EX-99.1 3 ex99-1tonov20038k.txt Exhibit 99.1 For more information, please contact: MATRIX David W. Kloos BANCORP Chief Financial Officer (303) 595-9898 MATRIX BANCORP ANNOUNCES THIRD QUARTER RESULTS November 3, 2003 Denver, Colorado -- Matrix Bancorp, Inc. (NASDAQ: MTXC) (the "Company") today reported for the quarter ended September 30, 2003, income from continuing operations of $300 thousand, or $0.05 per basic and diluted share, a loss from discontinued operations of $(2.3) million, or $(0.36) per basic and diluted share, and a net loss of $(2.0) million, or $(0.31) per basic and diluted share. The loss from discontinued operations reflects the completion of the sale of the wholesale mortgage origination platform at Matrix Financial Services Corporation (as discussed more fully below). These results compare to a loss from continuing operations of $(6.2) million, or $(0.96) per basic and diluted share, income from discontinued operations of $1.0 million, or $0.15 per basic and diluted share, and a net loss of $(5.2) million, or $(0.81) per basic and diluted share for the quarter ended September 30, 2002. For the nine months ended September 30, 2003, the Company reported a loss from continuing operations of $(1.6) million, or $(0.25) per basic and diluted share, income from discontinued operations of $2.9 million, or $0.45 per basic and diluted share, and net income of $1.3 million, or $0.20 per basic and diluted share. These results compare to the nine months ended September 30, 2002 which reflected a loss from continuing operations of $(5.5) million, or $(0.85) per basic and diluted share, income from discontinued operations of $3.2 million, or $0.50 per basic and diluted share, and a net loss of $(2.3) million, or $(0.35) per basic and diluted share. D. Mark Spencer, President and Co-CEO, commented, "On September 2, 2003, the Company announced that its wholly owned subsidiary, Matrix Financial Services Corporation ("Matrix Financial"), completed the sale of its wholesale mortgage origination platform based in Phoenix, Arizona to AmPro Mortgage Corporation. As previously reported, the transaction was structured to close in two stages for licensing reasons. As a result of the two-stage closing, the Company was required to continue to account for the origination platform as a continuing operation during the six months between the initial closing, February 28, 2003, and the final closing, August 31, 2003. Accordingly, during the third quarter of 2003 (in which the final closing occurred), the Company was required to compare the net earnings of the origination platform for these six months to the purchase price, which resulted in recording a loss of approximately $5.2 million, which is included in the results of discontinued operations for 2003. Through September 30, 2003, we earned $6.2 million of production premium pursuant to the Agreement with AmPro. We will continue to earn the 20 basis points production premium on the wholesale production originated from the platform sold, to a maximum amount of $9.1 million, through February 2004. Although the timing of the sale was not perfect based on the level of origination activity that has occurred since the original sale date, we believe this sale was, and continues to be, strategically the best long-term decision for the Company due to the cyclical and uncertain nature of the mortgage business. With the recent increase in interest rates, the refinance activity has experienced a significant reduction. With the sale of the platform, we will not have to face the operational and financial challenges associated with the decrease in the production volumes. The operations of the production platform are included as discontinued operations in the attached financial statements, and will be presented as such in future releases and filings. It should be noted that the discontinued operations are based upon the Company's historical results from operations of the production platform, adjusted to reflect the impact of the sale of the production platform. Because there was an opportunity cost of owning the production platform, the historical results are not necessarily indicative of the results that might have occurred if the disposition had actually been completed on the indicated date, and are not necessarily indicative of any future results." Mr. Spencer continued, "In the third quarter of 2003, the Company also incurred approximately $2 million in charge-offs of assets that were held at our subsidiary, ABS School Services. These charge-offs relate primarily to revaluations of various long-term investments and real estate acquired for development. The charge-offs are a direct result of the Company's decision to reduce its overall commitment to the charter school business. Also included in the third quarter 2003 operating results were charges of $1.1 million related to the settlement of litigation matters at Matrix Financial". Richard V. Schmitz, Chairman of the Board and Co-CEO of the Company, added, "While the accounting for the operations of the production platform creates an overall loss in our operations, the Company's core operations continued to produce positive results. Matrix Capital Bank has been able to maintain favorable margins in spite of the continued low interest rate environment. The settlement and clearing business in which we have an investment, Matrix Settlement & Clearance Services, had another strong quarter and has assets registered for trading in excess of $22.6 billion. To support our investment in the settlement and clearing business, Matrix Capital Bank's trust services acts as custodian and trustee for many of the same settlement and clearing customers. The trust assets at Matrix Capital Bank continue to grow and are now approximately $9.9 billion. Matrix Bancorp Trading had another impressive quarter with revenues of approximately $1.8 million. Finally, Matrix Asset Management continues its growth and has added internet capabilities with the purchase and operation of REOsource that we believe will continue to add growth and geographic diversity to our portfolio of residential properties under