PFF BANCORP, INC. REPORTS SECOND QUARTER EARNINGS
NET INTEREST MARGIN EXPANDS 11 BASIS POINTS, FOUR-Cs LOAN
ORIGINATIONS INCREASE 37% AND CORE DEPOSITS GROW 11%
Pomona, Calif. - October 24, 2005 -- PFF Bancorp, Inc. (NYSE:PFB), the holding company for PFF Bank & Trust (the "Bank"), Diversified Builder Services, Inc. ("DBS") and Glencrest Investment Advisors, Inc. ("Glencrest"), today reported net earnings of $13.4 million or $0.54 per diluted share for the quarter ended September 30, 2005 compared to $13.2 million or $0.52 per diluted share for the comparable period of 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). Excluding gains on sales of securities of $923,000 and $3.3 million during the quarters ended September 30, 2005 and 2004, respectively, earnings before income taxes increased $1.6 million or 8 percent between the quarters ended September 30, 2004 and 2005.
- Net interest margin expanded 11 basis points to 4.18% between the quarters ended September 30, 2004 and 2005 and was up 1 basis point on a sequential quarter basis. Net interest income of $39.7 million for the current quarter increased $2.2 million or 6 percent from the comparable quarter of 2004 and increased $149,000 on a sequential quarter basis.
Lower cost passbook, money market, NOW and other demand accounts ("core deposits") increased $68.3 million during the current quarter and are up $178.7 million or 11 percent from one year ago. Core deposits of $1.87 billion now represent 64 percent of total deposits compared to $1.69 billion or 65 percent of total deposits one year ago. The average cost of core deposits was 1.45% for the current quarter compared to 1.19% for the prior quarter and 0.89% for the comparable period of 2004. Transaction accounts ("NOW and other demand") represent $747.2 million or 26 percent of total deposits, down slightly from $765.8 million or 30 percent of total deposits one year ago. Non-interest bearing transaction accounts increased $16.0 million during the current quarter to $314.5 million or 11 percent of total deposits and are up $55.7 million or 22 percent from one year ago.
We opened our 30th full service banking branch in Mira Loma, California on September 12, 2005, bringing to four the number of branches opened during the past ten months.
- Construction, commercial business, commercial real estate and consumer loans (the "Four-Cs") increased $31.0 million during the current quarter to $1.82 billion or 52 percent of loans and leases receivable, net, compared to $1.63 billion or 47 percent of loans and leases receivable, net, one year ago. Four-Cs originations were $636.4 million or 87 percent of total originations for the current quarter compared to $465.1 million or 79 percent of total originations for the comparable quarter of 2004.
The undisbursed balance of construction loans, (which is not included in the totals for the Four-Cs noted above) increased $104.3 million during the current quarter to $705.0 million at September 30, 2005, and increased $209.9 million from $495.1 million one year ago. These balances represent funds that will be disbursed on existing construction loans as development progresses.
Larry M. Rinehart, President and CEO commented, "The significant increase in these undisbursed balances bodes extremely well for continued growth in higher yield interest-bearing assets over the next several quarters as the funds committed to the projects presently underway are disbursed".
During the current quarter we issued $25.0 million of floating rate trust preferred securities ("Capital Securities") through a newly formed unconsolidated special purpose business trust, PFF Bancorp Capital Trust II ("the Trust"). These Capital Securities mature November 23, 2035 and bear interest at three month LIBOR plus 1.52%. To capitalize the Trust and upstream the proceeds from the issuance of the Capital Securities from the Trust to the Bancorp, the Bancorp issued $25.8 million of floating rate junior subordinated debentures to the Trust with terms identical to those of the Capital Securities. Concurrent with the issuance of the Capital Securities, we entered into a $10.0 million interest rate swap agreeing to pay a fixed rate of 5.98 percent and receive three month LIBOR plus 1.52% until November 23, 2010. The proceeds from the issuance of the junior subordinated debentures are being used as a funding vehicle for DBS, as well as for general corporate purposes. At September 30, 2005, DBS has outstanding loans receivable, net, of $54.2 million compared to $44.6 million and $21.7 million at March 31, 2005 and September 30, 2004, respectively. The majority of these loans are classified as construction and land.
