to a
final, nonappealable judgment in or final settlement of its claim against the
United States in the lawsuit, California Federal Bank v. United States, Civil
Action No. 92-138C (the "Litigation"). The Bank's shareholders of record on July
14, 1995 received one Participation Interest for every ten shares of common
stock owned on the record date. In the Litigation, the Bank alleges that the
United States breached certain contractual commitments regarding the computation
of its regulatory capital and deprived the Bank of certain of its property
without just compensation in violation of the United States Constitution. The
Bank's claims arose from changes, mandated by FIRREA, with respect to the rules
for computing the Bank's regulatory capital. The Bank has not yet quantified the
damages portion of its claim. The Litigation was stayed pending the resolution
of the Winstar case, which is discussed below. The Litigation remains stayed
until further order of the Claims Court.
During the period since the filing of the Litigation, the Claims Court, the
United States Court of Appeals for the Federal Circuit, and the United States
Supreme Court handed down decisions relating to the liability portion of the
breach of contract claims brought by three other thrift institutions, which
breach of contract claims are similar to those of the Bank. On July 1, 1996, the
U.S. Supreme Court ruled on the three consolidated cases, United States v.
Winstar Corporation, and determined that when Congress adopted the accounting
changes to supervisory goodwill specified in FIRREA, the government became
responsible for any breaches to its original agreements with the institutions
regarding the accounting rules. Although the plaintiff thrift institutions in
the Winstar case prevailed in the U.S. Supreme Court decision, a court may still
determine that the Bank's claims involve sufficiently different facts and/or
legal issues as to render the Winstar case inapplicable to the Litigation and
thereby result in a different conclusion from that of the Winstar case.
Moreover, the damages portions of the claims presented by the Winstar plaintiff
thrift institutions remains to be litigated and could take several years to
resolve.
SUBSEQUENT EVENT
On July 29, 1996 the Company announced that it had signed a definitive
merger agreement with First Nationwide Holdings Inc. Please refer to the
Company's Form 8-K dated July 27, 1996 for further information.
30
<PAGE> 33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 1996 the Bank called for redemption all
3,740,000 shares of the Preferred Stock, Series A. Except for the conversion of
18,820 shares into 23,336 shares of the Company's common stock, the Series A
shares were redeemed effective June 14, 1996 at a redemption price of $25.00 per
share, plus a dividend of $0.398264 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
31
<PAGE> 34
PART II. OTHER INFORMATION (UNAUDITED)(CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<S> <C>
2 Agreement and Plan of Reorganization dated as of October 16, 1995 by and
among California Federal Bank, A Federal Savings Bank, Cal Fed Bancorp
Inc., and California Federal Interim Bank, a Federal Savings Bank
(previously filed as Appendix A to Cal Fed Bancorp Inc.'s final
prospectus/proxy statement dated October 20, 1995 filed pursuant to Rule
424 on October 27, 1995)
3.1 Restated Certificate of Incorporation of Cal Fed Bancorp Inc. (previously
filed as Appendix B to Cal Fed Bancorp Inc.'s final prospectus/proxy
statement dated October 20, 1995 filed pursuant to Rule 424 on October 27,
1995)
3.2 Bylaws of Cal Fed Bancorp Inc. (previously filed as Appendix C to Cal Fed
Bancorp Inc.'s final prospectus/proxy statement dated October 20, 1995
filed pursuant to Rule 424 on October 27, 1995)
3.3 Certificate of Designation, Preferences and Rights of Series RP Preferred
Stock of Cal Fed Bancorp Inc. (previously filed as Exhibit A to Exhibit
4.1 to the Form 8-K dated February 21, 1996)
4.1 Rights Agreement dated as of February 16, 1996 between Cal Fed Bancorp
Inc. and Chemical Bank, as Rights Agent (previously filed as Exhibit 4.1
to the Form 8-K dated February 21, 1996)
10.1 California Federal Bank, FSB 1993 Employee Stock Incentive Plan
(previously filed as Exhibit 99.5 to the Form S-8 (registration no.
333-866))
10.2 California Federal Bank, FSB 1994 Non-Employee Director Stock Option Plan
(previously filed as Exhibit 99.4 to the Form S-8 (registration no.
333-866))
10.3 Cal Fed Bancorp Inc. 1995 Non-Employee Director Stock Option Plan
(previously filed as Exhibit 99.2 to the Form S-8 (registration no.
333-866))
10.4 Cal Fed Bancorp Inc. 1995 Employee Stock Incentive Plan (previously filed
as Exhibit 99.3 to the Form S-8 (registration no. 333-866))
10.5 California Federal Bank, FSB Retirement Income Plan -- 1994 Restatement*
10.6 California Federal Bank, FSB Investment Plus Plan (previously filed as
Exhibit 10.5 to Exhibit 99.1 to the Form S-4 (registration no. 33-95238))
10.7 California Federal Bank, FSB 401(k) Excess Plan (previously filed as
Exhibit 10.6 to Exhibit 99.1 to the Form S-4 (registration no. 33-95238))
10.8 1994 Incentive Compensation Plan (previously filed as Exhibit 10.7 to
Exhibit 99.1 to the Form S-4 (registration no. 33-95238))
10.9 1993 Incentive Compensation Plan*
10.10 Key Executive Retention Plan*
10.11 Retirement Plan for Outside Directors (previously filed as Exhibit 10.10
to Exhibit 99.1 to the Form S-4 (registration no. 33-95238))
10.12 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Edward G. Harshfield and California Federal Bank, FSB*
10.13 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Gary W. Brummett and California Federal Bank, FSB*
10.14 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Dale E. Cohen and California Federal Bank, FSB*
