EX-99 3 a4439764_ex991.txt GBC EXHIBIT 99.1 Exhibit 99.1 GBC Bancorp Announces Operating Earnings of $3.6 Million; Year-to-Date Operating Earnings of $7.8 Million LOS ANGELES--(BUSINESS WIRE)--July 22, 2003--GBC Bancorp (Nasdaq: GBCB), parent company of General Bank, today announced financial results for the second quarter ended June 30, 2003. Operating earnings for the second quarter ended June 30, 2003 was $3.6 million, and operating earnings for the six months ended June 30, 2003 was $7.8 million. Reported net loss for the quarter was $13.1 million, or $1.12 per diluted share, which compares with a net loss of $8.0 million, or $0.69 per diluted share, in the second quarter of 2002. For the six months ended June 30, 2003, the reported net loss was $9.0 million, or $0.77 per diluted share, as compared to a net loss of $10.9 million, or $0.94 per diluted share for the six months ended June 30, 2002. The reported results of the second quarter ended June 30, 2003 included $21.7 million of non-cash stock compensation expense, measured as of June 30, 2003, associated with the Company's contingency stock option plan and its 1988 and 1999 stock option plans, whose terms were modified in connection with the merger agreement with Cathay Bancorp. The non-cash stock compensation expense does not reduce the Company's stockholders' equity. Rather, a $5.0 million tax benefit relating to the non-cash stock compensation expense was recorded, which increased stockholders' equity by $5.0 million. The non-cash stock compensation expense recognized in the second quarter, net of this tax benefit, was $16.7 million. Excluding the $16.7 million, operating earnings for the second quarter ended June 30, 2003 was $3.6 million, and operating earnings for the six months ended June 30, 2003 was $7.8 million. There was no non-cash stock compensation expense for the six months ended June 30, 2002. Management believes that the operating results of the Company can best be assessed by excluding the unusual non-cash stock compensation expense which was incurred as a result of the merger agreement with Cathay Bancorp. Please see the reconciliation table of the reported loss to operating earnings (loss) at the end. Asset Quality At quarter-end, the review of problem loans and leases resulted in $2.3 million of net charge-offs, which compares with $2.5 million in the first quarter of 2003 and $47.2 million in the second quarter of 2002. A $3.6 million provision for credit losses was recorded in the quarter, which compares with $4.6 million in the first quarter of 2003 and $39.2 million in the second quarter of 2002. Non-accrual loans at June 30, 2003 were $21.9 million, a decrease of approximately $2.0 million from March 31, 2003 and a decrease of $2.9 million from December 31, 2002. Of the non-accrual loans at June 30, 2003, $18.2 million were commercial loans and $3.7 million were real estate collateralized loans. The allowance for credit losses was $28.9 million at June 30, 2003, compared with $27.6 million at March 31, 2003 and $25.5 million at December 31, 2002. The allowance was 2.37% of loans and leases at June 30, 2003, as compared to 2.19% at March 31, 2002 and 2.13% at December 31, 2002. As of June 30, 2003, the Bank had reduced its level of classified assets to the specified percentages required to be achieved by June 30, 2003 pursuant to its Memorandum of Understanding ("MOU") with the Federal Deposit Insurance Corporation and the California Department of Financial Institutions. The Bank's Tier 1 Leverage Ratio was 8.37% as of June 30, 2003, which also was in compliance with the requirements of the MOU. It is a condition of closing under the terms of the Agreement of Merger with Cathay Bancorp that the Bank's Tier 1 Leverage Ratio must be at least 7.5% as of the end of the quarter preceding the closing. Another condition of closing is that General Bank's percentage of nonaccrual loans and leases to total loans and leases shall be less than 2.85% as of the end of the month preceding the closing. At June 30, 2003, the ratio was 1.80%. Financial Highlights For the quarter ended June 30, 2003, net interest income was $17.7 million, compared with $19.5 million in the first quarter of 2003 and $25.2 million in the same period of 2002. The decrease in net interest income was mostly attributable to lower yields on the Company's securities portfolio. Prepayments in mortgage-backed securities combined with lower reinvestment rates negatively impacted the yield on the securities portfolio. As of June 30, 2003, the expected weighted average life of the securities portfolio was 2.1 years. For the six months ended June 30, 2003, net interest income was $37.2 million, as compared to $49.2 million for the same period of 2002, due to the factors above. The yield on earning assets decreased to 4.76% in the second quarter of 2003, as compared with 5.19% in the first quarter of 2003, with the yield on loans declining from 6.54% to 6.47% and