Excluding the gains on sales of securities noted earlier, non-interest income increased $1.6 million between the quarters ended September 30, 2004 and 2005. These gains on sales were attributable to an investment in a single equity security, the entire balance of which was sold prior to September 30, 2005. Deposit and related fees rose $796,000 or 30 percent, and loan and servicing fees increased $1.1 million or 81 percent for the current quarter compared to the comparable quarter of the prior year. The increase in deposit and related fees reflects the fee income opportunities associated with the transaction accounts noted earlier.
Our efficiency ratio was 48.87 percent for the current quarter, compared to 45.91 percent for the comparable quarter of 2004. Excluding gains on sales of securities, our efficiency ratios would have been 49.83 percent and 49.45 percent for the quarters ended September 30, 2005 and 2004, respectively. General and administrative ("G&A") expense increased $2.0 million or 10 percent between the quarters ended September 30, 2005 and 2004 to $23.4 million. Compensation and benefits expense accounted for approximately 62 percent of the increase in total G&A expense. Approximately, $684,000 or 34 percent of the incremental increase in G&A expenses for the quarter ended September 30, 2005 as compared to the same period last year was attributable to the operating costs of the four new full service branches opened since November 2004.
Employee Stock Ownership Plan ("ESOP") expense was $758,000 for the current quarter compared to $2.4 million, for the comparable quarter of 2004, reflecting a reduction in the number of shares amortized from 95,771 for the quarter ended September 30, 2004 to 25,658 for the current quarter. The reduction in ESOP expense, a significant portion of which is not tax deductible, contributed to a reduction in our effective income tax rate from 45.1 percent for the quarter ended September 30, 2004 to 42.5 percent for the current quarter.
Asset quality remains strong with non-accrual loans declining to $11.9 million or 0.28 percent of gross loans and leases at September 30, 2005, from $12.2 million or 0.30 percent of gross loans and leases at March 31, 2005.
At September 30, 2005, the allowance for loan and lease losses was $34.5 million or 0.82 percent of gross loans and leases and 290 percent of non-accrual loans compared to $33.3 million or 0.83 percent of gross loans and leases and 273 percent of non-accrual loans at March 31, 2005. The provision for loan and lease losses was $1.2 million for the current quarter compared to $1.1 million for the same period of prior year. The current period provision for loan and lease losses was attributable primarily to an increase in the construction and land and commercial business loan portfolios.
We repurchased 328,890 shares of our common stock at a weighted average price of $30.10 per share during the current quarter, bringing fiscal year-to-date repurchases to 610,030 shares at a weighted average price of $29.52 per share. At September 30, 2005, 128,240 shares remain under a 1,200,000-share repurchase authorization adopted by our Board of Directors on January 26, 2005.
At September 30, 2005, we were conducting business through 30 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. Assets under management or advisory by Glencrest and the Bank's trust department rose to $577.6 million at September 30, 2005, compared to $393.8 million at September 30, 2004. These assets under management or advisory include $428.2 million managed or advised by Glencrest at September 30, 2005, as compared to $242.1 million at September 30, 2004.
We will host a conference call at 8:30 A.M. PDT on Tuesday, October 25, 2005, to discuss our financial results. The conference call can be accessed by dialing 1-800-322-0079 and referencing "PFF Bancorp, Inc. Second Quarter Conference Call". An audio replay of this conference call will be available through Friday, November 4, 2005, by dialing 1-877-519-4471 and referencing replay PIN number 6533087.
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, 2005. 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.