10.15 Employment Agreement between California Federal Bank, FSB and Warren A.
Raybould, as amended (previously filed as Exhibit 10.14 to Exhibit 99.1 to
the Form S-4 (registration no. 33-95238))
</TABLE>
32
<PAGE> 35
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
(A) EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S> <C>
10.16 Form of Warrant for Executive Officers*
10.17 Form of Stock Option Agreement for Executive Officers*
10.18 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Joseph M. Petitti and California Federal Bank, FSB*
10.19 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Jeffrey A. Rigsby and California Federal Bank, FSB*
10.20 Employment Agreement between Cal Fed Bancorp Inc. and Edward G. Harshfield
dated February 14, 1996*
10.21 Employment Agreement between Cal Fed Bancorp Inc. and Gary W. Brummett
dated February 14, 1996*
10.22 Employment Agreement between Cal Fed Bancorp Inc. and Dale E. Cohen dated
February 14, 1996*
10.23 Employment Agreement between Cal Fed Bancorp Inc. and Joseph M. Petitti
dated February 14, 1996*
10.24 Employment Agreement between Cal Fed Bancorp Inc. and Jeffrey A. Rigsby
dated February 14, 1996*
10.25 1995 Incentive Compensation Plan*
10.26 Amendment No. One to California Federal Bank, FSB Investment Plus Plan**
10.27 Amendment No. Two to California Federal Bank, FSB Investment Plus Plan**
10.28 Restated Retirement Plan for Outside Directors effective as of January 1,
1996**
10.29 Amendment to form of Stock Option Agreement for Executive Officers**
11 Computation of Earnings per share
12 Computation of Ratios
99.1 Mortgage Portfolio by State and Property Type at June 30, 1996
99.2 California Mortgage Portfolio by Selected Cities and Counties and Property
Type at June 30, 1996
99.3 Gross Loans Receivable by Index at June 30, 1996
99.4 Residential 1-4 and Equity Loans by Year of Origination and Outstanding
Balance at June 30, 1996
99.5 Multi-Family Loans by Year of Origination and Outstanding Balance at June
30, 1996
99.6 Commercial Real Estate Loans by Year of Origination and Outstanding
Balance at June 30, 1996
99.7 Consolidated Financial Highlights of Operations April 30, 1996
99.8 Consolidated Financial Highlights of Operations May 31, 1996
99.9 Consolidated Financial Highlights of Operations June 30, 1996
</TABLE>
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K dated June 6, 1996 announcing the conversion
of 18,820 shares of California Federal Bank, F.S.B. 7 3/4 percent Noncumulative
Convertible Preferred Stock, Series A into 23,336 shares of Cal Fed Bancorp Inc.
common stock.
- - ---------------
* Previously filed under the same exhibit number to Exhibit 99 of the Form 10-K
for the year ended December 31, 1995.
** Previously filed under the same exhibit number of the Form 10-Q for the
quarter ended March 31, 1996.
33
<PAGE> 36
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.
Registrant:
Cal Fed Bancorp Inc.
Date: August 7, 1996 /s/ JAMES H. LEONETTI
--------------------------------------
James H. Leonetti
Controller,
Chief Accounting Officer
34
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<S> <C> <C>
2 Agreement and Plan of Reorganization dated as of October 16, 1995 by
and among California Federal Bank, A Federal Savings Bank, Cal Fed
Bancorp Inc., and California Federal Interim Bank, a Federal Savings
Bank (previously filed as Appendix A to Cal Fed Bancorp Inc.'s final
prospectus/proxy statement dated October 20, 1995 filed pursuant to
Rule 424 on October 27, 1995)..........................................
3.1 Restated Certificate of Incorporation of Cal Fed Bancorp Inc.
(previously filed as Appendix B to Cal Fed Bancorp Inc.'s final
prospectus/proxy statement dated October 20, 1995 filed pursuant to
Rule 424 on October 27, 1995)..........................................
3.2 Bylaws of Cal Fed Bancorp Inc. (previously filed as Appendix C to Cal
Fed Bancorp Inc.'s final prospectus/proxy statement dated October 20,
1995 filed pursuant to Rule 424 on October 27, 1995)...................
3.3 Certificate of Designation, Preferences and Rights of Series RP
Preferred Stock of Cal Fed Bancorp Inc. (previously filed as Exhibit A
to Exhibit 4.1 to the Form 8-K dated February 21, 1996)................
4.1 Rights Agreement dated as of February 16, 1996 between Cal Fed Bancorp
Inc. and Chemical Bank, as Rights Agent (previously filed as Exhibit
4.1 to the Form 8-K dated February 21, 1996)...........................
10.1 California Federal Bank, FSB 1993 Employee Stock Incentive Plan
(previously filed as Exhibit 99.5 to the Form S-8 (registration no.
333-866))..............................................................
10.2 California Federal Bank, FSB 1994 Non-Employee Director Stock Option
Plan (previously filed as Exhibit 99.4 to the Form S-8 (registration
no. 333-866))..........................................................
10.3 Cal Fed Bancorp Inc. 1995 Non-Employee Director Stock Option Plan
(previously filed as Exhibit 99.2 to the Form S-8 (registration no.
333-866))..............................................................
10.4 Cal Fed Bancorp Inc. 1995 Employee Stock Incentive Plan (previously
filed as Exhibit 99.3 to the Form S-8 (registration no. 333-866))......
10.5 California Federal Bank, FSB Retirement Income Plan -- 1994
Restatement*...........................................................
10.6 California Federal Bank, FSB Investment Plus Plan (previously filed as
Exhibit 10.5 to Exhibit 99.1 to the Form S-4 (registration no.
33-95238)).............................................................
10.7 California Federal Bank, FSB 401(k) Excess Plan (previously filed as
Exhibit 10.6 to Exhibit 99.1 to the Form S-4 (registration no.
33-95238)).............................................................
10.8 1994 Incentive Compensation Plan (previously filed as Exhibit 10.7 to
Exhibit 99.1 to the Form S-4 (registration no. 33-95238))..............
10.9 1993 Incentive Compensation Plan*......................................
10.10 Key Executive Retention Plan*..........................................
10.11 Retirement Plan for Outside Directors (previously filed as Exhibit
10.10 to Exhibit 99.1 to the Form S-4 (registration no. 33-95238)).....
10.12 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Edward G. Harshfield and California Federal Bank, FSB*....
10.13 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Gary W. Brummett and California Federal Bank, FSB*........
10.14 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Dale E. Cohen and California Federal Bank, FSB*...........
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<S> <C> <C>
10.15 Employment Agreement between California Federal Bank, FSB and Warren A.
Raybould, as amended (previously filed as Exhibit 10.14 to Exhibit 99.1
to the Form S-4 (registration no. 33-95238))...........................
10.16 Form of Warrant for Executive Officers*................................
10.17 Form of Stock Option Agreement for Executive Officers*.................
10.18 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Joseph M. Petitti and California Federal Bank, FSB*.......
10.19 Amended and Restated Executive Employment Agreement dated February 28,
1996 between Jeffrey A. Rigsby and California Federal Bank, FSB*.......
10.20 Employment Agreement between Cal Fed Bancorp Inc. and Edward G.
Harshfield dated February 14, 1996*....................................
10.21 Employment Agreement between Cal Fed Bancorp Inc. and Gary W. Brummett
dated February 14, 1996*...............................................
10.22 Employment Agreement between Cal Fed Bancorp Inc. and Dale E. Cohen
dated February 14, 1996*...............................................
10.23 Employment Agreement between Cal Fed Bancorp Inc. and Joseph M. Petitti
dated February 14, 1996*...............................................
10.24 Employment Agreement between Cal Fed Bancorp Inc. and Jeffrey A. Rigsby
dated February 14, 1996*...............................................
