PFF BANCORP, INC. REPORTS 38 PERCENT INCREASE IN THIRD
QUARTER EARNINGS ON 29 BASIS POINT EXPANSION
IN NET INTEREST MARGIN
Pomona, Calif. - January 23, 2006 - 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 $13.2 million or $0.53 per diluted share for the quarter ended December 31, 2005 compared to $9.6 million or $0.38 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).
Net interest margin expanded 29 basis points to 4.32% between the quarters ended December 31, 2004 and 2005 and increased 14 basis points on a sequential quarter basis. Net interest income of $41.2 million for the current quarter increased $2.6 million or 7 percent from the comparable quarter of 2004 and increased $1.5 million or 4 percent on a sequential quarter basis.
Return on average stockholders' equity increased 33 percent and return on average assets increased 36 percent between the quarters ended December 31, 2004 and 2005 to 15.09 percent and 1.32 percent, respectively.
Construction, commercial business, commercial real estate and consumer loans (the "Four-Cs") increased $57.0 million during the current quarter to $1.88 billion or 53 percent of loans and leases receivable, net, compared to $1.66 billion or 49 percent of loans and leases receivable, net, one year ago. Four-Cs originations were $472.4 million or 81 percent of total originations for the current quarter compared to $582.1 million or 87 percent of total originations for the comparable quarter of 2004. At December 31, 2005, DBS has outstanding loans receivable of $76.1 million compared to $37.8 million one year ago. The majority of DBS's loans are classified as construction and land.
Reflecting a widening rate differential between certificate accounts and interest-bearing liquid accounts arising from increases in the general level of interest rates, certificates of deposit increased $113.3 million during the quarter, while lower cost passbook, money market, NOW and other demand accounts ("core deposits") decreased $122.0 million. Core deposits of $1.74 billion now represent 60 percent of total deposits compared to $1.78 billion or 66 percent of total deposits one year ago. The average cost of core deposits was 1.38% for the current quarter compared to 1.45% for the prior quarter and 1.03% for the comparable period of 2004. Non-interest bearing transaction accounts increased $32.1 million during the current quarter to $346.6 million or 12 percent of total deposits and are up $46.4 million or 15 percent from one year ago.
Larry M. Rinehart, CEO commented, "The slight erosion in our deposit base was attributable, in part, to our decision not to match some of the aggressive deposit pricing that was evident in our market last quarter. We are committed to maintaining the disciplined approach to our balance
sheet, including pricing, that continues to drive us to increasingly strong levels of profitability. Our substantial increases in net earnings, net interest margin, return on average assets and return on average equity clearly validate our strategy."
Non-interest income increased $1.5 million or 25 percent between the quarters ended December 31, 2004 and 2005. Deposit and related fees rose $650,000 or 25 percent, and loan and servicing fees increased $673,000 or 37 percent compared to the comparable quarter of the prior year. The increase in loan and servicing fees reflects loan prepayment fees and amortization of extension fees on construction loans. Loan prepayment fees and amortization of extension fees were $684,000 and $1.1 million, respectively for the quarter ended December 31, 2005, compared to $432,000 and $652,000 for the comparable quarter of 2004.
Our efficiency ratio improved to 48.46 percent for the current quarter, compared to 55.17 percent for the comparable quarter of 2004. General and administrative ("G&A") expense decreased $1.0 million or 4 percent between the quarters ended December 31, 2004 and 2005 to $23.5 million. Employee Stock Ownership Plan ("ESOP") expense was $747,000 for the current quarter compared to $2.8 million, for the comparable quarter of 2004, reflecting a reduction in the number of shares amortized from 95,771 for the quarter ended December 31, 2004 to 25,658 for the current quarter. Excluding the reduction in ESOP expense, total G&A expense increased $1.0 million or 5 percent between the quarters ended December 31, 2004 and 2005.
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 49 percent for the quarter ended December 31, 2004 to 43 percent for the current quarter.
