STRONG FOURTH QUARTER MARGIN EXPANSION PROPELS PFF
BANCORP, INC. TO RECORD EARNINGS FOR FISCAL 2005
Pomona, Calif. -- April 21, 2005 -- PFF Bancorp, Inc. (NYSE:PFB), the holding company for PFF Bank & Trust (the "Bank"), Diversified Builder Services, Inc. and Glencrest Investment Advisors, Inc. ("GIA"), today reported a 15 basis point expansion in net interest margin during the quarter ended March 31, 2005 driving net earnings to a record $45.8 million or $1.81 per diluted share for the year ended March 31, 2005 ("fiscal 2005") compared to $40.9 million or $1.63 per diluted share for the year ended March 31, 2004 ("fiscal 2004") (adjusted for the three-for-two stock split effected in the form of a stock dividend paid on March 3, 2005 to shareholders of record on February 15, 2005).
Earnings before income taxes increased 18 percent to $85.9 million for fiscal 2005, compared to $73.1 million for fiscal 2004. Our effective tax rate increased to 46.7 percent for fiscal 2005 compared to 44.0 percent for fiscal 2004, due principally to the non-deductibility of a significant portion of our Employee Stock Ownership Plan ("ESOP") expense. As discussed later in this release, as our stock rises, the nondeductible portion of our ESOP expense increases pushing our effective tax rate higher.
Our continued strong upward earnings momentum was attributable to the following positive
fundamentals:
- Total deposits increased $280.9 million or 11 percent during fiscal 2005 to $2.74 billion. Lower cost passbook, money market, and transaction accounts ("core deposits") increased $224.1 million or 14 percent and now total $1.78 billion or 65 percent of total deposits compared to $1.56 billion or 64 percent of total deposits one year ago.
- Non-interest bearing deposits increased $67.2 million or 31 percent during fiscal 2005 to $281.3 million and now represent 10 percent of total deposits.
- The average cost of total deposits and core deposits was 1.54% and 0.97% for fiscal 2005 compared to 1.55% and 0.93% for fiscal 2004.
- Construction, commercial business, commercial real estate and consumer loans (the "Four-Cs") increased $330.3 million or 24 percent during fiscal 2005 to $1.71 billion or 50 percent of loans and leases receivable, net, compared to $1.38 billion or 44 percent of loans and leases receivable, net, one year ago.
- For fiscal 2005, Four-Cs originations were $2.10 billion or 84 percent of total originations, compared to $1.82 billion or 84 percent of total originations for fiscal 2004.
- Net interest income increased $20.7 million or 16 percent to $151.7 million for fiscal 2005 compared to fiscal 2004 reflecting a $526.8 million or 17 percent increase in average interest-earning assets, partially offset by a 3 basis point year-over-year contraction in net interest margin to 4.08 percent for fiscal 2005.
- On a sequential quarter basis, total deposits and core deposits increased $31.3 million and $4.0 million, respectively and the Four-Cs increased $50.1 million. This growth contributed to the 15 basis point sequential quarter increase in net interest margin to 4.17 percent for the quarter ended March 31, 2005.
Larry M. Rinehart, President and CEO commented, "The strength of our net interest margin reflects our success in continuing to increase the proportion of our balance sheet comprised by the Four-Cs and core-deposits. We're confident that our demonstrated ability to grow these more profitable assets and liabilities coupled with the continued strength of the Inland Empire region of Southern California will lead to continued earnings growth."
Non-interest income increased $2.4 million or 10 percent between fiscal year 2005 and 2004 to $27.5 million. The increase in non-interest income reflects the following:
The increase in trust, investment and insurance fees for fiscal 2005 reflects the growth in the Company's subsidiary GIA and its subsidiary Glencrest Insurance Services ("GIS"). Trust and investment assets under custody or management at GIA and the Bank's trust department increased 39 percent to $515.3 million at March 31, 2005 from $371.4 million at March 31, 2004. Fees associated with the increase in assets under management increased $536,000 or 22 percent to $3.0 million. Insurance and annuity sales fees at GIS increased $76,000 to $1.4 million during fiscal 2005 as compared to fiscal 2004.