10.25 1995 Incentive Compensation Plan*......................................
10.26 Amendment No. One to California Federal Bank, FSB Investment Plus
Plan**.................................................................
10.27 Amendment No. Two to California Federal Bank, FSB Investment Plus
Plan**.................................................................
10.28 Restated Retirement Plan for Outside Directors effective as of January
1, 1996**..............................................................
10.29 Amendment to form of Stock Option Agreement for Executive Officers**...
11 Computation of Earnings per share......................................
12 Computation of Ratios..................................................
99.1 Mortgage Portfolio by State and Property Type at June 30, 1996.........
99.2 California Mortgage Portfolio by Selected Cities and Counties and
Property Type at June 30, 1996.........................................
99.3 Gross Loans Receivable by Index at June 30, 1996.......................
99.4 Residential 1-4 and Equity Loans by Year of Origination and Outstanding
Balance at June 30, 1996...............................................
99.5 Multi-Family Loans by Year of Origination and Outstanding Balance at
June 30, 1996..........................................................
99.6 Commercial Real Estate Loans by Year of Origination and Outstanding
Balance at June 30, 1996...............................................
99.7 Consolidated Financial Highlights of Operations April 30, 1996.........
99.8 Consolidated Financial Highlights of Operations May 31, 1996...........
99.9 Consolidated Financial Highlights of Operations June 30, 1996..........
</TABLE>
- - ---------------
* Previously filed under the same exhibit number to Exhibit 99 of the Form 10-K
for the year ended December 31, 1995.
** Previously filed under the same exhibit number to the Form 10-Q for the
quarter ended March 31, 1996.
36
<PAGE> 1
EXHIBIT 11
CAL FED BANCORP INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY NET EARNINGS PER COMMON SHARE:
Earnings before dividends on preferred
stock of subsidiary.................. $ 44.0 $ 21.7 $ 73.6 $ 36.4
Less: Dividends on preferred stock of
subsidiary........................... 7.9 6.4 14.3 12.8
----------- ----------- ----------- -----------
Net earnings available for common
stockholders, as adjusted for
calculation of primary net earnings
per common share..................... $ 36.1 $ 15.3 $ 59.3 $ 23.6
=========== =========== =========== ===========
Weighted average number of common
shares outstanding................... 49,377,167 49,199,044 49,338,806 49,199,044
Dilutive effect of outstanding stock
options.............................. 766,308 623,376 744,391 539,467
----------- ----------- ----------- -----------
Weighted average number of shares, as
adjusted for calculation of primary
net earnings per common share........ 50,143,475 49,822,420 50,083,197 49,738,511
=========== =========== =========== ===========
Primary net earnings per common
share............................. $ 0.72 $ 0.31 $ 1.18 $ 0.47
=========== =========== =========== ===========
FULLY-DILUTED NET EARNINGS PER COMMON
SHARE:
Net earnings available for common
stockholders, as adjusted for
calculation of fully-diluted net
earnings per common share............ $ 36.1 $ 15.3 $ 59.3 $ 23.6
Add: Interest on convertible
debentures, net of tax............... -- -- -- --
----------- ----------- ----------- -----------
Net earnings available for common
stockholders, as adjusted, for
calculation of fully-diluted net
earnings per common share............ $ 36.1 $ 15.3 $ 59.3 $ 23.6
=========== =========== =========== ===========
Weighted average number of common
shares outstanding................... 49,377,167 49,199,044 49,338,806 49,199,044
Dilutive effect of outstanding stock
options.............................. 780,582 675,534 782,645 675,534
Shares issuable from assumed exercise
of convertible subordinated
debentures........................... -- -- -- --
----------- ----------- ----------- -----------
Weighted average number of shares, as
adjusted for calculation of
fully-diluted net earnings per common
share................................ 50,157,749 49,874,578 50,121,451 49,874,578
=========== =========== =========== ===========
Fully-diluted net earnings per common
share............................. $ 0.72 $ 0.31 $ 1.18 $ 0.47
=========== =========== =========== ===========
</TABLE>
37
<PAGE> 1
EXHIBIT 12
CAL FED BANCORP INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
RETURN ON AVERAGE ASSETS:
Earnings before dividends on preferred $ 32.0 $ 21.7 $ 61.6 $ 36.4
stock of subsidiary and gain on sale of
San Diego branches(1)..................
x4 x4 x2 x2
--------- --------- --------- ---------
Annualized earnings before gain on sale of 128.0 86.8 123.2 72.8
San Diego branches(2)..................
Gain on sale of San Diego branches(1)..... 12.0 -- 12.0 --
--------- --------- --------- ---------
Annualized earnings after gain on sale of
San Diego branches(2)(A)............... $ 140.0 $ 86.8 $ 135.2 $ 72.8
========= ========= ========= =========
Average assets(B)......................... $14,162.8 $14,264.9 $14,183.0 $14,251.1
========= ========= ========= =========
Return on average assets(A/B)............. 0.99% 0.61% 0.95% 0.51%
========= ========= ========= =========
RETURN ON AVERAGE EQUITY:
Earnings before dividends on preferred $ 32.0 $ 21.7 $ 61.6 $ 36.4
stock of subsidiary and gain on sale of
San Diego branches(1)..................
x4 x4 x2 x2
--------- --------- --------- ---------
Annualized earnings before gain on sale of 128.0 86.8 123.2 72.8
San Diego branches(2)..................
Gain on sale of San Diego branches(1)..... 12.0 -- 12.0 --
--------- --------- --------- ---------
Annualized earnings after gain on sale of
San Diego branches(2)(C)............... $ 140.0 $ 86.8 $ 135.2 $ 72.8
========= ========= ========= =========
Average equity(3)(D)...................... $ 883.5 $ 835.1 $ 871.4 $ 822.9
========= ========= ========= =========
Return on average equity(C/D)............. 15.85% 10.39% 15.52% 8.85%
========= ========= ========= =========
</TABLE>
- - ---------------
(1) During the second quarter of 1996, the Bank sold six branches located in San
Diego county with deposits totalling approximately $380 million. The sale
resulted in a nonrecurring net gain of $12 million.
(2) Annualized earnings are based upon results for the quarter and six months
ended June 30, 1996 and 1995. Results may vary from quarter to quarter and
for the year.
(3) Average equity includes preferred stock of subsidiary totalling $172.5
million and $266.0 million at June 30, 1996 and 1995, respectively.
