Matrix Bancorp (NASDAQ:MTXC)
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From Sep 2019 to Sep 2024
Matrix Bancorp, Inc. (NASDAQ:MTXC):
-- Net income for the second quarter 2006 was $310 thousand, or
$0.04 per diluted share
-- Net income for the year to date was $5.8 million, or $0.71 per
diluted share
-- Net interest margin expanded 16 basis points on a year over
year basis
-- Commercial loans grew 14.9% in the second quarter, 33.9% year
to date
Matrix Bancorp, Inc. (NASDAQ:MTXC) (the "Company"), a Denver-based
holding company whose principal subsidiary, Matrix Capital Bank, is a
community bank focused on expansion across Colorado's Front Range
market, announced today results for the quarter and six month period
ended June 30, 2006.
For the second quarter 2006, the Company reported net income of
$310 thousand, or $0.04 per basic and diluted share, compared to $1.7
million, or $0.26 per basic and diluted share for the second quarter
2005 and $5.5 million or $0.64 per basic and diluted share for the
first quarter 2006. The results for the second quarter 2006 were
negatively impacted by the previously announced sale of ABS School
Services, LLC, which closed on May 5, 2006. Pursuant to terms of the
sale, the Company retained certain recourse obligations on the ABS
School Services assets sold, and on which an after-tax charge of
approximately $590 thousand, or $0.08 per diluted share, is included
in net income to establish a liability for those retained obligations.
On a year to year basis, the Company's quarterly results reflect the
loss of revenue from discontinued operations and other reductions in
non-core subsidiary contribution, even while the Company bore the
costs, primarily in salaries and benefits, of the ongoing transition
at Matrix Capital Bank to a community banking strategy.
Net income for the six months ended June 30, 2006 totaled $5.8
million, or $0.72 per basic share and $0.71 per diluted share,
compared to $4.6 million, or $0.70 per basic share and $0.69 per
diluted share for the six months ended June 30, 2005. Net income for
the six months ended June 30, 2006 was positively impacted by the sale
of certain assets and operations of non-core subsidiaries during the
first quarter 2006 on which the after-tax gain on sale of certain of
the subsidiaries of approximately $2.4 million is included in income
from discontinued operations. The discontinued operations for the
quarter and six months ended June 30, 2006 present operations from
those non-core subsidiaries.
The Company's assets totaled $2.16 billion on June 30, 2006,
compared to $2.08 billion at December 31, 2005. During the first and
second quarters 2006, the Company's community bank loan portfolio
(consisting of SBA loans, commercial, construction, land and
commercial real estate) increased $60.8 million, or 33.9%, to $240.2
million at June 30, 2006, compared to $179.4 million at December 31,
2005. This increase represents the net new loan production from Matrix
Bank's community banking professionals. In addition, the Bank
continued to redeploy repayments from its single family portfolio into
investment securities, which increased $260 million from December 31,
2005 to $800.2 million at June 30, 2006. During the first half of 2006
residential loans in the Company's held for sale and held for
investment portfolios declined $180.7 million, principally from
repayments. Deposits, including custodial escrow balances, increased
$199.3 million from December 31, 2005, to $1.37 billion at June 30,
2006. Of this increase, $27.4 million in deposits was a direct result
of our marketing efforts to attract new community bank deposits,
$144.2 million represents new institutional deposits and $13.4 million
was from utilization of brokered deposits. Due to the growth in
deposits used to fund the growth of the balance sheet, the Company's
borrowings from FHLBank decreased by $28.0 million to $587.0 million
at June 30, 2006.
During the first quarter 2006, the Company completed the
repurchase of shares under a previously announced tender offer, which
closed on January 23, 2006. The Company repurchased 4,184,277 common
shares for approximately $79.5 million. This repurchase was charged
against additional paid-in capital, which resulted in the overall
decrease in shareholders' equity to $107.2 million at June 30, 2006
compared to $180.7 million at December 31, 2005.
