GBC Bancorp Announces Quarterly Earnings of $6.8 Million, or $0.48 Diluted Earnings Per Share; Record Year-to- Date Earnings of $28.1 Million, or $1.96 Diluted Earnings Per Share

Business Wire, Jan 21, 1999

LOS ANGELES--(BUSINESS WIRE)--Jan. 21, 1999--GBC Bancorp, parent company of General Bank, announces net income for the quarter ended Dec. 31, 1998, of $6,790,000, or $0.48 diluted earnings per share, as compared with $7,884,000, or $0.55 diluted earnings per share for the fourth quarter of 1997.

Year-to-date net income was $28,142,000, or $1.96 diluted earnings per share, as compared with $25,946,000, or $1.84 diluted earnings per share for 1997 (after extraordinary item). Earnings per share reflect the two for one split of the stock to shareholders of record on April 30, 1998, and issued and distributed on May 15, 1998.

The $1,094,000, or 13.9 percent, decrease in fourth quarter net income from the same period of 1997 was caused by both the absence of a provision for credit losses and higher gains from the sale of OREO in 1997, partially offset by increased net interest income in 1998.

The $2,196,000, or 8.5 percent, increase of year-to-date net income from 1997 was from the growth of net interest income and higher non interest income, which were partially offset by higher non interest expense and a higher provision for credit losses. In the quarter, a provision for credit losses of $1,500,000 was recorded.

At year-end, an allocation of the allowance for credit losses for the $12.6 million non-accrual loan previously disclosed was made based upon the estimated expected realization of collateral value from the bankruptcy proceeding. As the company cannot determine the exact timing of the liquidation of the assets nor the actual values at that time, this allocation will continue to be evaluated at the end of subsequent quarters until the credit is removed from the balance sheet.

Return on average equity for the quarter was 16.2 percent, bringing the year-to-date return on equity to 17.6 percent. This compares with 20.0 percent for 1997.

"In 1998, record net income, earnings per share, loans and leases, total assets and stockholders' equity were again achieved," said Li-Pei Wu, chairman and chief executive officer. "Total assets at year-end were $1,681 million and total stockholders' equity was $163 million.

"Gross loans and leases were $789 million at year-end, and were up $38 million from Sept. 30, 1998, and $150 million from Dec. 31, 1997."

On Sept. 17, the Board of Directors authorized a stock repurchase program of up to 1.4 million shares of the company's stock. As of Dec. 31, 1998, 465,300 shares had been repurchased at a total cost of $10.4 million. The number of shares used for the diluted earnings per share calculation declined from 14.4 million in the third quarter, 1998, to 14.1 million for 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 Dec. 31, 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.

The Tier 1 leverage ratio at Dec. 31, 1998, was 9.75 percent, as compared with 9.58 percent at Dec. 31, 1997. The company's capital ratios remain well in excess of regulatory requirements. Book value per share at Dec. 31, 1998, was $11.89, as compared with $10.46 at Dec. 31, 1997, which amount was restated for the stock split.

For the quarter ended Dec. 31, 1998, net interest income was $17,681,000, as compared with $16,313,000 for the same period of 1997. In 1998, net interest income was $68,973,000, which was $7,500,000, or 12.2 percent, higher than 1997.

This was caused by an increase in average earning assets of $193 million, or 14.3 percent, which was partially offset by a decrease of the net interest spread (from 3.82 percent for 1997 to 3.62 percent for 1998). The net interest spread in the fourth quarter remained at about the same level as the third quarter (excluding the effect of the interest recovery of $1,458,000 in the third quarter).

For the year, the decline in the net interest spread is caused by the increased average cost of funds (from 4.38 percent in 1997 to 4.53 percent 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 percent in 1997 to 64 percent in 1998.

The yield on earning assets (excluding the effect of interest recoveries previously mentioned) has declined somewhat from 1997 to 1998 due mostly to a lower yield on loans, which was mitigated by the increased percentage of average loans and leases to average earning assets (from 44.9 percent in 1997 to 46.3 percent in 1998).