38
<PAGE> 1
EXHIBIT 99.1
CAL FED BANCORP INC. AND SUBSIDIARIES
MORTGAGE AND EQUITY LOAN PORTFOLIO
JUNE 30, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
OTHER
RESIDENTIAL MULTI- SHOPPING OFFICE COMMERCIAL/ INCOME % OF
STATE 1-4 UNITS FAMILY CENTERS BUILDINGS INDUSTRIAL PROPERTY TOTAL TOTAL
----- ----------- -------- -------- --------- ----------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California(1).......... $ 6,750.8 $1,196.5 $ 72.1 $ 146.0 $ 257.3 $ 13.1 $8,435.8 87.8%
Florida................ 431.5 29.0 3.1 1.9 4.6 1.6 471.7 4.9
Nevada................. 190.7 39.7 3.1 2.2 0.2 0.6 236.5 2.5
Georgia................ 73.6 7.9 0.2 1.2 -- 0.5 83.4 0.9
Arizona................ 25.6 15.1 -- 0.5 -- 0.2 41.4 0.4
New Jersey............. 36.3 -- -- -- -- -- 36.3 0.4
New York............... 34.1 0.1 -- -- -- -- 34.2 0.4
Connecticut............ 30.2 -- -- -- -- -- 30.2 0.3
Texas.................. 27.4 1.6 -- -- -- -- 29.0 0.3
Washington............. 22.9 4.9 -- -- -- -- 27.8 0.3
Massachusetts.......... 20.7 -- -- -- -- -- 20.7 0.2
Colorado............... 19.3 -- -- 1.4 -- -- 20.7 0.2
Illinois............... 15.7 1.0 -- -- -- -- 16.7 0.2
Michigan............... 14.8 -- -- -- -- -- 14.8 0.2
Virginia............... 14.4 -- -- -- -- -- 14.4 0.1
Oregon................. 9.7 2.4 -- -- -- -- 12.1 0.1
Maryland............... 11.6 -- -- -- -- -- 11.6 0.1
Other(2)............... 68.9 0.2 -- 1.1 -- 0.8 71.0 0.7
--------- -------- ------ ------- ------- ------ -------- -----
Total........ $ 7,798.2 $1,298.4 $ 78.5 $ 154.3 $ 262.1 $ 16.8 $9,608.3 100.0%
========= ======== ====== ======= ======= ====== ======== =====
% of Total............. 81.2% 13.5% 0.8% 1.6% 2.7% 0.2% 100.0%
========= ======== ====== ======= ======= ====== ========
</TABLE>
- - ---------------
(1) See Exhibit 99.2 for a comprehensive analysis of mortgage and equity loans
secured by collateral located in California.
(2) Includes states with totals less than $10 million.
<TABLE>
<S> <C> <C>
(3) Mortgage and equity loan portfolio...................................................... $9,608.3
Business banking........................................................................ 5.1
Consumer................................................................................ 214.8
--------
Gross loans receivable.................................................................. 9,828.2
Deferred costs, discounts and other items, net.......................................... 13.7
Allowance for loan losses............................................................... (172.8)
--------
$9,669.1
========
</TABLE>
39
<PAGE> 1
EXHIBIT 99.2
CAL FED BANCORP INC. AND SUBSIDIARIES
CALIFORNIA MORTGAGE AND EQUITY LOAN PORTFOLIO
JUNE 30, 1996
<TABLE>
<CAPTION>
COMMERCIAL
RESIDENTIAL 1-4 MULTI- REAL TOTAL
UNITS FAMILY ESTATE REAL ESTATE % OF TOTAL
--------------- -------- ---------- ----------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Los Angeles County
City
- - ----
Los Angeles......................... $ 536.4 $ 211.8 $ 20.9 $ 769.1 9.1%
Beverly Hills....................... 199.6 13.8 5.1 218.5 2.6
Long Beach.......................... 85.3 98.0 3.3 186.6 2.2
Palos Verdes........................ 144.8 0.7 0.4 145.9 1.7
West Hollywood...................... 93.0 32.1 0.9 126.0 1.5
Santa Monica........................ 83.4 23.5 4.3 111.2 1.3
Pacific Palisades................... 91.0 1.7 -- 92.7 1.1
Glendale............................ 43.7 38.2 3.0 84.9 1.0
Calabasas........................... 70.9 1.2 -- 72.1 0.9
Malibu.............................. 58.6 0.3 2.8 61.7 0.7
Pasadena............................ 40.2 11.8 8.7 60.7 0.7
Torrance............................ 36.6 15.1 8.7 60.4 0.7
Redondo Beach....................... 51.0 7.2 1.9 60.1 0.7
Manhattan Beach..................... 55.7 1.3 0.6 57.6 0.7
Canoga Park......................... 44.7 9.5 2.1 56.3 0.7
Sherman Oaks........................ 32.9 22.2 -- 55.1 0.7
Northridge.......................... 50.4 0.4 2.1 52.9 0.6
Van Nuys............................ 23.9 25.1 1.7 50.7 0.6
Woodland Hills...................... 47.8 1.4 1.1 50.3 0.6
Encino.............................. 47.6 0.7 -- 48.3 0.6
Burbank............................. 29.0 11.9 5.0 45.9 0.5
Rosemead............................ 3.6 1.7 39.6 44.9 0.5
North Hollywood..................... 21.1 20.5 0.7 42.3 0.5
All Other........................... 789.1 216.9 53.8 1,059.8 12.6
--------- -------- ------ --------- -----
Total Los Angeles
County.................. 2,680.3 767.0 166.7 3,614.0 42.8
--------- -------- ------ --------- -----
Orange County
City
- - ----
Huntington Beach.................... 102.4 17.0 16.2 135.6 1.6
Newport Beach....................... 110.1 0.3 3.3 113.7 1.3
Anaheim............................. 42.8 12.5 25.9 81.2 1.0
Santa Ana........................... 37.6 12.9 18.2 68.7 0.8
Mission Viejo....................... 59.0 0.3 2.2 61.5 0.7
Irvine.............................. 40.8 -- 17.6 58.4 0.7
South Laguna........................ 57.1 -- -- 57.1 0.7
Orange.............................. 35.6 3.5 17.2 56.3 0.7
Costa Mesa.......................... 26.4 8.2 2.7 37.3 0.4
All Other........................... 350.0 40.1 57.1 447.2 5.3
--------- -------- ------ --------- -----
Total Orange County....... 861.8 94.8 160.4 1,117.0 13.2
--------- -------- ------ --------- -----
Other Counties
County
- - ------
San Mateo........................... 526.4 15.8 5.4 547.6 6.5
San Diego........................... 365.7 142.4 19.9 528.0 6.3
Santa Clara......................... 443.7 21.6 36.9 502.2 6.0
San Francisco....................... 294.9 20.5 11.9 327.3 3.9
Marin............................... 317.4 7.3 1.4 326.1 3.9
Ventura............................. 277.6 10.7 6.1 294.4 3.4
All Other........................... 983.0 116.4 79.8 1,179.2 14.0
--------- -------- ------ --------- -----
Total Other Counties...... 3,208.7 334.7 161.4 3,704.8 44.0
--------- -------- ------ --------- -----