management, which is an all-time high in excess of 2,800." Mr. Schmitz continued, "The challenge that we continue to face is the unprofitability of our investment in mortgage servicing rights. The $43.2 million investment will remain a drag on our earnings in the current interest rate environment. Although the prepayment speeds have decreased from the recent record levels, they still remain higher than originally projected. We also face the challenge of managing the operational cost of the servicing platform as our investment in servicing decreases through run-off. We are continuing to operate under our previously outlined strategy of reducing our exposure to mortgage banking and school services, and continuing our expense containment while enhancing our core businesses." Financial Highlights The Company's assets totaled $1.6 billion on September 30, 2003, as compared to $1.7 billion at December 31, 2002. The decline was anticipated as we redeploy the assets previously committed to the mortgage origination platform. Net interest income before provision for loan and valuation losses totaled $10.3 million for the quarter ended September 30, 2003 as compared to $11.3 million for the quarter ended September 30, 2002. Net interest income before provision for loan and valuation losses totaled $31.7 million for the nine months ended September 30, 2003 as compared to $31.2 million for the nine months ended September 30, 2002. The decrease in net interest income for the quarter ended September 30, 2003, and the slight increase in net interest income for the nine months ended September 30, 2003 as compared to the quarter and nine months ended September 30, 2002, was primarily due to decreases in the net interest margins, which decreased to 2.84% and 2.89% for the quarter and nine months ended September 30, 2003, respectively, as compared to 3.19% and 3.03% for the quarter and nine months ended September 30, 2002, respectively. The decrease in the net interest margin was caused by decreases in the yield on our interest earning assets, offset by a decrease in the cost of our interest bearing liabilities and increases in the average balances of interest earning assets and interest bearing liabilities. Both the decrease in the yield on interest-earning assets and the cost of the interest bearing liabilities are attributable to the historically low interest rate environment. The provision for loan and valuation losses was $1.1 million for the quarter ended September 30, 2003 and $2.7 million for the nine months ended September 30, 2003 as compared to $1.3 million for the quarter ended September 30, 2002 and $3.0 million for the nine months ended September 30, 2002. The decrease between quarters and year-to-date is due to higher charge offs and additional amounts recorded in 2002 at Matrix Capital Bank, Matrix Financial and ABS School Services. Noninterest income was $14.5 million for the quarter ended September 30, 2003 as compared to $16.0 million for the quarter ended September 30, 2002. Noninterest income for the nine months ended September 30, 2003 was $52.8 million as compared to $47.4 million for the nine months ended September 30, 2002. The decrease for the quarter ended September 30, 2003 as compared to the quarter ended September 30, 2002 was due to lower levels of brokerage income, due to timing of the transactions driven by the market demand, and due to decreases in other income due to losses recognized on our mortgage servicing asset hedge which is included in other income. These decreases were offset by recognition of gains on sales of multi-family and the guaranteed portion of SBA loans during the quarter ended September 30, 2003. The increases in noninterest income for the nine months ended September 30, 2003 was due to higher volume of transactions in loan administration, trust services, real estate disposition services and year-to-date net hedging gains included in other income. These increases were partially offset by the lower levels of school services income due to the planned reduction in our commitment to that industry. Noninterest expense was $23.7 million and $85.9 million for the quarter and nine months ended September 30, 2003, respectively, as compared to $36.9 million and $86.1 million for the quarter and nine months ended September 30, 2002, respectively. The decrease was mainly the result of recovery of a portion of our previously charged impairment on our mortgage servicing rights, offset by continued increases in the amortization of mortgage servicing rights due to continued increase in the average prepayment rate on the Company's mortgage servicing rights portfolio. As noted above, also included in the noninterest expense are amounts related to the settlement of certain outstanding litigation at Matrix Financial. Forward-Looking Statements Certain statements contained in this press 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 press release could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: third party claims or actions in relation to the ongoing or future bankruptcies of the Company's customers; interest rate fluctuations; level of delinquencies; defaults and prepayments; general economic conditions; competition; government regulation; possible future litigation; the actions or inactions of third parties, including failure of the Buyer to perform its obligations under the purchase agreement relating to the sale of the wholesale production platform, and actions or inactions of those that are parties to the existing or future bankruptcies of the Company's customers or litigation related thereto; unanticipated developments in connection with the bankruptcy actions or litigation described above, including judicial variation from existing legal precedent and the decision by one or more parties to appeal decisions rendered; the risks and uncertainties discussed elsewhere in this annual report and in the Company's current report on Form 8-K, filed with the Securities and Exchange Commission on March 14, 2001; and the uncertainties set forth from time to time in the Company's periodic reports, filings and other public statements.
