8-K

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Draft dated 1-2-01
For discussion purpose only

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 29, 2001

LIFE FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)

0-22193
(Commission File No.)

DELAWARE	33-0743195
(State or Other Jurisdiction of Incorporation)	(IRS Employer Identification No.)

10540 Magnolia Avenue, Suite B, Riverside, CA	92503-1814
(Address of Principal Executive Offices)	(Zip Code)

(909) 637-4000
(Registrant's Telephone Number, Including Area Code)

Not Applicable
(Former Name or Former Address, If Changed Since Last Report)

Item 5  Other Events

    The attached press release was published on October 29, 2001.

ITEM 7.  EXHIBITS

1 Press release dated October 29, 2001

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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.

	LIFE FINANCIAL CORPORATION
Dated: November 2, 2001	By:	/s/ STEVEN R. GARDNER Steven R. Gardner President and Chief Executive Officer

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Item 5 Other Events
ITEM 7. EXHIBITS
SIGNATURES

EX-99.1

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EXHIBIT 99.1

LIFE FINANCIAL CORPORATION ANNOUNCES THIRD QUARTER 2001 RESULTS

    RIVERSIDE, Calif., October 29, 2001—LIFE Financial Corporation (NASDAQ: LFCO) ("the Company" or "Life Financial"), the holding company of LIFE Bank, F.S.B. ("Life Bank" or "the Bank"), announced the results of operations for the quarter ended September 30, 2001. The Company reported a third quarter loss of $2.7 million, or $2.05 per basic and diluted share, compared to a loss of $1.3 million or $.94 per basic and diluted share for the quarter ended June 30, 2001.

    Life Financial's net interest income before provision for loan losses remained relatively unchanged at $2.0 million during the quarter ended September 30, 2001, compared to $1.9 million for the quarter ended June 30, 2001. The slight increase in net interest income is due to the reduction in the Bank's cost of funds during the quarter.

    The provision for loan losses was $959 thousand for the quarter ended September 30, 2001 compared to $788 thousand provision for the quarter ended June 30, 2001. The provision for the quarter ended September 30, 2001 includes $423 thousand for net charge-offs. The provision for the quarter ended June 30, 2001 includes $634 thousand lower of cost or market adjustment for loans that were designated as held for sale.

    Noninterest income was $981 thousand for the quarter ended September 30, 2001 and June 30, 2001. Noninterest income for the quarter ended September 30, 2001 included $327 thousand income from the sale of investment securities. The quarter ended June 30, 2001 included $351 thousand income related to recoveries from the 1999 desecuritizations.

    Noninterest expenses were $3.8 million for the quarter ended September 30, 2001, compared to $3.4 million in the quarter ended June 30, 2001. The $397 thousand increase was primarily the result of a $507 thousand provision for various potential liabilities.

    The provision for income taxes increased $970 thousand as a result of the write-off of the Company's deferred tax asset due to the uncertainty regarding the realization of the asset.

    Total assets of Life Financial were $271.5 million as of September 30, 2001 compared to $313.2 million as of June 30, 2001. The $41.7 million or 13.3% decrease in total assets is the result of a $21 million decrease in the loan portfolio, a $15 million decrease in cash and cash equivalents and a $4 million decrease in investment securities.

    The allowance for loan losses totaled $4.7 million and the balance in the lower of cost or market adjustment was $1.6 million as of September 30, 2001 and $4.1 million and $2.1 million, respectively as of June 30, 2001. The September 30, 2001 allowance for loan losses as a percent of non-accrual loans was 34.79% and 26.73% as of June 30, 2001. Non-accrual loans totaled $13.5 million at September 30, 2001 and $15.5 million as of June 30, 2001.

    Loan production and loans purchased for the quarter ended September 30, 2001 was $10.4 million, compared to $312 thousand for the quarter ended June 30, 2001.

    Total deposits were $257.8 million as of September 30, 2001 compared to $276.6 million as of June 30, 2001. The $18.8 million decrease in deposits is the result of lower funding requirements as a result of the reduction in the loan portfolio and the Bank's strategy to focus on local consumer and business accounts and to reduce reliance on wholesale and brokered certificates of deposit. The ratio of Branch Bank deposits to total deposits increased to 97.0% at September 30, 2001 compared to 96.0% as of June 30, 2001. The cost of deposits decreased from 5.78% for the quarter ending June 30, 2001 to 5.14% for the quarter ending September 30, 2001.