Total California.......... $ 6,750.8 $1,196.5 $488.5 $ 8,435.8 100.0%
========= ======== ====== ========= =====
Percentage of Total....... 80.0% 14.2% 5.8% 100.0%
========= ======== ====== =========
</TABLE>
40
<PAGE> 1
EXHIBIT 99.3
CAL FED BANCORP INC. AND SUBSIDIARIES
GROSS LOANS RECEIVABLE BY INDEX
JUNE 30, 1996
<TABLE>
<CAPTION>
CONSUMER
OTHER AND
RESIDENTIAL MULTI- SHOPPING OFFICE INCOME BUSINESS
1-4 UNITS FAMILY CENTERS BUILDINGS PROPERTY BANKING TOTAL
----------- ----------- -------- --------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Loans:
Fixed......................... $ 427.1 $ 61.9 $ 3.8 $ 16.6 $ 20.7 $ 38.5 $ 568.6
3-5 Year Fixed(A)............. 978.1 -- -- -- -- -- 978.1
--------- ---------- ------ ------- ------ ------ --------
Subtotal Fixed.................. 1,405.2 61.9 3.8 16.6 20.7 38.5 1,546.7
Adjustable Rate Loans:
COFI:
Adjusted Monthly.............. 3,076.6 811.8 48.2 87.2 242.8 -- 4,266.6
Adjusted Three Months......... -- -- -- -- -- -- --
Adjusted Six Months........... 1,064.5 84.1 8.3 0.3 1.0 -- 1,158.2
Adjusted Annually............. 2.3 1.5 -- -- 1.7 -- 5.5
Other adjusted COFI........... 0.2 18.0 -- 39.2 0.1 -- 57.5
--------- ---------- ------ ------- ------ ------ --------
Subtotal COFI................... 4,143.6 915.4 56.5 126.7 245.6 -- 5,487.8
Treasury Bills(B):
Adjusted Monthly.............. 91.7 116.4 4.2 6.3 5.7 -- 224.3
Adjusted Three Months......... 158.7 -- -- -- -- -- 158.7
Adjusted Six Months........... 942.2 178.4 9.2 2.4 5.1 51.8 1,189.1
Adjusted Annually............. 1,027.7 22.9 0.8 1.9 1.2 1.1 1,055.6
Other adjusted Treasury....... 9.1 2.0 -- -- -- -- 11.1
--------- ---------- ------ ------- ------ ------ --------
Subtotal Treasury Bills......... 2,229.4 319.7 14.2 10.6 12.0 52.9 2,638.8
Prime Rate...................... 0.3 -- 0.3 0.5 -- 128.4 129.5
LIBOR........................... 5.8 -- 3.7 -- -- -- 9.5
Other Adjustable................ 14.0 1.4 -- -- 0.5 -- 15.9
--------- ---------- ------ ------- ------ ------ --------
Gross Loans Receivable.......... $ 7,798.3 $ 1,298.4 $ 78.5 $ 154.4 $278.8 $219.8 $9,828.2
========= ========== ====== ======= ====== ====== ========
</TABLE>
- - ---------------
(A) The interest rates associated with these loans are fixed for terms of either
3 or 5 years and then convert to adjustable rate loans.
(B) The majority of these loans will reprice based upon the 1 year Treasury
Constant Maturity index upon the expiration of their fixed rate terms.
41
<PAGE> 1
EXHIBIT 99.4
CAL FED BANCORP INC. AND SUBSIDIARIES
RESIDENTIAL 1-4 AND EQUITY LOANS
JUNE 30, 1996
<TABLE>
<CAPTION>
OUTSTANDING BALANCE OF RESIDENTIAL 1-4 AND EQUITY LOANS
--------------------------------------------------------------------------------------------------------
YEAR OF 0K- 100K- 200K- 300K- 400K- 500K- 600K- % OF
ORIGINATION 99K 199K 299K 399K 499K 599K 999K 1,000K+ TOTAL TOTAL
----------- ------ -------- -------- -------- ------ ------ ------ ------- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996............. $ 31.2 $ 157.1 $ 340.3 $ 215.5 $154.5 $ 84.5 $152.6 $ 47.9 $1,183.6 15.2%
1995............. 59.1 344.8 502.2 298.9 197.2 94.5 176.7 34.6 1,708.0 21.9%
1994............. 92.7 369.2 393.1 225.9 125.2 80.0 194.2 57.2 1,537.5 19.7%
1993............. 74.7 155.5 173.5 93.1 52.5 21.3 88.4 20.2 679.2 8.7%
1992............. 28.8 64.7 49.8 28.5 21.9 6.1 58.8 12.8 271.4 3.5%
1991............. 29.1 79.6 61.0 36.9 26.4 16.2 58.6 18.8 326.6 4.2%
1990............. 58.6 141.7 103.6 59.4 38.6 20.8 63.4 38.6 524.7 6.7%
1989............. 63.3 79.2 57.6 23.5 11.1 5.4 15.7 15.3 271.1 3.5%
1988............. 116.0 192.6 119.1 43.9 21.6 10.7 43.6 16.9 564.4 7.2%
1987............. 93.7 56.1 27.3 7.5 7.4 2.9 15.3 7.2 217.4 2.8%
1986............. 58.1 39.0 17.5 10.5 4.3 1.1 -- -- 130.5 1.7%
1985............. 56.2 42.1 13.7 2.0 2.6 1.7 2.8 1.1 122.2 1.6%
1984............. 67.2 32.1 5.7 0.7 0.8 -- -- -- 106.5 1.4%
1983............. 42.8 13.9 1.6 0.4 0.4 -- -- -- 59.1 0.8%
1982............. 7.3 1.2 -- -- -- -- -- -- 8.5 0.1%
1981............. 2.4 1.0 -- -- -- -- -- -- 3.4 0.0%
Prior to 1981.... 80.1 3.0 1.0 -- -- -- -- -- 84.1 1.0%
------ -------- -------- -------- ------ ------ ------ ------ -------- -----
Total.......... $961.3 $1,772.8 $1,867.0 $1,046.7 $664.5 $345.2 $870.1 $270.6 $7,798.2 100.0%
====== ======== ======== ======== ====== ====== ====== ====== ======== =====
% of Total....... 12.3% 22.7% 24.0% 13.4% 8.5% 4.4% 11.2% 3.5%
====== ======== ======== ======== ====== ====== ====== ======
</TABLE>
42
<PAGE> 1
EXHIBIT 99.5
CAL FED BANCORP INC. AND SUBSIDIARIES
MULTI-FAMILY LOANS
JUNE 30, 1996
<TABLE>
<CAPTION>
OUTSTANDING BALANCE OF MULTI-FAMILY LOANS
----------------------------------------------------------------------------------------------
YEAR OF 0- 750K- 1,000K- 2,000K- 3,000K- 4,000K- 5,000K- % OF
ORIGINATION 749K 999K 1,999K 2,999K 3,999K 4,999K 5,999K 6,000K+ TOTAL TOTAL
----------- ------ ------ ------- ------- ------- ------- ------- ------- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996........................... $ 8.1 $ 0.9 $ 1.1 $ -- $ -- $ -- $ -- $ -- $ 10.1 0.8%
1995........................... 17.4 2.6 4.9 -- -- -- -- -- 24.9 1.9%
1994........................... 27.7 1.7 10.7 -- 3.7 -- -- -- 43.8 3.4%
1993........................... 67.2 23.6 26.7 4.7 -- -- -- -- 122.2 9.4%
1992........................... 20.2 7.1 16.6 8.8 7.1 -- -- -- 59.8 4.6%
1991........................... 13.6 8.8 12.3 -- -- -- -- -- 34.7 2.7%
1990........................... 37.4 14.5 12.0 7.3 3.7 4.7 -- 6.4 86.0 6.6%
1989........................... 17.1 3.3 4.1 -- 6.9 4.9 -- -- 36.3 2.8%
1988........................... 137.2 14.6 19.1 6.7 7.2 4.5 5.0 -- 194.3 15.0%
1987........................... 151.4 15.7 23.5 2.3 6.9 14.0 -- -- 213.8 16.5%
1986........................... 171.8 13.3 11.8 11.6 7.5 4.1 5.3 -- 225.4 17.2%
1985........................... 100.5 4.1 12.5 6.5 6.7 -- -- -- 130.3 10.0%
1984........................... 40.3 -- 1.9 -- -- -- -- -- 42.2 3.3%