Scot T. Wetzel, President and CEO, commented, "I am very pleased
with the progress we are making towards building a community-banking
branch network across key Colorado geographic markets. Our five
regional presidents and their teams are working diligently to re-brand
the former institutional bank into a leading community bank in our
targeted areas. During the quarter, we closed on the purchase of a
building for our Boulder branch, located at the intersection of 28th
and Arapahoe in Boulder, which has over 80 thousand vehicles pass in
daily traffic. We expect construction of our Cherry Creek branch to be
completed by the end of the year, and have opened a loan production
office in Ft. Collins. We are also pleased to have announced on August
10, 2006, additions to both the Company's and Matrix Bank's Board of
Directors. The Company appointed Jeffrey R. Leeds and William D.
Snider to serve terms to be ratified at the annual shareholders'
meeting in 2007. Mr. Snider was also appointed Vice-Chairman of the
Board, and serves as the Company's Chief Financial Officer. Matrix
Bank appointed Dennis R. Santistevan and Gary G. Petak to the Matrix
Bank Board of Directors. Mr. Santistevan serves as Chief Financial
Officer of Matrix Bank and Mr. Petak serves as Chief Credit Officer of
Matrix Bank. These appointments strengthen our Boards and will be
instrumental in further implementing our community banking platform."
Michael J. McCloskey, Chief Operating Officer, added, "During the
quarter, we closed the sale of ABS School Services, which
substantially completed our divestiture of non-core subsidiaries. We
continue to focus on the shareholder value strategies that were
identified and communicated in the fall 2005. In the early portion of
the third quarter 2006, we monetized additional New Market Tax
Credits, realizing fees of $1.65 million, or approximately $1.0
million after tax, and as we had discussed as part of our overall
strategy, we will continue to monitor the performance of our former
subsidiary, Matrix Asset Management Corporation, and continue to
consider the timing of the exercise our put option as we progress into
the last part of 2006. The timing and monitoring of the former
subsidiary's performance is important because if its business
continues to improve, we could realize significant additional monetary
value for shareholders beyond the predetermined $2.5 million, pre-tax
minimum value when we finally execute our put option to sell our
remaining interest. We are also continuing to evaluate options
regarding the sale of our owned office tower in downtown Denver. We
believe that our progress towards accomplishing completion of our
identified short-term strategic directives gives us significant
momentum entering the second half of 2006."
Financial Highlights
Net Interest Income. Net interest income before provision for
credit losses totaled $13.5 million for the quarter ended June 30,
2006, compared to $10.9 million for the quarter ended June 30, 2005
and $13.5 million for the quarter ended March 31, 2006. Our net
interest margin was 2.64% for the second quarter 2006, 2.45% for the
second quarter 2005 and was 2.69% for the first quarter 2006. This
modest five basis point decline in net interest margin between the
first and second quarter 2006 was due to three primary factors: (1)
the continuing origination of the community banking loans which have
higher yields and which positively impacted our margins offset by; (2)
the increases in short term interest rates upon which the majority of
our liabilities are priced and thus increased interest expense; and
(3) the impact of the single-family residential held for sale
portfolio on which our yield did not increase commensurate with the
increase in our cost of funds due to higher than anticipated
repayments in the portfolio. Our single-family loans yielded 4.71% in
the second quarter 2006, an 18 basis point increase from the first
quarter, while our cost of interest-bearing liabilities increased 33
basis points.
At Matrix Bank, our net interest margin was 2.87% for the second
quarter 2006, 2.76% for the second quarter 2005 and 2.94% for the
first quarter 2006. The increase between 2006 and 2005 reflects the
impact of the additional community banking commercial loans that have
been originated between the periods, which have more than offset the
increase in our cost of interest bearing liabilities. The decline
between the first quarter and second quarter 2006 is consistent with
the factors discussed above. During the second quarter 2006, interest
income on interest yielding loans at Matrix Bank was positively
impacted by 13 basis points due to the community bank loans that have
been originated to date. Also impacting our net interest margin is our
approach to the acquisition of investment securities. During the
second quarter 2006, we acquired investment securities that we believe
have lower interest rate risk and have lower comparative coupons to
securities purchased previously. We are also classifying a portion of
these securities as available for sale in order to provide liquidity
for our community bank loan funding needs.
