Golden State Bancorp Reports Second-Quarter Cash Operating Earnings of $0.67 Per Share
SAN FRANCISCO--(BUSINESS WIRE)--July 22, 1999--Golden State Bancorp Inc. (NYSE:GSB - news), the publicly traded parent of California Federal Bank, today reported second-quarter cash operating earnings of $0.67 per diluted share or $95.4 million.
Cash operating earnings exclude amortization of goodwill of $18 million, an after-tax gain of $9.4 million on the sale of servicing rights, and an after-tax expense of $3.2 million for the redemption of the bank's Series B Preferred Stock (reflected as minority interest). Operating earnings, including the amortization of goodwill, were $0.55 per diluted share or $77.4 million. Total reported earnings were $0.59 per diluted share or $83.6 million.
''Our second-quarter results demonstrate the strength of our franchise to create exceptionally strong cash earnings,'' said Gerald J. Ford, chairman and chief executive officer. ''I am especially pleased that we exceeded all our goals for our merger with Glendale Federal by June 30, a full six months earlier than planned. I'm also pleased that the efficiency ratio for the bank declined to 47 percent, our credit quality indicators improved, and our return on equity increased to more than 20 percent.''
''The importance of achieving all of our merger goals early is that it allows us now to be 100 percent focused on our customers,'' added Carl B. Webb, president and chief operating officer. Webb cited four areas that highlight the bank's efforts to increase profitability by delivering a broad array of financial products to its customers:
-- First Nationwide Mortgage Corporation, the bank's residential
mortgage subsidiary, originated $5.0 billion of mortgage loans in
the second quarter, up from $4.7 billion in the first quarter.
Originations of adjustable rate mortgages (ARMs) for portfolio
reached $2.0 billion in the second quarter, up 12 percent from
ARM originations of $1.8 billion in the first quarter.
-- Mutual fund, annuity, and other security sales through Cal Fed
Investments totaled $551 million in the first half of 1999. Fees
from investment sales accounted for 28 percent of customer
banking fees in the quarter.
-- Home equity lending accelerated to a $48.2 million per month pace
in June from a $14.5 million per month pace in January, while
time to process loans was reduced by 30 percent during the same
time period. In June, Cal Fed launched a new home equity product,
the Equity Prime Line of Credit, which accounted for a 30 percent
increase in production from May to June.
-- Checking accounts opened totaled 17,954 in the month of June, up
from 12,343 in January. In June, checking accounts opened
exceeded checking accounts closed by 1,748.
Financial Highlights
Net Interest Income totaled $297.0 million for the quarter at the holding company level, with average interest-earning assets of $52.4 billion. Average earning assets at the bank level were also $52.4 billion, with a net interest margin of 2.53 percent. Net interest income was down from the first-quarter level of $308.0 million due primarily to an extra day in the second quarter, which increased funding costs, but did not have a commensurate impact on interest income. The cost of funds remained essentially flat from first-quarter levels, with the rate on interest-bearing liabilities for the bank at 4.51 percent, down from 4.53 percent in the first quarter. The yield on interest-earning assets fell 9 basis points in the quarter to 6.90 percent, primarily as a result of the high level of mortgage refinancings that took place earlier in the year.
Noninterest Income was $107.4 million in the second quarter, compared to $105.2 million in the first quarter, and $80.3 million in the fourth quarter of 1998. Loan servicing fees declined to $34.3 million in the second quarter from $36.0 million in the first quarter as a result of the sale of servicing rights. Customer banking fees and service charges increased at a 17 percent annualized rate to $46.6 million from the first quarter level of $44.7 million due to growth in checking and other transaction deposit fees. Gain on sale of assets in the quarter included the gain on the sale of servicing rights of $16.3 million. Gain on sales of loans in the quarter was reduced by a valuation adjustment on loans held for sale of $8.8 million.
Noninterest Expense: General and administrative expenses (noninterest expenses less the amortization of goodwill, and merger and integration costs) totaled $204.6 million for the quarter, down $30 million from the first-quarter level of $234.6 million. The level of expenses was positively impacted by the achievement of the merger cost saves by the end of the quarter (see below). Every category of general and administrative expenses was down in the second quarter, with the exception of a $0.6 million increase in data processing expense. Included in second-quarter noninterest expense was a merger charge of $1.7 million. The efficiency ratio for the bank was 47 percent for the quarter, excluding the merger charge.
Merger Completion: GSB announced today that it had achieved all of its commitments related to the Glendale merger as of June 30, six months earlier than planned at the time of the February 1998 merger announcement (see attached table). Annualized cost saves totaled $162.0 million, $1.8 million above the commitment of $160.2 million; reduced FTE equaled 1,137 compared to the commitment of 1,123.
Credit Costs and Asset Quality: Every category of reported non-performing assets and restructured loans -- including non-accrual loans, REO and other assets, and restructured loans -- declined during the second quarter from March 31, 1999 levels. GSB recorded a loan loss provision of $5.0 million in the second quarter, unchanged from the first quarter. The allowance for loan losses totaled $578.4 million at the end of the quarter and non-accrual loans were $190.0 million, resulting in a coverage ratio of 305 percent. Total net chargeoffs for the quarter were $9.8 million, or 0.03 percent of total loans.
Assets and Liabilities: Total assets were $56.8 billion on June 30, up from $56.2 billion at March 31. Assets increased as a result of higher loan receivables of $861 million, partially offset by a decline of $329 million in mortgage-backed securities. Single-family residential loans were $24.9 billion at the end of the quarter, accounting for 78 percent of all loans. Non-real-estate loans increased at a 20 percent annualized rate during the quarter, totaling $1.7 billion on June 30, up $82 million from March 31 levels. Deposits totaled $23.9 billion at quarter end, and included an additional $543 million in deposits acquired from the purchase of 12 branches in Nevada. Checking accounts represented 18 percent of total deposits, while total transaction accounts represented 47 percent of the amount.
Stockholders' Equity totaled $1.5 billion on June 30, and capital ratios of the bank continued to exceed regulatory requirements for classification as ''well capitalized,'' the highest regulatory standard. The number of diluted shares outstanding was 140.3 million on June 30, 1999, down from 140.8 million at March 31, 1999. GSB repurchased 2.1 million shares of common stock in the quarter at an average purchase price of $23.18 per share.
Minority interest for the second quarter of 1999 includes the cost of $3.2 million for the redemption of the remaining $61 million of the bank's Series B, 10-5/8 percent preferred stock not already owned by GSB on April 1. |