1983........................... 24.6 0.8 -- -- -- -- -- -- 25.4 2.0%
1982........................... 0.9 0.8 -- -- -- -- -- -- 1.7 0.1%
1981........................... 0.6 -- -- -- -- -- -- -- 0.6 0.1%
Prior to 1981.................. 39.8 1.8 5.3 -- -- -- -- -- 46.9 3.6%
------ ------ ------ ----- ----- ----- ----- ----- -------- -----
Total........................ $875.8 $113.6 $162.5 $47.9 $49.7 $32.2 $10.3 $ 6.4 $1,298.4 100.0%
====== ====== ====== ===== ===== ===== ===== ===== ======== =====
% of Total..................... 67.5% 8.7% 12.5% 3.7% 3.8% 2.5% 0.8% 0.5%
====== ====== ====== ===== ===== ===== ===== =====
</TABLE>
43
<PAGE> 1
EXHIBIT 99.6
CAL FED BANCORP INC. AND SUBSIDIARIES
COMMERCIAL REAL ESTATE LOANS
JUNE 30, 1996
<TABLE>
<CAPTION>
OUTSTANDING BALANCE OF COMMERCIAL REAL ESTATE LOANS
----------------------------------------------------------------------------------------------
YEAR OF 0- 750K- 1,000K- 2,000K- 3,000K- 4,000K- 5,000K- % OF
ORIGINATION 749K 999K 1,999K 2,999K 3,999K 4,999K 5,999K 6,000K+ TOTAL TOTAL
----------- ------ ----- ------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996............................. $ 0.5 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 0.5 0.1%
1995............................. 1.5 -- -- -- -- -- -- -- 1.5 0.3%
1994............................. 3.6 1.8 5.3 -- -- 5.0 -- 28.5 44.2 8.6%
1993............................. 3.3 0.9 -- -- -- -- -- -- 4.2 0.8%
1992............................. 0.8 1.0 1.3 -- 6.8 -- -- 7.7 17.6 3.4%
1991............................. 0.6 -- -- -- -- -- -- -- 0.6 0.1%
1990............................. 0.7 -- -- -- -- -- -- -- 0.7 0.1%
1989............................. 16.9 -- 1.0 2.1 -- -- -- 7.7 27.7 5.4%
1988............................. 63.1 16.9 24.8 2.2 7.0 8.9 -- -- 122.9 24.0%
1987............................. 56.2 14.0 31.4 7.3 13.2 -- 5.2 -- 127.3 24.9%
1986............................. 49.6 9.1 14.6 5.1 -- 4.7 -- -- 83.1 16.2%
1985............................. 24.0 9.4 12.6 2.0 -- -- -- -- 48.0 9.4%
1984............................. 4.7 0.8 1.2 2.8 -- -- -- -- 9.5 1.9%
1983............................. -- -- -- -- -- -- -- 10.7 10.7 2.1%
1982............................. -- -- -- -- -- -- -- -- -- 0.0%
1981............................. -- -- -- -- -- -- -- -- -- 0.0%
Prior to 1981.................... 12.5 0.7 -- -- -- -- -- -- 13.2 2.7%
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total Commercial............... $238.0 $54.6 $92.2 $21.5 $27.0 $18.6 $ 5.2 $54.6 $ 511.7 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
% of Total....................... 46.5% 10.7% 18.0% 4.2% 5.3% 3.6% 1.0% 10.7%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
44
<PAGE> 1
EXHIBIT 99.7
CAL FED BANCORP INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE MONTH MONTHS
ENDED APRIL 30, ENDED APRIL 30,
----------------- -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Loans Originated and Purchased, gross:
Residential 1-4................................................... $247.9 $127.4 $863.2 $664.1
Multi-family...................................................... 1.3 1.4 8.8 12.9
Other mortgage loans.............................................. -- -- 0.2 0.2
------ ------ ------ ------
Total mortgage loans.............................................. 249.2 128.8 872.2 677.2
Other loans....................................................... 10.6 10.3 34.3 33.8
------ ------ ------ ------
$259.8 $139.1 $906.5 $711.0
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996 APRIL 30, 1995
-------------------- --------------------
AVG. RATE BALANCE PERCENT BALANCE PERCENT
--------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
COMPOSITION OF DEPOSITS:
No minimum term -- checking:
Tiered checking.................................. 1.17% $ 686.2 7.7% $ 774.7 8.3%
Non-interest bearing commercial.................. -- 234.1 2.6 177.5 1.9
No minimum term -- savings:
Passbook......................................... 2.21 466.8 5.3 538.3 5.8
Money market savings............................. 3.60 1,246.1 14.1 1,290.7 13.9
Term:
Less than 3 months............................... 4.44 121.9 1.4 94.9 1.0
3 months to 6 months............................. 5.05 634.1 7.2 405.1 4.3
7 months to 1 year............................... 5.35 2,249.4 25.4 2,921.4 31.4
13 months to 2 years............................. 6.08 2,661.7 30.1 2,297.0 24.7
25 months to 3 years............................. 5.59 61.1 0.7 135.5 1.5
37 months to 4 years............................. 5.96 36.8 0.4 75.5 0.8
49 months to 5 years............................. 6.31 178.9 2.0 286.0 3.1
Over 5 years..................................... 7.11 276.0 3.1 305.9 3.3
-------- ----- -------- -----
Total consolidated deposits........................ $8,853.1 100.0% $9,302.5 100.0%
======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
----------------------- -----------------------
SELECTED ASSET AND LIABILITY DATA AS OF: 1996 1995 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total assets............................................ $14,093.7 $14,180.6 $14,320.6 $14,182.4
Cash and investments.................................... 1,926.8 2,159.9 2,222.7 2,417.7
Mortgage-backed securities, net......................... 2,207.0 2,642.3 2,366.7 2,513.7
Loans, net.............................................. 9,527.3 8,831.8 9,303.6 8,747.3
Deposits................................................ 8,853.1 9,302.5 9,476.7 8,360.9
Borrowings.............................................. 4,107.7 3,847.7 3,786.4 4,818.8
NON-PERFORMING ASSETS:
REO................................................... $ 30.8 $ 43.4 $ 22.2 $ 39.1
Non-accrual loans/past due............................ 193.1 165.1 206.3 178.2
Restructured loans.................................... 3.7 -- 3.3 5.8
--------- --------- --------- ---------
Total of non-performing assets...................... $ 227.6 $ 208.5 $ 231.8 $ 223.1
========= ========= ========= =========