Asset quality remains strong with non-accrual loans declining to $1.6 million or 0.04 percent of gross loans and leases at December 31, 2005, from $12.2 million or 0.30 percent of gross loans and leases at March 31, 2005.
During the quarter ended December 31, 2005, we were successful in having a receiver appointed to oversee the completion of a 20 home development in Murrietta, California on which we had a loan of $10.3 million and a specific valuation allowance of $2.1 million. This loan had been on non-accrual status since July 2002 when a dispute arose between the developer and the third party equity provider. Upon appointment of the receiver, the $2.1 million specific valuation allowance was charged-off and the resulting $8.2 million net loan balance was moved to assets acquired through foreclosure, net. This transfer to assets acquired through foreclosure reduced our ratio of non-performing loans to gross loans and leases by 24 basis points, based on December 31, 2005 balances. At December 31, 2005, that ratio is 0.04 percent compared to 0.30 percent at March 31, 2005. We expect the project will be completed during calendar 2006 at no additional loss to the Company. Fifteen of the twenty homes were pre-sold prior to the commencement of initial construction and remain in that status.
At December 31, 2005, our allowance for loan and lease losses was $33.8 million or 0.80 percent of gross loans and leases and 2,157 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 $2.1 million charge-off discussed above represented 5 basis points of gross loans and leases. Annualized net charge-offs to average loans and leases receivable, net, were 0.29 percent for the current quarter, 0.24 percent of which was represented by the $2.1 million charge-off.
The provision for loan and lease losses was $1.9 million for the current quarter compared to $1.0 million for the same period of the prior year. The current period provision for loan and lease losses was attributable primarily to an increase in construction and land loans.
We repurchased 173,930 shares of our common stock at a weighted average price of $30.71 per share during the current quarter, bringing fiscal year-to-date repurchases to 783,960 shares at a weighted average price of $29.79 per share. At December 31, 2005, 954,310 shares remain under a 1.0 million share repurchase authorization adopted by our Board of Directors on October 26, 2005.
At December 31, 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 $603.6 million at December 31, 2005, compared to $422.4 million at December 31, 2004. These assets under management or advisory include $451.1 million managed or advised by Glencrest at December 31, 2005, as compared to $255.2 million at December 31, 2004.
We will host a conference call at 8:30 A.M. PDT on Monday, January 23, 2006, to discuss our financial results. The conference call can be accessed by dialing 1-800-322-0079 and referencing "PFF Bancorp, Inc. Third Quarter Conference Call". An audio replay of this conference call will be available through Friday, February 3, 2006, by dialing 1-877-519-4471 and referencing replay PIN number 6861176.
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, 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)
| | December 31,
2005 | | March 31,
2005 | |
| | | | |
ASSETS | | | | |
Cash and cash equivalents | $ 77,926 | | $ 44,844 | |