PFF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
| | September 30,
2005 | | March 31,
2005 | |
| | | | |
ASSETS | | | | |
Cash and cash equivalents | $ 53,188 | | $ 44,844 | |
Investment securities held-to-maturity (estimated fair value of $6,620 at September 30, 2005, and $6,647 at March 31, 2005) | 6,730 | | 6,736 | |
Investment securities available-for-sale, at fair value | 60,494 | | 61,938 | |
Mortgage-backed securities available-for-sale, at fair value | 233,578 | | 250,954 | |
Loans held-for-sale | 865 | | 1,466 | |
Loans and leases receivable, net | 3,474,100 | | 3,431,544 | |
Federal Home Loan Bank (FHLB) stock, at cost | 42,324 | | 41,839 | |
Accrued interest receivable | 17,922 | | 16,413 | |
Property and equipment, net | 42,582 | | 30,385 | |
Prepaid expenses and other assets | 23,094 | | 24,942 | |
Total assets | $ 3,954,877 | | $ 3,911,061 | |
| | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Liabilities: | | | | |
Deposits | $ 2,894,539 | | $ 2,735,937 | |
FHLB advances and other borrowings | 620,000 | | 769,423 | |
Junior subordinated debentures | 56,702 | | 30,928 | |
Accrued expenses and other liabilities | 39,284 | | 37,847 | |
Total liabilities | 3,610,525 | | 3,574,135 | |
Commitments and contingencies | - | | - | |
Stockholders' equity: | | | | |
Preferred stock, $.01 par value. Authorized 2,000,000
shares; none issued | - | | - | |
Common stock, $.01 par value. Authorized 59,000,000 shares; issued 24,483,676 and 24,908,823; outstanding 24,433,276 and 24,782,623 at September 30, 2005 and March 31, 2005, respectively | 244 | | 248 | |
Additional paid-in capital | 170,535 | | 164,536 | |
Retained earnings, substantially restricted | 181,566 | | 178,288 | |
| Unearned stock-based compensation | (2,085 | ) | (352) | |
Treasury stock (50,400 and 126,200 at September 30, 2005, and
March 31, 2005, respectively) | (1 | ) | (1) | |
Accumulated other comprehensive income (losses) | (5,907 | ) | (5,793) | |
Total stockholders' equity | 344,352 | | 336,926 | |
Total liabilities and stockholders' equity | $ 3,954,877 | | $ 3,911,061 | |
| | | | |
| | | | |
| | | | |
PFF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
| For the Three Month Ended September 30, | For the Six Months Ended
September 30, |
| | 2005 | | 2004 | | 2005 | | 2004 | |
Interest income: | | | | | | | | |
Loans and leases receivable | $ 57,293 | | $ 47,795 | | $ 111,867 | | $ 92,336 | |
Mortgage-backed securities | 2,201 | | 2,441 | | 4,547 | | 4,989 | |
Investment securities and deposits | 1,116 | | 1,131 | | 2,249 | | 2,114 | |
Total interest income | 60,610 | | 51,367 | | 118,663 | | 99,439 | |
Interest expense: | | | | | | | | |
Deposits | 15,097 | | 9,352 | | 27,701 | | 17,991 | |
Borrowings | 5,809 | | 4,496 | | 11,703 | | 8,062 | |
Total interest expense | 20,906 | | 13,848 | | 39,404 | | 26,053 | |
Net interest income | 39,704 | | 37,519 | | 79,259 | | 73,386 | |
| Provision for loan and lease losses | 1,220 | | 1,140 | | 1,220 | | 1,664 | |
Net interest income after provision for loan and lease losses | 38,484 | | 36,379 | | 78,039 | | 71,722 | |
Non-interest income: | | | | | | | | |
Deposit and related fees | 3,469 | | 2,673 | | 6,416 | | 5,225 | |
Loan and servicing fees | 2,424 | | 1,340 | | 4,290 | | 2,954 | |
Trust, investment and insurance fees | 1,030 | | 1,160 | | 2,176 | | 2,238 | |
Gain on sale of loans, net | 36 | | 81 | | 103 | | 124 | |
Gain on sale of securities, net | 923 | | 3,330 | | 923 | | 4,769 | |
Other non-interest income | 287 | | 414 | | 660 | | 595 | |