the yield on securities declining from 4.18% to 3.22%. For the six months ended June 30, 2003, the yield on earning assets was 4.97%, as compared to 6.22% for the same period of 2002. Due to deposit repricing, the cost of interest-bearing deposits declined from 1.92% in the first quarter of 2003 to 1.81% in the second quarter of 2003. For the six months ended June 30, 2003, the cost of interest-bearing deposits was 1.87%, as compared to 2.21% for the same period of 2002. The cost of funds declined from 2.39% in the first quarter of 2003 to 2.26% in the second quarter of 2003, resulting in a cost of funds of 2.32% for the six months ended June 30, 2003. This compares with a cost of funds of 2.63% for the six months ended June 30, 2002. The net interest margin was 2.92% in the second quarter of 2003, as compared with 3.24% in the first quarter of 2003 and 4.01% in the second quarter of 2002. The decrease in net interest margin from the previous quarter is attributable to the decline in the yield on securities resulting from the decline of prevailing interest rates from actual and anticipated Federal Reserve Bank interest rate reductions. For the six months ended June 30, 2003, the net interest margin was 3.08%, as compared to 4.04% for the six months ended June 30, 2002. Non-interest income for the quarter ended June 30, 2003 was $1.4 million, compared to $10.8 million in the same period of the prior year, which included a $10.1 million gain from the sale of securities available-for-sale. For the six months ended June 30, 2003, non-interest income was $2.3 million, as compared to $9.2 million for the six months ended June 30, 2002. The 2002 period included the above securities gain partially offset by a $3.0 million write-down in the carrying value of the Aircraft Finance Trust. For the quarter ended June 30, 2003, non-interest expense was $30.9 million, including the $21.7 million non-cash stock compensation expense previously mentioned. Included in the quarter was a $1.2 million litigation settlement recovery, which was recorded as an offset against "other" expense. Also recorded in the quarter were $0.7 million of merger-related expenses, bringing merger-related expenses to $1.4 million year-to-date. For the six months ended June 30, 2003, non-interest expense was $40.6 million, including the $21.7 million of non-cash stock compensation expense, as compared to $18.2 million for the six months ended June 30, 2002. For the quarter ended June 30, 2003, the tax benefit recorded has been reduced by the effect of the non-cash stock compensation expense and the merger-related expenses expected to be non-deductible. Balance Sheet Loans and leases were $1.22 billion at June 30, 2003, compared to $1.26 billion at March 31, 2003 and $1.20 billion at December 31, 2002. As shown below, the increase from year-end was entirely attributable to the conventional real estate portfolio. In the second quarter of 2003, the Bank experienced approximately $100 million of pay-offs in its construction real estate loan portfolio due to increased sales of the underlying collateral at higher prices, reflecting the real estate market and the low level of interest rates. These payoffs resulted in a decline of real estate construction loans from $317 million at March 31, 2003 to $292 million at June 30, 2003. New loan originations and disbursements from existing loan commitments reduced the impact of the loan pay-offs. Undisbursed real estate construction loans were $226 million at June 30, 2003, up $7 million from the level of March 31, 2003. (millions) 6/30/03 12/31/02 Increase(decrease) Commercial $371 $386 $(15) RE - Construction 292 301 (9) RE - Conventional 528 472 56 Leveraged Leases 9 9 0 Other 20 31 (11) Total $1,220 $1,199 $ 21 The two largest concentrations in commercial loans are the apparel/textile industry and the computer/electronic goods industry (excluding early-stage technology companies). The approximate amount of commercial loans for these two concentrations as of June 30, 2003 were $61.1 million and $39.4 million, respectively, compared to $62.7 million and $42.8 million, respectively, at March 31, 2003. In addition, there were $19.1 million of loans to early stage technology companies at June 30, 2003, compared to $28.5 million at March 31, 2002. Of the $18.2 million of non-accrual commercial loans as of June 30, 2003, $0.5 million, $1.1 million and $0 were from the apparel/textile, computer/electronic goods industries and early stage high technology companies, respectively. Also included in commercial loans are five credits that are participations in facilities to Indian casinos that are construction loans to be repaid under mini-perm facilities from the cash flows of the casinos. The total commitments were $40.3 million as of June 30, 2003 and the total loans outstanding were $28.1 million, as compared to total commitments of $40.8 million and loans outstanding of $29.9 million at March 31, 2003. All