Investment securities held-to-maturity (estimated fair value of $6,606 at December 31, 2005, and $6,647 at March 31, 2005) | 6,727 | | 6,736 | |
Investment securities available-for-sale, at fair value | 70,532 | | 61,938 | |
Mortgage-backed securities available-for-sale, at fair value | 245,542 | | 250,954 | |
Loans held-for-sale | 701 | | 1,466 | |
Loans and leases receivable, net | 3,531,896 | | 3,431,544 | |
Federal Home Loan Bank (FHLB) stock, at cost | 34,897 | | 41,839 | |
Accrued interest receivable | 19,066 | | 16,413 | |
Assets acquired through foreclosure, net | 8,327 | | - | |
Property and equipment, net | 43,529 | | 30,385 | |
Prepaid expenses and other assets | 24,218 | | 24,942 | |
Total assets | $ 4,063,361 | | $ 3,911,061 | |
| | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Liabilities: | | | | |
Deposits | $ 2,885,842 | | $ 2,735,937 | |
FHLB advances and other borrowings | 728,900 | | 769,423 | |
Junior subordinated debentures | 56,702 | | 30,928 | |
Accrued expenses and other liabilities | 40,720 | | 37,847 | |
Total liabilities | 3,712,164 | | 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 24,489,460 and 24,908,823; outstanding 24,339,360 and 24,782,623 at December 31, 2005 and March 31, 2005, respectively | 244 | | 248 | |
Additional paid-in capital | 172,411 | | 164,536 | |
Retained earnings, substantially restricted | 186,548 | | 178,288 | |
Unearned stock-based compensation | (1,757 | ) | (352 | ) |
Treasury stock (150,100 and 126,200 at December 31, 2005, and
March 31, 2005, respectively) | (2 | ) | (1 | ) |
Accumulated other comprehensive income (losses) | (6,247 | ) | (5,793 | ) |
Total stockholders' equity | 351,197 | | 336,926 | |
Total liabilities and stockholders' equity | $ 4,063,361 | | $ 3,911,061 | |
| | | | |
| | | | |
PFF BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
| | For the Three Months Ended
December 31 | For the Nine Months Ended
December 31, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| Interest income: | | | | | | | | |
| Loans and leases receivable | $ 60,264 | | $ 51,118 | | $ 172,131 | | $ 143,454 | |
| Mortgage-backed securities | 2,422 | | 2,460 | | 6,969 | | 7,449 | |
| Investment securities and deposits | 1,067 | | 1,022 | | 3,316 | | 3,136 | |
| Total interest income | 63,753 | | 54,600 | | 182,416 | | 154,039 | |
| Interest expense: | | | | | | | | |
| Deposits | 16,056 | | 10,673 | | 43,757 | | 28,664 | |
| Borrowings | 6,486 | | 5,297 | | 18,189 | | 13,359 | |
| Total interest expense | 22,542 | | 15,970 | | 61,946 | | 42,023 | |
| Net interest income | 41,211 | | 38,630 | | 120,470 | | 112,016 | |
| Provision for loan and lease losses | 1,875 | | 1,030 | | 3,095 | | 2,694 | |
| Net interest income after provision for loan and lease losses | 39,336 | | 37,600 | | 117,375 | | 109,322 | |
| Non-interest income: | | | | | | | | |
| Deposit and related fees | 3,268 | | 2,618 | | 9,684 | | 7,843 | |
| Loan and servicing fees | 2,504 | | 1,831 | | 6,961 | | 4,785 | |
| Trust, investment and insurance fees | 1,185 | | 1,072 | | 3,361 | | 3,310 | |
| Gain on sale of loans, net | 31 | | 136 | | 134 | | 260 | |
| Gain on sale of securities, net | - | | 2 | | 923 | | 4,771 | |
| Other non-interest income | 279 | | 157 | | 772 | | 752 | |
| Total non-interest income | 7,267 | | 5,816 | | 21,835 | | 21,721 | |