    The $20 million of Other Borrowings, which had a borrowing cost of 5.31% for the quarter, was paid off at the end of the third quarter of 2001.

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    Life Bank's core, tier 1 and total risk-based capital ratios based on risk-weighted assets at September 30, 2001 were 4.00%, 4.34% and 5.59%, respectively. Due to the drop in the risk-based capital ratio, the Bank's capital category is now "significantly undercapitalized". The drop in the Bank's ratios is attributable to the write-offs of the Bank's deferred tax asset of $2 million and a receivable for current taxes of $3 million owed by LIFE Financial to the Bank. The write-offs are consistent with the findings of the recently completed Office of Thrift Supervision audit coupled with the termination of New Life Holding's agreement.

    Due to the Bank's significantly undercapitalized designation and pursuant to Prompt Corrective Action ("PCA") regulations, the Board of Directors has consented to an OTS request to sign a Marketing Assistance Agreement and Consent to the Appointment of a Conservator or Receiver. Additionally, the issuance and request by OTS is due to the Bank being in violation of the Supervisory Agreement dated September 25, 2000, in violation of the Prompt Corrective Action Directive dated March 23, 2001, and the OTS considers the Bank to be in an unsafe and unsound condition. Steven Gardner, President and CEO of the Bank, stated that "We fully expect to enter into a transaction that will re-capitalize the Bank and that the OTS will allow the Company sufficient time to resolve the Bank's capital levels."

    LIFE Financial is a saving and loan holding company that owns 100% of the capital stock of the Bank, Life Financial's principal operating subsidiary. The Bank is a federally chartered stock savings bank whose primary business includes branch banking, permanent residential and construction lending. The Bank currently operates five full-service branches located in Orange, San Bernardino and Riverside Counties, in Southern California.

FORWARD-LOOKING COMMENTS

    The statements contained in this release that are not historical facts are forward-looking statements based on management's current expectations and beliefs concerning future developments and their potential effects on Life Financial. There can be no assurance that future developments affecting Life Financial will be the same as those anticipated by management.

    Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties. These include, but are not limited to, the following risks:

•

Changes in the performance of the financial markets;



•

Changes in the demand for and market acceptance of Life Financial's products and services;



•

Changes in general economic conditions including interest rates, presence of competitors with greater financial resources, and the impact of competitive products and pricing;



•

The effect of Life Financial's policies;



•

The continued availability of adequate funding sources;



•

Actual prepayment rates and credit losses of loans sold as compared to prepayment rates and credit losses assumed by Life Financial at the time of sale for purposes of its gain on sale computations;



•

The effect of changes in market interest rates on the spread between the coupon rate on loans sold and the pass through rate on securities backed by such loans issued by Life Financial in securitization transactions and on the discount rate assumed by Life Financial in its gain on sale computations; and various legal, regulatory and litigation risks.

FOR INFORMATION ON LIFE FINANCIAL PLEASE E-MAIL YOUR REQUEST TO rpainter@lifebank.net OR CALL ROY L. PAINTER, CHIEF FINANCIAL OFFICER AT 909.637.4095 OR STEVEN R. GARDNER, PRESIDENT AND CHIEF EXECUTIVE OFFICER AT 909.637.4110. PLEASE INCLUDE YOUR PHONE, FACSIMILE AND MAILING ADDRESS.

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LIFE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

UNAUDITED (In thousands)

		September 30, 2001			December 31, 2000
ASSETS
Cash and due from banks		$	9,286		$	7,810
Federal Funds Sold			—			730
	Cash and cash equivalents		9,286			8,540
Securities Held under Repurchase Agreements			—			25,000
Investment Securities Available for Sale			32,138			42,370
Loans held for sale—net			5,924			—
Loans receivable, net of allowance for loan losses of $4,679 in 2001 and $5,384 in 2000, respectively			207,687			316,724
Mortgage servicing rights			109			5,652
Accrued interest receivable			1,811			3,187
Foreclosed real estate			5,579			1,683
Premises and equipment			2,067			3,100
Income taxes receivable			—			202
Deferred income taxes			—			901
Participation Contract			4,428			4,428
Other assets			2,494			2,634
TOTAL ASSETS		$	271,523		$	414,421
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposit accounts		$	257,814		$	345,093
Other borrowings			—			47,120
Subordinated debentures			1,500			1,500
Accrued expenses and other liabilities			2,368			6,808
Total liabilities			261,682			400,521
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value			13			13
Additional paid-in capital			42,628			42,629
Retained earnings			(32,904	)		(28,912	)
Accumulated adjustments to stockholders' equity			104			170
Total stockholders' equity			9,841			13,900
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	271,523		$	414,421