MATRIX BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2003 2002 ----------------- ----------------- (Unaudited) ASSETS Cash and cash equivalents $ 58,706 $ 58,725 Interest-earning deposits and federal funds sold 2,151 3,687 Securities available for sale 63,037 29,073 Loans held for sale, net 995,345 1,107,926 Loans held for investment, net 287,493 285,891 Mortgage servicing rights, net 43,188 63,200 Other receivables 41,434 54,811 Federal Home Loan Bank stock, at cost 32,336 30,379 Foreclosed real estate 6,081 8,343 Premises and equipment, net 25,141 27,705 Bank owned life insurance 20,354 - Other assets, net 26,074 31,857 ----------------- ----------------- Total assets $ 1,601,340 $ 1,701,597 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits $ 996,275 $ 933,957 Custodial escrow balances 134,655 151,790 Draft payable - 7,097 Federal Home Loan Bank borrowings 267,225 385,785 Borrowed money 49,045 61,403 Guaranteed preferred beneficial interests 64,500 64,500 Other liabilities 18,745 23,357 Income taxes payable and deferred income taxes liability 2,596 6,772 ----------------- ----------------- Total liabilities 1,533,041 1,634,661 Shareholders' equity: Preferred stock, $.0001 par value - - Common stock, $.0001 par value 1 1 Additional paid in capital 20,451 20,375 Retained earnings 47,835 46,534 Accumulated other comprehensive income 12 26 ----------------- ----------------- Total shareholders' equity 68,299 66,936 ----------------- ----------------- Total liabilities and shareholders' equity $ 1,601,340 $ 1,701,597 ================= =================
MATRIX BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) Quarter Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 -------------- --------------- ------------- ------------- Interest income: Loans and securities $ 17,846 $ 20,452 $ 55,532 $ 61,426 Interest-earning deposits 237 378 764 937 -------------- --------------- ------------- ------------- Total interest income 18,083 20,830 56,296 62,363 Interest expense: Deposits 3,200 4,656 10,664 16,551 Borrowed money and guaranteed preferred beneficial interests 4,588 4,837 13,889 14,574 -------------- --------------- ------------- ------------- Total interest expense 7,788 9,493 24,553 31,125 Net interest income before provision for loan and valuation losses 10,295 11,337 31,743 31,238 Provision for loan and valuation losses 1,114 1,308 2,651 3,008 -------------- --------------- ------------- ------------- Net interest income after provision for loan and valuation losses 9,181 10,029 29,092 28,230 Noninterest income: Loan administration 6,373 7,157 25,430 24,161 Brokerage 2,298 3,728 7,522 6,555 Trust services 1,680 1,188 4,977 3,930 Real estate disposition services 1,786 1,049 4,608 2,944 Gain on sale of loans and securities 1,711 135 2,201 284 Gain on sale of mortgage servicing rights - - - 1,054 Loan origination 245 338 87 1,011 School Services 520 882 1,786 3,702 Other (65) 1,557 6,190 3,764 -------------- --------------- ------------- ------------- Total noninterest income 14,548 16,034 52,801 47,405 Noninterest expense: Compensation and employee benefits 8,338 9,555 26,541 27,973 Amortization of mortgage servicing rights 8,263 6,037 27,517 17,073 Occupancy and equipment 1,575 1,897 4,568 4,304 Postage and communications 572 692 1,881 2,004 Professional fees 557 910 2,381 2,086 Data processing 689 721 2,114 2,108 Impairment (recovery) on mortgage servicing rights (5,100) 8,000 (2,700) 9,219 Other general and administrative 8,804 9,117 23,630 21,371 -------------- --------------- ------------- ------------- Total noninterest expense 23,698 36,929 85,932 86,138 Income (loss) from continuing operations before income taxes 31 (10,866) (4,039) (10,503) Income tax benefit (289) (4,675) (2,391) (5,015) -------------- --------------- ------------- ------------- Income (loss) from continuing operations 320 (6,191) (1,648) (5,488) Discontinued Operations: Income (loss) from discontinued operations, net of income tax provision (benefit) of $(1,528), $640, $1,908 and $2,089, respectively (2,360) 990 2,949 3,229 -------------- ---------------- ------------- ------------- Net income (loss) $ (2,040) $ (5,201) $ 1,301 $ (2,259) ============== =============== ============= =============
