Golden State Bancorp Reports Strong Third-Quarter Earnings
SAN FRANCISCO--(BUSINESS WIRE)--Oct. 19, 1999--Golden State
Bancorp Inc. (NYSE:GSB), the publicly traded parent of California
Federal Bank, today reported third-quarter 1999 earnings of $0.58 per
diluted share, or $81.6 million.
Cash earnings, excluding amortization of goodwill of $17.6
million, were $0.71 per diluted share, or $99.2 million.
"Our third-quarter results demonstrate the power of our franchise
to produce strong and consistent results during a period of changing
market conditions," said Gerald J. Ford, chairman and chief executive
officer. "I am especially pleased with the financial discipline
evident in our results. That is a hallmark of our management team. The
bank's efficiency ratio declined to 46.9 percent, our non-performing
assets as a percent of total assets fell to 39 basis points, and our
return on equity reached 22.5 percent."
"Third-quarter results demonstrated that our revenue growth
initiatives are beginning to take hold," added Carl B. Webb, president
and chief operating officer. Webb cited four areas that highlight the
bank's efforts to grow its revenue by delivering an increasingly broad
array of financial products to its customers:
*T
-- Loans receivable increased at an 11 percent annualized rate in
the third quarter, as loans purchased and originated for the
bank's portfolio exceeded repayments. First Nationwide Mortgage
Corporation, the bank's residential mortgage subsidiary,
originated $3.2 billion of mortgage loans in the third quarter,
including originations of adjustable rate mortgages (ARMs) for
portfolio of $1.4 billion. ARM originations were 44 percent of
total residential real estate originations in the third quarter,
up from 31 percent in the third quarter of last year.
-- Home equity originations accelerated to $104.7 million in the
third quarter from $97.0 in the second quarter and $61.6 in the
first quarter of the year. In the second quarter, Cal Fed renewed
its emphasis on consumer lending by launching a new home equity
product, the Equity Prime Line of Credit.
-- Multifamily and commercial real estate loan originations and
purchases increased to $216.1 million in the third quarter from
$109.4 million in the second quarter and $121.8 million in the
first quarter.
-- Mutual fund, annuity, and other security sales through Cal Fed
Investments totaled $816 million in the first three-quarters of
1999. Cal Fed Investments' deposit profit penetration (pretax
profits from investment sales divided by total deposits) exceeds
12 basis points, up from 7 basis points last year, one of the
highest levels in the banking industry.
Financial Highlights
Net Interest Income totaled $287.1 million for the quarter at the
holding company level, with average interest-earning assets of $53.0
billion. Average interest-earning assets at the bank level were also
$53.0 billion, with a net interest margin of 2.46 percent. Net
interest income was down from the second-quarter level of $297.0
million due in part to an extra day in the third quarter, which
increased funding costs, but did not have a commensurate impact on
interest income. The net interest margin at the bank declined slightly
from the second-quarter level of 2.53 percent due primarily to an
increase of 10 basis points in the cost of funds from second-quarter
levels, with the rate on interest-bearing liabilities for the bank at
4.61 percent. The cost of funds increased due to the higher levels of
market interest rates coupled with the full effect of second-quarter
extensions and repricing of borrowings. It should be noted that
despite the overall increase in market interest rates, the cost of
deposits remained flat at 3.67 percent, reflecting the continued
impact of the corporation's lower certificate of deposit pricing
strategy.
Noninterest Income was $102.5 million in the third quarter, up
from the second-quarter operating level of $91.1 million (which
excluded the one-time gain on sale of servicing rights of $16.3
million). Loan servicing fees increased to $38.1 million in the third
quarter from $34.3 million in the second quarter and $36.0 in the
first quarter. Loan servicing fees are benefiting from the slowdown in
mortgage loan prepayments. Customer banking fees and service charges
increased to $47.5 million in the third quarter from $46.6 million in
the second quarter and $44.7 million in the first quarter. This
consistent growth is the result of growth in checking and other
transaction deposit activities. Third-quarter noninterest income
includes a $2.3 million gain on the sale of two California branches.
Gain on sales of loans in the quarter was reduced by a valuation
adjustment on loans held for sale of $2.6 million.
Noninterest Expense: General and administrative expenses
(noninterest expenses less the amortization of goodwill, and any
merger and integration costs) totaled $204.6 million for the quarter,
equal to the second-quarter level. There was no merger charge in the
third quarter, therefore the third-quarter level of expenses
represents the post-merger run rate for the company. Every category of
general and administrative expenses was down in the third quarter,
with the exception of occupancy expense and other expense. Goodwill
amortization expense fell in the quarter due to a $47 million
reduction of the goodwill asset to $874 million from $939 million at
the end of the second quarter.
Credit Costs and Asset Quality: Every category of reported
non-performing assets -- including non-accrual loans, real estate
owned and other assets -- declined during the third quarter from June
30, 1999, levels. In addition, restructured loans were also down. Loan
chargeoffs were at a record low level totaling $7.6 million, or 0.02
percent of total loans, for the quarter, down from $9.8 million in the
second quarter. As a result of strong credit quality indicators and
its existing reserve position, GSB did not record a loan loss
provision in the third quarter. The allowance for loan losses totaled
$570.8 million at the end of the quarter and non-accrual loans were
$171.0 million, resulting in a coverage ratio of 334 percent at
September 30, up from 305 percent at June 30.
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