Total non-interest income | 8,169 | | 8,998 | | 14,568 | | 15,905 | |
Non-interest expense: | | | | | | | | |
General and administrative: | | | | | | | | |
Compensation and benefits | 13,760 | | 12,503 | | 26,709 | | 24,914 | |
Occupancy and equipment | 3,600 | | 3,488 | | 7,057 | | 6,827 | |
Marketing and professional services | 2,660 | | 2,316 | | 5,647 | | 4,631 | |
Other non-interest expense | 3,375 | | 3,049 | | 6,648 | | 6,855 | |
Total general and administrative | 23,395 | | 21,356 | | 46,061 | | 43,227 | |
Foreclosed asset operations, net | 10 | | (42 | ) | 9 | | 34 | |
Total non-interest expense | 23,405 | | 21,314 | | 46,070 | | 43,261 | |
Earnings before income taxes | 23,248 | | 24,063 | | 46,537 | | 44,366 | |
| Income taxes | 9,889 | | 10,859 | | 20,820 | | 20,387 | |
Net earnings | $ 13,359 | | $ 13,204 | | $ 25,717 | | $ 23,979 | |
| | | | | | | | |
Basic earnings per share | $ 0.55 | | $ 0.54 | | $ 1.06 | | $ 0.98 | |
Weighted average shares outstanding for basic
earnings per share calculation | 24,256,805 | | 24,550,355 | | 24,329,067 | | 24,506,799 | |
Diluted earnings per share | $ 0.54 | | $ 0.52 | | $ 1.03 | | $ 0.95 | |
Weighted average shares outstanding for diluted
earnings per share calculation | 24,892,633 | | 25,341,804 | | 24,974,616 | | 25,301,397 | |
PFF BANCORP, INC. AND SUBSIDIARIES
Selected Ratios and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| For the Three Months Ended
September 30, | For the Six months Ended
September 30, |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| Performance Ratios | | | | | | | | |
Return on average assets (1) | 1.35 | % | 1.39 | % | 1.31 | % | 1.28% | |
Return on average stockholders' equity (1) | 15.51 | % | 16.16 | % | 15.04 | % | 14.78% | |
General and administrative expense to average assets (1) | 2.37 | % | 2.25 | % | 2.34 | % | 2.31% | |
Efficiency ratio (3) | 48.87 | % | 45.91 | % | 49.09 | % | 48.41% | |
Average interest-earning assets to average interest- | | | | | | | | |
bearing liabilities | 107.14 | % | 107.54 | % | 107.26 | % | 107.49% | |
| | | | | | | | |
Yields and Costs (1) | | | | | | | | |
Net interest spread | 4.02 | % | 3.95 | % | 4.02 | % | 3.98% | |
Net interest margin (2) | 4.18 | % | 4.07 | % | 4.17 | % | 4.08% | |
Average yield on interest-earning assets | 6.36 | % | 5.55 | % | 6.24 | % | 5.53% | |
Average cost of interest-bearing liabilities | 2.34 | % | 1.60 | % | 2.22 | % | 1.55% | |
Average yield on loans and leases receivable, net | 6.63 | % | 5.76 | % | 6.50 | % | 5.75% | |
Average yield on securities | 3.67 | % | 3.56 | % | 3.71 | % | 3.61% | |
Average cost of core deposits | 1.45 | % | 0.89 | % | 1.32 | % | 0.87% | |
Average cost of C.D.s | 3.37 | % | 2.51 | % | 3.22 | % | 2.46% | |
Average cost of total deposits | 2.12 | % | 1.46 | % | 1.99 | % | 1.44% | |
Average cost of FHLB advances and other borrowings | 3.06 | % | 1.99 | % | 2.90 | % | 1.88% | |
Average cost of junior subordinated debentures | 6.05 | % | 5.93 | % | 6.07 | % | 5.92% | |
| | | | | | | | | |
| Asset Quality | | | | | | | | |
Net charge-offs (recoveries) | $ (70 | ) | $ 301 | | $ 40 | | $ 596 | |
Net charge-offs (recoveries) to average loans and leases receivable, net (1) | (0.01) | % | 0.04 | % | 0.00% | | 0.04% | |
| | | | | | | | | |
| Average Balances | | | | | | | | |
Average total assets | $ 3,954,541 | | $ 3,795,499 | | $ 3,936,291 | | $ 3,736,350 | |
Average interest-earning assets | $ 3,800,951 | | $ 3,690,455 | | $ 3,798,572 | | $ 3,598,125 | |
Average interest-bearing liabilities | $ 3,547,500 | | $ 3,431,719 | | $ 3,541,594 | | $ 3,347,408 | |
