GBC Bancorp Announces Quarterly Earnings of $7.9 Million, or $0.55 Diluted Earnings Per Share; Year-to-date Earnings of $21.4 Million, or $1.48 Diluted Earnings Per Share

Business Wire, Oct 14, 1998

LOS ANGELES--(BUSINESS WIRE)--Oct. 14, 1998--GBC Bancorp, parent company of General Bank, announced net income for the quarter ended September 30, 1998 of $7,878,000, or $0.55 diluted earnings per share, as compared to $5,858,000, or $0.41 per share for the third quarter of 1997.

Year-to-date net income was $21,352,000, or $1.48 diluted earnings per share, as compared to $18,062,000, or $1.29 diluted earnings per share for the same period of 1997. Earnings per share reflect the 2 for 1 split of the stock to shareholders of record on April 30, 1998 and issued and distributed on May 15, 1998.

The $3,290,000, or 18.2%, increase of year-to-date net income from 1997 was from the growth of net interest income, the absence of a provision for credit losses, and higher non interest income, which were partially offset by higher non interest expense.

In the quarter, two performing (one of which was restructured) loans were repaid, with a resulting recognition of $1,458,000 pre-tax of interest recoveries, $1.7 million of recoveries to the allowance for credit losses, and a reduction of $7.0 million of restructured loans.

Return on equity for the quarter was 18.9%, bringing the year-to-date return on equity to 18.1%. This compares to 19.4% for the first nine months of 1997.

"In the third quarter, record loans and leases, total assets and stockholders' equity were again achieved," said Li-Pei Wu, Chairman and Chief Executive Officer. "Total assets at quarter-end were $1,623 million and total stockholders' equity was $170 million. Gross loans and leases were $751 million at quarter-end, and were up $32 million from June 30, 1998 and $112 million from December 31, 1997.

"On September 17, the Board of Directors authorized a stock repurchase program of up to 1.4 million shares of the Company's stock. No shares were purchased as of September 30, but as of October 9, 1998, 368,600 shares had been repurchased and will be reflected in the financial results of the fourth quarter.

"During 1998, significant disruptions to certain financial markets in Asia have continued. Although the Company engages in international trade financing, the majority of the business involves imports and all of the Company's loans are denominated in U.S. dollars. The Company has no foreign loans in its loan portfolio as of September 30, 1998.

"The primary source of prepayment for substantially all of the Company's loans is from the cash flow generated from the borrowers' operations, which are located within the United States. There could be adverse financial impacts on individual borrowers as they adjust their businesses to the changes caused by the financial disruptions, but at this time, management believes that negative impacts, if any, should not be significant.

"On September 30, 1998, the Federal Reserve announced a reduction in the fed funds rate of 25 basis points, which resulted in an immediate reduction of the prime rate by the same amount. The decline of the prime rate and of the fed funds rate affects the yield of $680 million of the Company's earning assets as of September 30, 1998.

"In addition, there is an increasing rate of prepayments of the Company's securities that will be reinvested in lower yields based on current money market conditions. Partially offsetting these reductions in interest income will be a reduction of interest expense due to lower rates paid on the Company's certificates of deposits, which totaled $874 million as of September 30, 1998, and on other interest-bearing deposits.

"Although the net interest income of the Company in the future will be affected by many variables, including the amount of loan growth in the future, loan pricing and future changes in money market conditions, management expects that the immediate effect of the above changes will be a decline in the net interest spread."

The Tier 1 leverage ratio at September 30, 1998, was 10.3%, as compared to 9.6% at December 31, 1997. The Company's capital ratios remain well in excess of regulatory requirements. Book value per share at September 30, 1998, was $12.03, as compared to $10.46 at December 31, 1997, which amount was restated for the stock split.

For the quarter, net interest income was $18,639,000, as compared to $15,266,000 for the same period of 1997. Year-to-date net interest income was $51,292,000, which was $6,132,000, or 13.6%, higher than the same period of 1997.

This was caused by an increase in average earning assets of $203 million, or 15.4%, which was partially offset by a decrease of the net interest spread (from 3.87% a year ago to 3.53% for 1998; the 1998 spread excludes the effect of the repayment of the two loans). The net interest spread declined slightly from second quarter to the third quarter of 1998 (excluding the effect of the repayment of the two loans previously mentioned).

For the year, the decline in the net interest spread is caused by the increased average cost of funds (from 4.33% in 1997 to 4.60% in 1998), which in turn is caused by higher average rates on the Bank's certificates of deposits. The percentage of average certificates of deposits to average total deposits also increased from 61% in 1997 to 64% in 1998.