Net interest income totaled $26.9 million for the six months ended
June 30, 2006, compared to $21.8 million for the six months ended June
30, 2005. The increase is attributable to the continued trend of an
overall increase in the Company's average balance of interest-earning
assets to $2.04 billion and $2.02 billion for the quarter and six
months ended June 30, 2006, respectively, compared to $1.78 billion
and $1.74 billion for the quarter and six months ended June 30, 2005,
respectively. The yield on those interest-earning assets also
increased to 5.57% and 5.45% for the second quarter and first six
months of 2006, respectively, compared to 4.75% and 4.70% for the
corresponding periods of 2005, respectively. There was also a
continued increase in the average balance of the Company's
interest-bearing liabilities to $1.82 billion and $1.80 billion for
the quarter and six months ended June 30, 2006, respectively, compared
to $1.58 billion and $1.54 billion for the quarter and six months
ended June 30, 2005, respectively. The cost of the interest-bearing
liabilities also increased to 3.29% and 3.12% for the second quarter
and first six months of 2006, respectively, compared to 2.58% and
2.49% for the comparable periods of 2005, respectively. The increase
in yield on the interest-earning assets and in the rate on
interest-bearing liabilities was in response to the increase in the
overall interest rate environment over the periods and in the change
in mix of assets and liabilities that comprise the balances.
Provision for Credit Losses. The provision for credit losses was
$1.1 million for the quarter ended June 30, 2006 and $2.0 million for
the six months ended June 30, 2006, compared to $300 thousand for the
quarter ended June 30, 2005 and $1.1 million for the six months ended
June 30, 2005. The increase in the provision in the first half of 2006
is attributable to the Company's reevaluation of loan loss reserve
levels associated with our commercial loan portfolio, increases in
balances in the commercial loan portfolio due to new loan production
and additional provisions related to specific loans that have
demonstrated weakening conditions. During the first quarter 2006,
Matrix Bank's credit risk management team revised the estimated loss
factors that are applied to certain of our commercial loans to reflect
credit and risk management's experience with inherent losses in these
types of loans, and the impact of that revision is reflected in the
year to date 2006 provision.
Noninterest Income. Noninterest income was $5.4 million for the
quarter ended June 30, 2006, compared to $7.0 million for the quarter
ended June 30, 2005 and $9.3 million for the first quarter 2006. The
decrease in the second quarter 2006 from the second quarter 2005 was
due to decreases in the size of our mortgage servicing portfolio
compared to prior year balances and lower brokerage revenues due to
the sale of non-core subsidiaries discussed above. The decrease
compared to the first quarter 2006 was due to legal settlements
included in the first quarter, one at Matrix Financial and another at
Matrix Bank related to loan losses previously recorded.
For the first six months of 2006 noninterest income was $14.7
million, compared to $15.6 million for the first six months of 2005.
The decline was the result of lower loan administration income from
our depleting mortgage servicing portfolio, lower levels of brokerage
revenues, lower gains on sale, which are dependent on market
conditions, and lower trust revenue due to the sale of the trust
operations of Matrix Bank in April 2005.
Noninterest Expense. Noninterest expense was $17.6 million for the
quarter ended June 30, 2006, compared to $15.2 million for the quarter
ended June 30, 2005, and $16.2 million for the quarter ended March 31,
2006. The increases were a result of the combination of the following.
The Company had an increase in subaccounting fees at Matrix Bank of
$1.9 million between 2006 and 2005 and $500 thousand between the
second and first quarter 2006, due to increase in the levels of
institutional deposits held on which subaccounting services are
incurred and the level of subaccounting fees, which generally move
with changes in the Federal Open Market Committee target rate for
overnight deposits. The Company experienced increases in compensation
and benefits expense of $680 thousand between 2006 and 2005 as a
result of the hiring of employees at Matrix Bank, primarily during the
first quarter 2006, to implement the community banking strategy.
Compensation declined between the first and second quarter 2006 due to
lower commissions at First Matrix, lower self-insured medical expenses
and lower payroll taxes. Included in compensation expense was $130
thousand and $230 thousand for the quarter and year to date periods of
2006, respectively, for stock options granted during the periods.