Average loans and leases receivable, net | $ 3,444,878 | | $ 3,307,935 | | $ 3,440,238 | | $ 3,210,845 | |
Average securities | $ 298,762 | | $ 332,173 | | $ 305,057 | | $ 335,638 | |
Average core deposits | $ 1,838,408 | | $ 1,640,817 | | $ 1,795,626 | | $ 1,603,260 | |
Average C.D.s | $ 990,302 | | $ 895,373 | | $ 978,006 | | $ 889,077 | |
Average total deposits | $ 2,828,710 | | $ 2,536,190 | | $ 2,773,632 | | $ 2,492,337 | |
Average FHLB advances and other borrowings | $ 683,660 | | $ 895,192 | | $ 734,921 | | $ 855,071 | |
Average junior subordinated debentures | $ 35,130 | | $ 337 | | $ 33,041 | | $ 169 | |
Average stockholders' equity | $ 344,439 | | $ 326,865 | | $ 342,064 | | $ 324,497 | |
| | | | | | | | | |
| Loan and Lease Activity | | | | | | | | |
Total originations | $ 727,562 | | $ 585,306 | | $ 1,425,489 | | $ 1,251,773 | |
One-to-four-family | $ 83,076 | | $ 108,200 | | $ 181,563 | | $ 210,812 | |
Multi-family | $ 8,060 | | $ 11,992 | | $ 16,635 | | $ 23,323 | |
Commercial real estate | $ 37,255 | | $ 33,466 | | $ 109,020 | | $ 86,696 | |
Construction and land | $ 427,055 | | $ 298,471 | | $ 797,740 | | $ 680,670 | |
Commercial loans and leases | $ 112,504 | | $ 74,609 | | $ 207,467 | | $ 133,755 | |
Consumer | $ 59,612 | | $ 58,568 | | $ 113,064 | | $ 116,517 | |
Purchases | $ 25,520 | | $ 168,667 | | $ 25,520 | | $ 240,710 | |
Principal repayments | $ 642,206 | | $ 495,917 | | $ 1,245,607 | | $ 1,197,086 | |
Sales | $ 4,360 | | $ 13,476 | | $ 9,226 | | $ 17,233 | |
| | | | | |
(1) Compute on an annualized basis. | | | | |
(2) Net interest income divided by average interest-earning assets. |
(3) Total general and administrative expense divided by net interest income plus non-interest income. |
PFF BANCORP, INC. AND SUBSIDIARIES
Selected Ratios and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| | As of September 30,
2005 | | As of March 31,
2005 | |
| | | | |
| Asset Quality | | | | |
Non-accrual loan | $ 11,886 | | $ 12,204 | |
Non-accrual loans to gross loans and leases | 0.28 | % | 0.30 | % |
Non-performing assets to total assets (1) | 0.30 | % | 0.31 | % |
Allowance for loan and lease losses | $ 34,482 | | $ 33,302 | |
Allowance for loan and lease losses to non-accrual loans | 290 | % | 273 | % |
Allowance for loan and lease losses to gross loans and leases | 0.82% | | 0.83 | % |
| | | | |
| Capital | | | | |
Stockholders' equity to assets ratio | 8.71 | % | 8.61 | % |
Core capital ratio* | 8.54 | % | 8.38 | % |
Risk-based capital ratio* | 11.50 | % | 11.74 | % |
Shares outstanding at end of period | 24,433,276 | | 24,782,623 | |
Book value per share outstanding | $ 14.09 | | $ 13.60 | |
Tangible book value per share outstanding (2) | $ 14.04 | | $ 13.54 | |
| | | | |
| Loan, Lease and Deposit Balances | | | | |
One-to-four family loans | $ 1,523,722 | | $ 1,614,678 | |
Multi-family loans | $ 165,308 | | $ 138,417 | |
Commercial real estate loans | $ 536,679 | | $ 520,912 | |
Construction and land loans (3) | $ 827,442 | | $ 756,818 | |
Commercial business loans and leases | $ 217,270 | | $ 197,956 | |
Consumer loans | $ 241,820 | | $ 237,032 | |
Core deposits | $ 1,866,619 | | $ 1,784,994 | |
C.D.s | $ 1,027,920 | | $ 950,943 | |
| | | | | |
| | | | | |
| | | | | |
(1) Non-performing assets consist of non-accrual loans and assets acquired through foreclosure, net. |
(2) Stated book value minus goodwill. |
(3) Net of undisbursed balances of $704,971 and $554,497 at September 30, 2005 and March 31, 2005, respectively. |
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* PFF Bank & Trust
