Quaker City Bancorp, Inc. Reports Earnings for Fourth Quarter and Fiscal 2004

Business Wire, July 27, 2004

WHITTIER, Calif. -- Quaker City Bancorp, Inc. ("Company") (NASDAQ: QCBC), the holding company for Quaker City Bank ("Bank"), reported net earnings of $20.2 million, $3.13 per share, for the fiscal year ended June 30, 2004, compared to $22.6 million, $3.43 per share, for the fiscal year ended June 30, 2003. Net earnings for the quarter ended June 30, 2004 were $3.4 million, $0.52 per share, compared to $5.5 million, $0.86 per share, for the quarter ended June 30, 2003. The Company's net earnings for the quarter and fiscal year ended June 30, 2004 were lower than the comparable prior year periods due to expenses incurred in fiscal 2004 in connection with the Company's merger with Popular, Inc. (NASDAQ: BPOP), as described below. All per share earnings are presented on a fully diluted basis.

Net earnings for the quarter and fiscal year ended June 30, 2004 were less than the same periods last year, primarily due to merger related expenses of $2.9 million included in general and administrative ("G&A") expenses of $11.1 million for the quarter and $34.4 million for the year. The merger-related G&A expenses for the quarter and fiscal year ended June 30, 2004 consisted of $1.0 million for consulting, legal and proxy filing fees and $1.8 million in accelerated expenses recognized for the complete allocation of the remaining ESOP shares to employees and pension expenses relating to the freezing of Quaker City's Cash Balance Plan, as set forth in the merger agreement.

The net interest margin for fiscal 2004 decreased to 3.52% compared to 3.83% for fiscal 2003, as the yield on interest earning assets decreased more quickly than the cost of interest bearing liabilities. The net interest margin for the quarter ended June 30, 2004 decreased to 3.41% compared to 3.70% for the same period last year. The net interest margin for the quarter ended March 31, 2004 was 3.54%.

Return on average assets ("ROAA") for the fiscal year ended June 30, 2004 was 1.15% compared to 1.46% for the fiscal year ended June 30, 2003. ROAA for the quarter ended June 30, 2004 was 0.73% compared to 1.39% for the same period last year. The Company's return on average equity ("ROAE") for fiscal 2004 was 13.96%, compared to 17.01% for fiscal 2003. ROAE for the quarter ended June 30, 2004 was 9.01% compared to 16.13% for the same period last year. ROAA and ROAE for the latest quarter and fiscal 2004, as compared to the comparable prior year periods, were negatively impacted by merger related expenses. The book value per share at June 30, 2004 was $24.26, compared to $21.86 per share at June 30, 2003, an 11.0% increase.

Average earning assets for fiscal 2004 increased to $1.71 billion compared to $1.51 billion for the same period last year, a 12.6% increase. Average earning assets for the quarter ended June 30, 2004 increased to $1.82 billion compared to $1.55 billion for the same quarter one year ago, a 17.3% increase. As a result of increased average earning assets, partially offset by a decrease in net interest margin, net interest income before provision for loan losses for fiscal 2004 was $60.0 million, compared to $58.1 million for the same period last year. For the fiscal year ended June 30, 2004, the Company added $800,000 to the allowance for loan losses due to growth in the real estate loan portfolio during fiscal 2004 and the establishment of specific reserves of $276,000 on one commercial real estate loan.

Total assets for the fiscal year ended June 30, 2004, were $1.87 billion, compared to $1.62 billion for the fiscal year ended June 30, 2003, a 15.3% increase that was principally due to an increase in loans of $184.1 million and an increase in mortgage-backed securities and other investment securities of $61.5 million.

Total other income for the fiscal year ended June 30, 2004 increased to $12.2 million from $10.3 million for the same period last year, an increase of 18.3%. The increase for fiscal 2004 was due to an increase in retail deposit fees to $6.5 million (compared to $5.1 million for the same period last year), an increase in loan servicing charges and fees to $2.2 million (compared to $2.0 million for the same period last year), an increase in commissions to $883,000 (compared to $648,000 for the same period last year), an increase in other income to $1.6 million (compared to $277,000 for the same period last year), partially offset by a decrease in gain on sale of loans held-for-sale to $1.0 million (compared to $2.3 million for the same period last year). Gain on sale of loans held-for-sale for fiscal 2004 decreased from fiscal 2003, as the fiscal year ended June 30, 2003 included the sale of a package of single family second trust deed loans for a gain of $226,000, as well as reduced loan refinancing activity to fixed rate loans that were subsequently sold, from $2.0 million for the fiscal year ended June 30, 2003 to $1.0 million for the fiscal year ended June 30, 2004. Other income for the fiscal year ended June 30, 2004 included the gain of $928,000 on sale of assets the Company owned with a zero basis and $609,000 in collections on loans purchased that the Company also owned with a zero basis.