Also, the Company recorded a $950 thousand recourse reserve during the
second quarter 2006 related to the sale of ABS School Services, LLC,
included in other expense.
Capital. Matrix Bank remains a well capitalized institution.
Matrix Bank's tier 1 risk-based, total risk-based and leverage capital
ratios are approximately 6.36%, 15.01% and 14.37%, respectively, as of
June 30, 2006, all of which are well in excess of regulatory
requirements. These ratios reflect the low risk levels associated with
the securities and single-family loan portfolio, and the prudent
leverage of Matrix Bank's balance sheet.
Conference Call
The Company's management will host a conference call to review the
results of operations for the second quarter and six month period
ended June 30, 2006 and other topics that may be raised during the
discussion on Friday, August 11, 2006 at 9:00 a.m. Mountain Time. To
access the call, participants should dial 800-240-7305 at least ten
minutes prior to the start of the call. International callers should
dial 303-262-2211. To hear a live web simulcast or to listen to the
archived web cast following the completion of the call, please visit
the Company's web site at www.matrixbancorp.com, click on the investor
relations tab and then select conference calls to access the link to
the call.
Denver-based Matrix Bancorp, Inc. is focused on developing its
community-based banking network through its subsidiary, Matrix Capital
Bank, by strategically positioning branches across Colorado's Front
Range market. The area spans the Eastern slope of the Rocky Mountains
-- from Pueblo to Fort Collins, and includes the metropolitan Denver
marketplace. Matrix Bank plans to grow its network to an estimated
five to seven community bank branches over the next three to five
years. The Company's shareholders have approved "United Western" as
our new brand name and the Company anticipates a formal change in
legal and trade names to be completed during the third quarter 2006.
For more information, please visit our web site at
www.matrixbancorp.com.
Forward-Looking Statements
Certain statements contained in this earnings release that are not
historical facts, including, but not limited to, statements that can
be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "predict," "believe," "plan,"
"estimate" or "continue" or the negative thereof or other variations
thereon or comparable terminology, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995, and involve a number of risks and uncertainties. The actual
results of the future events described in such forward-looking
statements in this earnings release could differ materially are: the
timing of regulatory approvals or consents for new branches or other
contemplated actions; the availability of suitable and desirable
locations for additional branches; and the continuing strength of our
existing business, which may be affected by various factors, including
but not limited to interest rate fluctuations, level of delinquencies,
defaults and prepayments, general economic conditions, competition;
the delay in or failure to receive any required shareholder approvals
of the contemplated actions; and the risks and uncertainties discussed
elsewhere in the annual report for the year ended December 31, 2005
filed with the Securities and Exchange Commission on March 15, 2006;
and the uncertainties set forth from time to time in the Company's
periodic reports, filings and other public statements.