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LIFE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

UNAUDITED

(In thousands, except per share data)

		Three Months Ended						Nine Months Ended
		September 30, 2001			September 30, 2000			September 30, 2001			September 30, 2000
INTEREST INCOME:
Loans		$	5,148		$	8,810		$	17,752		$	30,749
Other interest-earning assets			642			921			2,022			2,399
	Total interest income		5,790			9,731			19,774			33,148
INTEREST EXPENSE:
Interest-bearing deposits			3,392			6,610			12,462			19,806
Other borrowings			347			405			993			2,164
Subordinated debentures			53			53			157			158
	Total interest expense		3,792			7,068			13,612			22,128
NET INTEREST INCOME			1,998			2,663			6,162			11,020
PROVISION FOR LOAN LOSSES			959			716			2,166			716
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			1,039			1,947			3,996			10,304
NONINTEREST INCOME:
Loan servicing fee income			333			2,351			1,572			5,890
Bank and other fee income			152			150			498			413
Net gain (loss) on loan sales			72			(5,798	)		465			(5,887	)
Net gain/ (loss) from investment securities			327			(1,025	)		871			(1,025	)
Other income/ (loss)			97			(65	)		624			159
	Total noninterest income(loss)		981			(4,387	)		4,030			(450	)
NONINTEREST EXPENSE:
Compensation and benefits			1,213			2,778			4,156			9,270
Premises and occupancy			628			1,100			1,967			3,399
Data processing			167			186			579			836
Net loss on foreclosed real estate			44			256			185			319
Other expense			1,737			2,383			4,165			6,267
	Total noninterest expense		3,789			6,703			11,052			20,091
LOSS FROM OPERATIONS			(1,769	)		(9,143	)		(3,026	)		(10,237	)
PROVISION FOR INCOME TAXES			966			2,068			966			1,623
NET LOSS FROM OPERATIONS		$	(2,735	)	$	(11,211	)	$	(3,992	)	$	(11,860	)
Basic Average Shares Outstanding			1,333,572			1,333,687			1,333,636			1,333,632
Basic (Loss) per Share		$	(2.05	)	$	(8.41	)	$	(2.99	)	$	(8.89	)
Diluted Average Shares Outstanding			1,333,572			1,333,687			1,333,636			1,333,632
Diluted (Loss) per Share		$	(2.05	)	$	(8.41	)	$	(2.99	)	$	(8.89	)

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LIFE FINANCIAL CORPORATION AND SUBSIDIARIES

Statistical Information

UNAUDITED

(In thousands)

Asset Quality:
Non-accrual loans	$	13,450
Real estate owned	$	5,579
Net charge offs for the quarter ended September 30, 2001	$	423
Allowance for loan losses	$	4,679
Net charge offs to average loans, annualized		0.74	%
Non-accrual loans to total loans		6.33	%
Non-accrual loans to total assets		4.95	%
Allowance for credit losses to total loans		2.20	%
Allowance for credit losses to non-accrual loans		34.79	%
Average Balance Sheet for the quarter ended September 30, 2001:
Total assets	$	299,204
Loans	$	227,547
Deposits	$	263,893
Borrowings	$	20,848
Net interest margin for the quarter ended September 30, 2001		2.86	%
Share Data:
Book value	$	7.38
Market value(Closing Price as of September 30, 2001)	$	1.35

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EXHIBIT 99.1
LIFE FINANCIAL CORPORATION ANNOUNCES THIRD QUARTER 2001 RESULTS
FORWARD-LOOKING COMMENTS
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET UNAUDITED (In thousands)
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT UNAUDITED (In thousands, except per share data)
LIFE FINANCIAL CORPORATION AND SUBSIDIARIES Statistical Information UNAUDITED (In thousands)