| Non-interest expense: | | | | | | | | |
| General and administrative: | | | | | | | | |
| Compensation and benefits | 13,171 | | 14,118 | | 39,880 | | 39,032 | |
| Occupancy and equipment | 3,871 | | 3,917 | | 10,928 | | 10,744 | |
| Marketing and professional services | 2,746 | | 2,827 | | 8,393 | | 7,458 | |
| Other non-interest expense | 3,705 | | 3,657 | | 10,353 | | 10,512 | |
| Total general and administrative | 23,493 | | 24,519 | | 69,554 | | 67,746 | |
| Foreclosed asset operations, net | 5 | | 30 | | 14 | | 64 | |
| Total non-interest expense | 23,498 | | 24,549 | | 69,568 | | 67,810 | |
| Earnings before income taxes | 23,105 | | 18,867 | | 69,642 | | 63,233 | |
| Income taxes | 9,935 | | 9,292 | | 30,755 | | 29,679 | |
| Net earnings | $ 13,170 | | $ 9,575 | | $ 38,887 | | $ 33,554 | |
| | | | | | | | | |
| Basic earnings per share | $ 0.55 | | $ 0.39 | | $ 1.60 | | $ 1.36 | |
| Weighted average shares outstanding for basic earnings per share calculation | 24,136,345 | | 24,780,764 | | 24,263,328 | | 24,601,401 | |
| Diluted earnings per share | $ 0.53 | | $ 0.38 | | $ 1.56 | | $ 1.33 | |
| Weighted average shares outstanding for diluted earnings per share calculation | 24,754,168 | | 25,448,654 | | 24,900,187 | | 25,244,331 | |
PFF BANCORP, INC. AND SUBSIDIARIES
Selected Ratios and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| | For the Three Months Ended
December 31, | For the Nine months Ended
December 31, |
| | 2005 | | 2004 | | 2005 | | 2004 | | |
| Performance Ratios | | | | | | | | | |
Return on average assets (1) | 1.32 | % | 0.97 | % | 1.31 | % | 1.18 | % | |
Return on average stockholders' equity (1) | 15.09 | % | 11.33 | % | 15.04 | % | 13.58 | % | |
General and administrative expense to average assets (1) | 2.36 | % | 2.48 | % | 2.34 | % | 2.38 | % | |
Efficiency ratio (3) | 48.46 | % | 55.17 | % | 48.88 | % | 50.66 | % | |
Average interest-earning assets to average interest- | | | | | | | | | |
bearing liabilities | 107.38 | % | 107.38 | % | 107.30 | % | 107.46 | % | |
| | | | | | | | | |
Yields and Costs (1) | | | | | | | | | |
Net interest spread | 4.14 | % | 3.90 | % | 4.06 | % | 3.95 | % | |
Net interest margin (2) | 4.32 | % | 4.03 | % | 4.22 | % | 4.06 | % | |
Average yield on interest-earning assets | 6.66 | % | 5.68 | % | 6.38 | % | 5.58 | % | |
Average cost of interest-bearing liabilities | 2.52 | % | 1.78 | % | 2.32 | % | 1.63 | % | |
Average yield on loans and leases receivable, net | 6.92 | % | 5.93 | % | 6.64 | % | 5.81 | % | |
Average yield on securities | 3.92 | % | 3.70 | % | 3.78 | % | 3.64 | % | |
Average cost of core deposits | 1.38 | % | 1.03 | % | 1.34 | % | 0.93 | % | |
Average cost of C.D.s | 3.62 | % | 2.68 | % | 3.36 | % | 2.53 | % | |
Average cost of total deposits | 2.22 | % | 1.59 | % | 2.07 | % | 1.49 | % | |
Average cost of FHLB advances and other borrowings | 3.54 | % | 2.20 | % | 3.10 | % | 1.99 | % | |
Average cost of junior subordinated debentures | 5.94 | % | 6.10 | % | 6.00 | % | 6.10 | % | |
| | | | | | | | | |
| Asset Quality | | | | | | | | | |
Net charge-offs | $ 2,518 | | $ 200 | | $ 2,558 | | $ 796 | | |
Net charge-offs to average loans and leases receivable, net (1) | 0.29 | % | 0.02 | % | 0.10 | % | 0.03 | % | |
| | | | | | | | | |
| Average Balances | | | | | | | | | |
Average total assets | $ 3,982,922 | | $ 3,948,079 | | $ 3,955,295 | | $ 3,799,733 | | |