Ratio of non-performing assets to total assets:
including restructured loans(1)....................... 1.62% 1.47% 1.62% 1.57%
</TABLE>
<TABLE>
<CAPTION>
"AT" APRIL 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
WEIGHTED AVERAGE INTEREST RATES:
Yield on net loan portfolio.......................................................... 7.82% 7.61%
Yield on mortgage-backed securities.................................................. 6.80 6.56
Yield on other interest earning assets(2)............................................ 5.38 6.00
Yield on interest earning assets................................................... 7.35 7.20
Cost of deposits(3).................................................................. 4.69 4.74
Cost of borrowings................................................................... 5.48 6.39
Cost of interest bearing liabilities............................................... 4.94 5.22
Interest rate spread (yield on interest earning
assets less cost of interest bearing liabilities).................................. 2.41 1.98
</TABLE>
- - ---------------
(1) Represents the ratio of gross non-accrual loans, restructured loans and real
estate acquired in settlement of loans to total assets.
(2) Consists of certificates of deposit, federal funds sold and investment
securities.
(3) The cost of deposits has been impacted for hedging activities.
The information contained herein is unaudited and subject to revision.
45
<PAGE> 1
EXHIBIT 99.8
CAL FED BANCORP INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE MONTH ENDED FOR THE FIVE MONTHS
MAY 31, ENDED MAY 31,
------------------- ---------------------
1996 1995 1996 1995
------ ------ -------- ------
<S> <C> <C> <C> <C>
Loans Originated and Purchased, gross:
Residential 1-4........................................... $274.6 $132.1 $1,137.8 $796.2
Multi-family.............................................. 1.4 3.0 10.2 15.9
Other mortgage loans...................................... -- 0.2 0.2 0.4
------ ------ -------- ------
Total mortgage loans...................................... 276.0 135.3 1,148.2 812.5
Other loans............................................... 7.6 8.2 41.9 42.0
------ ------ -------- ------
$283.6 $143.5 $1,190.1 $854.5
====== ====== ======== ======
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1996 MAY 31, 1995
-------------------- --------------------
AVG. RATE BALANCE PERCENT BALANCE PERCENT
---------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
COMPOSITION OF DEPOSITS:
No minimum term -- checking:
Tiered checking.................................. 1.17% $ 729.8 8.2% $ 768.4 8.3%
Non-interest bearing commercial.................. -- 236.6 2.7 194.9 2.1
No minimum term -- savings:
Passbook......................................... 2.21 466.5 5.3 535.5 5.8
Money market savings............................. 3.64 1,302.5 14.7 1,282.2 13.8
Term:
Less than 3 months............................... 4.40 120.4 1.3 91.8 1.0
3 months to 6 months............................. 5.01 639.4 7.2 373.4 4.0
7 months to 1 year............................... 5.30 2,265.7 25.5 2,975.2 32.1
13 months to 2 years............................. 6.05 2,560.9 28.9 2,330.9 25.1
25 months to 3 years............................. 5.61 62.1 0.7 73.1 0.8
37 months to 4 years............................. 5.87 32.3 0.4 75.7 0.8
49 months to 5 years............................. 6.32 179.6 2.0 237.8 2.6
Over 5 years..................................... 7.11 274.0 3.1 332.9 3.6
-------- ----- -------- -----
Total consolidated deposits........................ $8,869.8 100.0% $9,271.8 100.0%
======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
MAY 31, DECEMBER 31,
----------------------- -----------------------
SELECTED ASSET AND LIABILITY DATA AS OF: 1996 1995 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total assets............................................ $14,073.3 $14,127.6 $14,320.6 $14,182.4
Cash and investments.................................... 1,815.5 2,095.3 2,222.7 2,417.7
Mortgage-backed securities, net......................... 2,171.2 2,679.6 2,366.7 2,513.7
Loans, net.............................................. 9,635.6 8,866.3 9,303.6 8,747.3
Deposits................................................ 8,869.8 9,271.8 9,476.7 8,360.9
Borrowings.............................................. 4,058.4 3,794.9 3,786.4 4,818.8
NON-PERFORMING ASSETS:
REO................................................... $ 29.2 $ 45.7 $ 22.2 $ 39.1
Non-accrual loans/past due............................ 192.0 191.0 206.3 178.2
Restructured loans.................................... 3.7 -- 3.3 5.8
--------- --------- --------- ---------
Total non-performing assets.................... $ 224.9 $ 236.7 $ 231.8 $ 223.1
========= ========= ========= =========
Ratio of non-performing assets to total assets:
including restructured loans(1)....................... 1.60% 1.68% 1.62% 1.57%
</TABLE>
<TABLE>
<CAPTION>
"AT" MAY 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
WEIGHTED AVERAGE INTEREST RATES:
Yield on net loan portfolio........................................................ 7.72% 7.70%
Yield on mortgage-backed securities................................................ 6.76 6.71
Yield on other interest earning assets(2).......................................... 5.43 6.11
Yield on interest earning assets................................................. 7.30 7.28
Cost of deposits(3)................................................................ 4.65 4.83
Cost of borrowings................................................................. 5.52 6.37
Cost of interest bearing liabilities............................................. 4.92 5.28
Interest rate spread (yield on interest earning
assets less cost of interest bearing liabilities)................................ 2.38 2.00
</TABLE>
- - ---------------
(1) Represents the ratio of gross non-accrual loans, restructured loans and real
estate acquired in settlement of loans to total assets.