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MATRIX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share information)
June 30, Dec. 31,
2006 2005
----------- -----------
(Unaudited)
ASSETS
Cash and cash equivalents $10,498 $15,877
Interest-earning deposits and federal funds
sold 18,794 18,355
Investment securities - available for sale 35,697 14,462
Investment securities - held to maturity 669,777 421,010
Investment securities - trading 94,691 104,722
Loans held for sale, net 699,115 927,442
Loans held for investment, net 470,540 425,943
FHLBank stock, at cost 41,529 34,002
Mortgage servicing rights, net 18,107 20,708
Accrued interest receivable 10,889 9,752
Other receivables 21,811 19,387
Premises and equipment, net 18,635 17,154
Bank owned life insurance 22,892 22,454
Other assets, net 15,995 19,898
Income taxes receivable and deferred income
tax asset 3,334 3,696
Foreclosed real estate, net 3,816 4,526
----------- -----------
Total assets $2,156,120 $2,079,388
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $1,309,053 $1,124,044
Custodial escrow balances 63,651 49,385
FHLBank borrowings 586,980 615,028
Borrowed money 10,000 29,581
Junior subordinated debentures owed to
unconsolidated subsidiary trusts 61,372 61,372
Deferred income tax liability 2,451 -
Other liabilities 15,423 19,250
----------- -----------
Total liabilities 2,048,930 1,898,660
----------- -----------
Shareholders' equity:
Common stock, $0.0001 par value 1 1
Additional paid-in capital 29,121 108,395
Retained earnings 78,138 72,314
Accumulated other comprehensive (loss) income (70) 18
----------- -----------
Total shareholders' equity 107,190 180,728
----------- -----------
Total liabilities and shareholders' equity $2,156,120 $2,079,388
=========== ===========
MATRIX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share information)
(Unaudited)
Quarter Ended Six Months Ended
June June March June June
30, 30, 31, 30, 30,
2006 2005 2006 2006 2005
------- ------- ------- ------- -------
Interest and dividend
income:
Single-family loans $8,707 $11,021 $9,586 $18,293 $21,383
Other loans 9,387 5,548 7,978 17,365 10,740
Investment securities 9,501 4,092 8,329 17,830 8,097
Interest-earning
deposits 825 405 759 1,584 756
------- ------- ------- ------- -------
Total interest and
dividend income 28,420 21,066 26,652 55,072 40,976
Interest expense:
Deposits 5,867 3,940 4,201 10,068 7,208
FHLBank advances 7,468 4,638 7,428 14,897 8,780
Borrowed money and
junior subordinated
debentures 1,636 1,620 1,554 3,190 3,172
------- ------- ------- ------- -------
Total interest expense 14,971 10,198 13,183 28,155 19,160
Net interest income before
provision for credit
losses 13,449 10,868 13,469 26,917 21,816
Provision for credit
losses 1,071 302 957 2,028 1,060
------- ------- ------- ------- -------
Net interest income after
provision for credit
losses 12,378 10,566 12,512 24,889 20,756
Noninterest income:
Loan administration 1,967 2,499 2,273 4,239 5,534
Brokerage 9 305 553 563 1,000
Trust services 1,654 1,785 1,704 3,358 4,300
Real estate disposition
services - 423 168 168 844
Gain on sale of loans
and securities 140 537 251 391 1,268
Gain on sale of assets - 302 100 100 302
Litigation settlements 300 - 2,250 2,550 -
Other 1,303 1,127 1,978 3,282 2,401
------- ------- ------- ------- -------
Total noninterest income 5,373 6,978 9,277 14,651 15,649
Noninterest expense:
Compensation and
employee benefits 5,210 4,527 5,679 10,889 9,655
Amortization of mortgage
servicing rights 1,549 2,352 1,517 3,066 4,126
Impairment on (recovery
of impairment) mortgage
servicing rights - 230 (276) (276) 55
Occupancy and equipment 1,161 999 960 2,121 1,982
Postage and
communication 263 304 287 550 664
Professional fees 592 553 525 1,135 1,175
Mortgage servicing
rights subservicing
fees 639 771 681 1,320 1,596
Data processing 217 208 222 439 512
Subaccounting fees 5,130 3,199 4,638 9,768 5,851
Other general and
administrative 2,888 2,104 1,962 4,833 4,635
------- ------- ------- ------- -------
Total noninterest expense 17,649 15,247 16,195 33,845 30,251
Income from continuing
operations before income
taxes 102 2,297 5,594 5,695 6,154
Income tax (benefit)
provision (102) 703 1,715 1,614 2,045
------- ------- ------- ------- -------
Income from continuing
operations 204 1,594 3,879 4,081 4,109
Discontinued operations:
Income from discontinued
operations, net of
income tax provision
(benefit) 103 116 1,638 1,743 521
------- ------- ------- ------- -------
Net income $307 $1,710 $5,517 $5,824 $4,630
======== ======== ======== ======= ========
Income from continuing
operations per share -
basic $0.03 $0.24 $0.45 $0.51 $0.62
Income from continuing
operations per share -
assuming dilution 0.03 0.24 0.45 0.50 0.61
------- -------- -------- ------- --------
Income from discontinued
operations per share -
basic and assuming
dilution 0.01 0.02 0.19 0.21 0.08
------- -------- -------- ------- --------
Net income per share -
basic $0.04 $0.26 $0.64 $0.72 $0.70
======== ======== ======== ======== ========
Net income per share -
assuming dilution $0.04 $0.26 $0.64 $0.71 $0.69
======== ======== ======== ======== ========
MATRIX BANCORP, INC. AND SUBSIDIARIES
OPERATING RATIOS AND OTHER SELECTED DATA
(Dollars in thousands, except share information)
(Unaudited)
Quarter Ended
June 30, June 30, March 31,
2006 2005 2006
----------- ----------- -----------
Weighted average shares - basic 7,556,573 6,620,850 8,579,396
Weighted average shares - assuming
dilution 7,639,560 6,698,498 8,632,135
Number of shares outstanding at
end of period 7,556,573 6,620,850 7,556,573
Average Balances
----------------
Single-family loans receivable $739,475 $1,090,806 $846,313
Other loans receivable 301,310 257,205 265,446
Originated SBA loans and
securities 304,046 169,695 319,649
Other mortgage backed securities 633,063 220,008 510,309
Interest-earning assets 2,039,458 1,775,521 2,001,185
Total assets 2,162,275 1,952,914 2,150,211
Interest-bearing deposits 20,606 4,248 21,472
FHLBank and other borrowings 701,227 623,172 770,276
Interest-bearing liabilities 1,822,888 1,578,674 1,782,324
Shareholders' equity 106,768 95,638 116,623
Operating Ratios & Other Selected Data (1)
------------------------------------------
Return on average equity 0.76% 6.67% 13.30%
Net interest margin (2) 2.64 2.45 2.69
Net interest margin - Matrix
Bank (2) 2.87 2.76 2.94
Operating efficiency ratios (3) 85.54 70.97 65.74
Balance of servicing portfolio $1,484,035 $2,005,054 $1,600,754
Average prepayment rate on owned
servicing portfolio 20.93% 24.10% 18.90%
Book value per share (end of
period) $14.19 $14.68 $14.16
Loan Performance Ratios (1)
---------------------------
Annualized net charge
offs/average loans 0.30% 0.07% 0.03%
Allowance for loan and loan
valuation losses/total loans 0.78% 0.80% 0.83%
Six Months Ended
June 30, June 30,
2006 2005
----------- -----------
Weighted average shares - basic 8,065,159 6,620,850
Weighted average shares - assuming
dilution 8,132,599 6,698,199
Number of shares outstanding at
end of period 7,556,573 6,620,850
Average Balances
----------------
Single-family loans receivable $785,696 $1,048,858
Other loans receivable 397,131 247,659
Originated SBA loans and securities 311,804 199,077
Other mortgage backed securities 465,620 208,795
Interest-earning assets 2,020,773 1,741,807
Total assets 2,156,623 1,926,155
Interest-bearing deposits 21,037 3,895
FHLBank and other borrowings 735,560 621,317
Interest-bearing liabilities 1,802,717 1,542,013
Shareholders' equity 111,696 94,501
Operating Ratios & Other Selected Data (1)
------------------------------------------
Return on average equity 7.31% 8.70%
Net interest margin (2) 2.66 2.50
Net interest margin - Matrix Bank (2) 2.90 2.85
Operating efficiency ratios (3) 74.71 69.58
Balance of servicing portfolio $1,484,035 $2,005,054
Average prepayment rate on owned
servicing portfolio 19.95% 21.97%
Book value per share (end of period) $14.19 $14.68
Loan Performance Ratios (1)
---------------------------
Annualized net charge offs/average loans 0.16% 0.12%
Allowance for loan and loan valuation
losses/total loans 0.78% 0.80%
(1) Calculations are based on average daily balances where available
and monthly averages otherwise, as applicable.
(2) Net interest margin has been calculated by dividing net interest
income before credit losses by average interest earning assets.
(3) The operating efficiency ratios have been calculated by dividing
noninterest expense, excluding amortization of mortgage servicing
rights, by operating income. Operating income is equal to net
interest income before provision for credit losses plus noninterest
income.
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