Average interest-earning assets | $ 3,814,833 | | $ 3,830,238 | | $ 3,804,019 | | $ 3,676,073 | | |
Average interest-bearing liabilities | $ 3,552,649 | | $ 3,567,010 | | $ 3,545,290 | | $ 3,420,986 | | |
Average loans and leases receivable, net | $ 3,468,485 | | $ 3,437,473 | | $ 3,449,687 | | $ 3,286,628 | | |
Average securities | $ 300,924 | | $ 326,647 | | $ 303,677 | | $ 332,969 | | |
Average core deposits | $ 1,789,316 | | $ 1,757,282 | | $ 1,793,515 | | $ 1,654,787 | | |
Average C.D.s | $ 1,074,062 | | $ 907,521 | | $ 1,010,141 | | $ 895,247 | | |
Average total deposits | $ 2,863,378 | | $ 2,664,803 | | $ 2,803,656 | | $ 2,550,034 | | |
Average FHLB advances and other borrowings | $ 632,569 | | $ 871,267 | | $ 700,678 | | $ 860,489 | | |
Average junior subordinated debentures | $ 56,702 | | $ 30,940 | | $ 40,956 | | $ 10,463 | | |
Average stockholders' equity | $ 349,069 | | $ 338,165 | | $ 344,637 | | $ 329,372 | | |
| | | | | | | | | |
| Loan and Lease Activity | | | | | | | | | |
Total originations | $ 586,299 | | $ 667,481 | | $ 2,011,788 | | $ 1,919,254 | | |
One-to-four-family | $ 102,686 | | $ 65,330 | | $ 284,249 | | $ 276,142 | | |
Multi-family | $ 11,244 | | $ 20,014 | | $ 27,879 | | $ 43,337 | | |
Commercial real estate | $ 36,993 | | $ 53,283 | | $ 146,013 | | $ 139,979 | | |
Construction and land | $ 255,072 | | $ 365,230 | | $ 1,052,812 | | $ 1,045,900 | | |
Commercial loans and leases | $ 111,415 | | $ 87,812 | | $ 318,882 | | $ 221,567 | | |
Consumer | $ 68,889 | | $ 75,812 | | $ 181,953 | | $ 192,329 | | |
Purchases | $ 25,956 | | $ 155 | | $ 51,476 | | $ 240,865 | | |
Principal repayments | $ 605,321 | | $ 660,741 | | $ 1,850,928 | | $ 1,857,827 | | |
Sales | $ 3,514 | | $ 8,733 | | $ 12,740 | | $ 25,966 | | |
| | | | | |
(1) Computed 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 December 31,
2005 | | As of March 31,
2005 | |
| | | | |
| Asset Quality | | | | |
Non-accrual loans | $ 1,569 | | $ 12,204 | |
Non-accrual loans to gross loans and leases | 0.04 | % | 0.30 | % |
Non-performing assets to total assets (1) | 0.24 | % | 0.31 | % |
Allowance for loan and lease losses | $ 33,839 | | $ 33,302 | |
Allowance for loan and lease losses to non-accrual loans | 2,157 | % | 273 | % |
Allowance for loan and lease losses to gross loans and leases | 0.80 | % | 0.83 | % |
| | | | |
| Capital | | | | |
Stockholders' equity to assets ratio | 8.64 | % | 8.61 | % |
Core capital ratio* | 8.43 | % | 8.38 | % |
Risk-based capital ratio* | 11.28 | % | 11.74 | % |
Shares outstanding at end of period | 24,339,360 | | 24,782,623 | |
Book value per share outstanding | $ 14.43 | | $ 13.60 | |
Tangible book value per share outstanding (2) | $ 14.38 | | $ 13.54 | |
| | | | |
| Loan, Lease and Deposit Balances | | | | |
One-to-four family loans | $ 1,513,686 | | $ 1,614,678 | |
Multi-family loans | $ 174,447 | | $ 138,417 | |
Commercial real estate loans | $ 540,735 | | $ 520,912 | |
Construction and land loans (3) | $ 878,127 | | $ 756,818 | |
Commercial business loans and leases | $ 203,348 | | $ 197,956 | |
Consumer loans | $ 258,036 | | $ 237,032 | |
Core deposits | $ 1,744,596 | | $ 1,784,994 | |
C.D.s | $ 1,141,246 | | $ 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 $641,300 and $554,497 at December 31, 2005 and March 31, 2005, respectively. |
| | | | | |
| | | | | |
* PFF Bank & Trust