MATRIX BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED (Dollars in thousands, except per share data) (Unaudited) Quarter Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 -------------- --------------- ------------- ------------- Income (loss) from continuing operations per share - basic $ 0.05 $ (0.96) $ (0.25) $ (0.85) -------------- --------------- ------------- ------------ Income (loss) from continuing operations per share - assuming dilution $ 0.05 $ (0.96) $ (0.25) $ (0.85) -------------- --------------- ------------- ------------ Income (loss) from discontinued operations per share - basic $ (0.36) $ 0.15 $ 0.45 $ 0.50 -------------- --------------- ------------- ------------ Income (loss) from discontinued operations per share - assuming dilution $ (0.36) $ 0.15 $ 0.45 $ 0.50 -------------- --------------- ------------- ------------ Net income (loss) per share - basic $ (0.31) $ (0.81) $ 0.20 $ (0.35) ============== =============== ============= ============ Net income (loss) per share - assuming dilution $ (0.31) $ (0.81) $ 0.20 $ (0.35) ============== =============== ============= ============
MATRIX BANCORP, INC. AND SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Dollars in thousands, except share data) (Unaudited) Quarter Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 -------------- -------------- -------------- --------------- Weighted average shares - basic 6,496,554 6,454,244 6,492,959 6,465,083 Weighted average shares - assuming dilution 6,496,554 6,454,244 6,539,206 6,465,083 Number of shares outstanding at end of period 6,498,543 6,454,244 6,498,543 6,454,244 Average Balances Loans receivable $ 1,399,567 $ 1,350,569 $ 1,399,067 $ 1,315,970 Interest-earning assets 1,452,174 1,421,950 1,462,329 1,372,824 Total assets 1,661,228 1,661,040 1,671,982 1,597,211 Interest-bearing deposits 827,496 707,986 804,880 718,517 FHLB and other borrowings 474,249 534,885 464,922 473,957 Interest-bearing liabilities 1,301,745 1,242,871 1,269,802 1,192,474 Shareholders' equity 70,333 71,470 69,326 71,913 Operating Ratios & Other Selected Data (1) Net interest margin(2) 2.84 % 3.19 % 2.89 % 3.03 % Net interest margin - Matrix Bank(2) 2.73 % 3.24 % 2.93 % 3.60 % Operating efficiency ratio(3) 82.66 % 83.64 % 72.29 % 76.10 % Balance of servicing portfolio $ 3,430,059 $ 5,699,852 $ 3,430,059 $ 5,699,852 Average prepayment rate on owned servicing portfolio 41.50 % 23.20 % 37.50 % 21.00 % Book value per share (end of period) $ 10.51 $ 10.59 $ 10.51 $ 10.59 Loan Performance Ratios(1) Net charge offs/average loans 0.08 % 0.09 % 0.21 % 0.21 % Allowance for loan and valuation losses/total loans 0.70 % 0.87 % 0.70 % 0.87 % --------------------------- (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 provision for loan and valuation loss by average interest-earning assets. (3) The operating efficiency ratio has been calculated by dividing noninterest expense, excluding amortization of mortgage servicing rights and impairment on mortgage servicing rights, by operating income. Operating income is equal to net interest income before provision for loan and valuation losses plus noninterest income.