General and administrative ("G&A") expense increased $10.6 million or 13 percent between fiscal 2004 and 2005 to $90.5 million. Excluding operating costs associated with new branches, the year over year increase was approximately $9.3 million or 11 percent. Compensation and benefits expense accounted for approximately 43 percent of the increase in total G&A reflecting a seven percent increase in the number of full-time equivalent employees between March 31, 2004 and 2005 as well an increase in performance-based cash compensation. Compared to the comparable quarter of the prior year, total G&A expense for the current quarter was up 7 percent.
We expect our effective tax rate to decrease to approximately 43 percent beginning April 1, 2005. The anticipated reduction in our effective tax rate will accompany and result from an expected decrease in ESOP expense beginning April 1, 2005. For the year ended March 31, 2005, ESOP expense of $9.9 million was based on 383,082 shares being amortized, (an average of 95,771 shares per quarter). From April 1 through December 31, 2005, ESOP expense will be based on a quarterly amortization of approximately 25,658 shares - a 73 percent reduction from the average quarterly amortization level for fiscal 2005. All shares under the current ESOP will be allocated as of December 31, 2005. We intend to continue our ESOP beyond calendar 2005 by acquiring additional shares and allocating those shares to employees at a level similar to that projected for the April through December 2005 period. In addition to the anticipated decrease in total ESOP expense resulting from the reduction in shares being amortized, we expect that the non-deductible portion of ESOP expense will be reduced further beginning January 1, 2006 because there will be a smaller difference between the cost basis of the shares acquired to continue the plan and the fair value of those shares as they are amortized throughout the period.
Asset quality remains strong with non-accrual loans down to $12.2 million or 0.30 percent of gross loans and leases at March 31, 2005, from $13.1 million or 0.33 percent of gross loans and leases at December 31, 2004 and $13.6 million or 0.37 percent of gross loans and leases at March 31, 2004.
At March 31, 2005, the allowance for loan and lease losses was $33.3 million or 0.83 percent of gross loans and leases and 273 percent of non-accrual loans compared to $30.8 million or 0.84 percent of gross loans and leases and 226 percent of non-accrual loans at March 31, 2004. The provision for loan and lease losses remained unchanged at $2.7 million for both fiscal 2005 and fiscal 2004. The negative provision for loan and lease losses for the quarter ended March 31, 2005 was attributable to net recoveries of $625,000, on a tract construction loan and several commercial business loans.
We repurchased 750,150 shares of our common stock at a weighted average price of $28.39 per share during the quarter ended March 31, 2005. During fiscal 2005, we repurchased 1,229,100 shares at a weighted average price of $26.65 per share. At March 31, 2005, 738,270 shares remain under a 1,200,000-share repurchase authorization adopted by our Board of Directors on January 26, 2005. Consistent with our current intention of maintaining our cash dividend yield at approximately 2 percent, we increased our quarterly dividend by 13 percent to 0.15 per share effective with the dividend paid on March 24, 2005.
At March 31, 2005, we were conducting business through 29 full-service banking branches, three registered investment advisory offices, three trust offices, a Southern California regional loan center, an office providing diversified financial services to home builders and one loan origination office in Northern California.
We will host a conference call at 8:30 A.M. PDT on Friday, April 22, 2005, to discuss our financial results. The conference call can be accessed by dialing 1-800-322-0079 and referencing PFF Bancorp Inc. fiscal 2004 Conference Call. An audio replay of this conference call will be available through Friday, May 6, 2005, by dialing 1-877-519-4471 and referencing replay PIN number 5899080.
Certain matters discussed in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market and statements regarding the Company's strategic objectives. These forward-looking statements are based upon current management expectations, and may therefore involve risks and uncertainties. The Company's actual results or performance, may differ materially from those suggested, expressed, or implied by forward-looking statements due to a wide range of factors including, but not limited to, the general business environment, the California real estate market, competitive conditions in the business and geographic areas in which the Company conducts its business, regulatory actions or changes and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended March 31, 2004. The Company disclaims any obligation to subsequently revise or update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Contact Larry M. Rinehart, President and CEO or Gregory C. Talbott, Executive Vice President, CFO, PFF Bancorp, Inc. 350 So. Garey Avenue, Pomona, CA 91766, (909) 623-2323.