(2) Consists of certificates of deposit, federal funds sold and investment
securities.
(3) The cost of deposits has been impacted for hedging activities.
The information contained herein is unaudited and subject to revision.
46
<PAGE> 1
EXHIBIT 99.9
CAL FED BANCORP INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
MONTH ENDED MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ---------------------
1996 1995 1996 1995
------ ------ -------- --------
<S> <C> <C> <C> <C>
Loans Originated and Purchased, gross:
Residential 1-4................................................ $184.8 $191.2 $1,322.6 $ 987.4
Multi-family................................................... 3.2 2.9 13.4 18.8
Other mortgage loans........................................... 0.3 -- 0.5 0.4
------ ------ -------- --------
Total mortgage loans........................................... 188.3 194.1 1,336.5 1,006.6
Other loans.................................................... 7.4 8.6 49.3 50.6
------ ------ -------- --------
$195.7 $202.7 $1,385.8 $1,057.2
====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------------- -------------------
AVG. RATE BALANCE PERCENT BALANCE PERCENT
---------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
COMPOSITION OF DEPOSITS:
No minimum term -- checking:
Tiered checking....................................... 1.17% $ 696.0 7.9% $ 790.9 8.4%
Non-interest bearing commercial....................... -- 265.9 3.0 203.2 2.2
No minimum term -- savings:
Passbook.............................................. 2.21 459.3 5.2 535.3 5.7
Money market savings.................................. 3.66 1,264.9 14.3 1,261.5 13.5
Term:
Less than 3 months.................................... 4.41 118.4 1.4 92.6 1.0
3 months to 6 months.................................. 4.93 557.5 6.3 419.0 4.5
7 months to 1 year.................................... 5.28 2,371.0 26.8 2,890.7 30.8
13 months to 2 years.................................. 6.05 2,563.0 29.0 2,427.7 25.9
25 months to 3 years.................................. 5.65 63.7 0.7 125.4 1.3
37 months to 4 years.................................. 5.72 28.4 0.3 73.9 0.8
49 months to 5 years.................................. 6.32 179.7 2.0 215.1 2.3
Over 5 years.......................................... 7.11 276.4 3.1 332.9 3.6
-------- ----- -------- -----
Total consolidated deposits............................. $8,844.2 100.0% $9,368.2 100.0%
======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- -----------------------
SELECTED ASSET AND LIABILITY DATA AS OF: 1996 1995 1995 1994
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Total assets............................................ $14,045.4 $14,319.8 $14,320.6 $14,182.4
Cash and investments.................................... 1,813.4 2,207.3 2,222.7 2,417.7
Mortgage-backed securities, net......................... 2,140.0 2,643.5 2,366.7 2,513.7
Loans, net.............................................. 9,669.1 8,944.6 9,303.6 8,747.3
Deposits................................................ 8,844.2 9,368.2 9,476.7 8,360.9
Borrowings.............................................. 4,185.9 3,930.0 3,786.4 4,818.8
NON-PERFORMING ASSETS:
REO................................................... $ 16.3 $ 46.4 $ 22.2 $ 39.1
Non-accrual loans/past due............................ 166.7 179.8 206.3 178.2
Restructured loans.................................... 3.7 -- 3.3 5.8
-------- -------- --------- ---------
Total non-performing assets.................... $ 186.7 $ 226.2 $ 231.8 $ 223.1
======== ======== ========= =========
Ratio of non-performing assets to total assets:
including restructured loans(1)....................... 1.33% 1.58% 1.62% 1.57%
</TABLE>
<TABLE>
<CAPTION>
"AT" JUNE 30,
--------------------
1996 1995
---- ----
<S> <C> <C>
WEIGHTED AVERAGE INTEREST RATES:
Yield on net loan portfolio....................................................... 7.70% 7.77%
Yield on mortgage-backed securities............................................... 6.72 6.80
Yield on other interest earning assets(2)......................................... 5.58 6.17
Yield on interest earning assets................................................ 7.30 7.35
Cost of deposits(3)............................................................... 4.65 4.87
Cost of borrowings................................................................ 5.59 6.33
Cost of interest bearing liabilities............................................ 4.95 5.30
Interest rate spread (yield on interest earning assets less cost of interest
bearing liabilities)............................................................ 2.35 2.05
</TABLE>
- - ---------------
(1) Represents the ratio of gross non-accrual loans, restructured loans and real
estate acquired in settlement of loans to total assets.
(2) Consists of certificates of deposit, federal funds sold and investment
securities.
(3) The cost of deposits has been impacted for hedging activities.
The information contained herein is unaudited and subject to revision.
47
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 255,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,352,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 205,500
<INVESTMENTS-CARRYING> 2,140,000
<INVESTMENTS-MARKET> 2,125,700
<LOANS> 9,669,100
<ALLOWANCE> 172,800
<TOTAL-ASSETS> 14,045,400
<DEPOSITS> 8,844,200
<SHORT-TERM> 3,197,900
<LIABILITIES-OTHER> 159,600
<LONG-TERM> 988,000
49,400
0
<COMMON> 172,500
<OTHER-SE> 633,800
<TOTAL-LIABILITIES-AND-EQUITY> 14,045,400
<INTEREST-LOAN> 376,100
<INTEREST-INVEST> 132,900
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 509,000
<INTEREST-DEPOSIT> 221,500
<INTEREST-EXPENSE> 334,600
<INTEREST-INCOME-NET> 174,400
<LOAN-LOSSES> 20,400
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 124,000
<INCOME-PRETAX> 73,700
<INCOME-PRE-EXTRAORDINARY> 73,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,600
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 2.49
<LOANS-NON> 166,700
<LOANS-PAST> 0
<LOANS-TROUBLED> 3,700
<LOANS-PROBLEM> 24,500
<ALLOWANCE-OPEN> 181,000
<CHARGE-OFFS> 33,100
<RECOVERIES> 4,500
<ALLOWANCE-CLOSE> 172,800
<ALLOWANCE-DOMESTIC> 19,300
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 153,500
</TABLE>