were performing in accordance with the borrowing agreements. At June 30, 2003, total deposits were $1.85 billion, down $61.5 million from March 31, 2003 and down $52.1 million from December 31, 2002. Approximately $35 million of this decline occurred due to the acquisition of a corporate depositor whose cash was then withdrawn by the acquiror, and the majority of the remaining decline was associated with high tech companies. Interest Rate Outlook In the event of a future 50 basis point increase in interest rates by the Federal Reserve, the Company anticipates that there would be a positive impact on the net interest margin. Based upon the results of a computer simulation analysis that uses a static balance sheet as of June 30, 2003 and projects changes in the yields earned on assets and the rates paid on liabilities in relation to changes in market interest rates, the Company estimates that there would be a $2.7 million increase in net interest income for the twelve months following a 50 basis point increase. However, in the event of a future 50 basis point decrease in interest rates, the Company estimates that there would be a $0.8 million decrease in net interest income for the following twelve months. Capital Ratios The Company's Tier 1 leverage ratio at June 30, 2003 was 7.87%, as compared to 7.46% at March 31, 2003 and 7.33% at December 31, 2002. The Company's capital ratios remain in excess of regulatory requirements for a well-capitalized institution. Book value per share at June 30, 2003 was $18.30, compared with $17.81 at March 31, 2003 and $17.69 at December 31, 2002. Certain statements contained herein, including without limitation, statements containing the words "anticipates," "believes," "expects," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: credit quality, general economic and business conditions in those areas in which the company operates; competition; fluctuations in interest rates; changes in business strategy or development plans; and changes in governmental regulation. Given these uncertainties, undue reliance should not be placed on such forward-looking statements. The company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. Reconciliation of Reported Loss to Operating Earnings (Loss) Three Months Ended Six Months Ended June 30, June 30, (In Thousands) 2003 2002 2003 2002 Net Loss as Reported $(13,072) $(8,010) $(8,952) $(10,916) Add: Non-Cash Stock Compensation Expense 21,719 21,719 Deduct: Tax Benefit for Non-Cash Stock Compensation Expense (5,012) - (5,012) - --------- -------- -------- --------- Operating Earnings (Loss) $3,635 $(8,010) $7,755 $(10,916) GBC BANCORP CONSOLIDATED FINANCIAL HIGHLIGHTS CONDENSED BALANCE SHEETS (Unaudited) June 30, December 31, ---------------------------------------------------------------------- (Dollars In Thousands) 2003 2002 ---------------------------------------------------------------------- Assets Cash and Due From Banks $37,837 $46,889 Federal Funds Sold & Securities Purchased Under Agreements to Resell 9,550 181,000 ----------- ----------- Cash and Cash Equivalents 47,387 227,889 Securities Available-for-Sale at Fair Value 1,134,619 1,075,697 Trading Securities 12 1 Loans and Leases 1,219,784 1,198,628 Less: Allowance for Credit Losses (28,889) (25,534) Deferred Loan Fees (6,273) (6,595) ----------- ----------- Loans and Leases, net 1,184,622 1,166,499 Bank Premises and Equipment, net 5,735 6,286 Other Investments 6,093 7,509 Accrued Interest Receivable and Other Assets 28,217 26,863 ----------- ----------- Total Assets $2,406,685 $2,510,744 =========== =========== Liabilities and Stockholders' Equity Deposits Noninterest-Bearing Demand $259,093 $251,197 Interest-Bearing Demand and Savings 585,354 631,509 Time Deposits 1,007,591 1,021,437 ----------- ----------- Total Deposits 1,852,038 1,904,143 Borrowings from the Federal Home Loan Bank 267,400 322,400 Subordinated Debt 39,465 39,400 Accrued Expenses and Other Liabilities 35,416 40,700 ----------- ----------- Total Liabilities 2,194,319 2,306,643 Stockholders' Equity Common Stock 95,811 72,932 Retained Earnings 101,023 112,774 Accumulated Other Comprehensive Income 13,429 16,292 Deferred Compensation 2,103 2,103 ----------- ----------- Total Stockholders' Equity 212,366 204,101 ----------- ----------- Total Liabilities and Stockholders' Equity $2,406,685 $2,510,744 =========== =========== Non-accrual Loans $21,896 $24,770 Restructured Loans $587 $666 Capital Ratios Total Risk-Based Capital Ratio 14.89% 13.62% Tier 1 Risk-Based Capital Ratio 12.12% 10.51% Tier 1 Leverage Ratio 7.87% 7.33% Other Period End Statistics Book Value per Share (a) $18.30 $17.69 (a) Computed based on shares outstanding net of shares held in trust. GBC BANCORP CONSOLIDATED FINANCIAL HIGHLIGHTS CONDENSED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Six Months Ended June 30, Ended June 30, ---------------------------------------------------------------------- (Dollars In Thousands Except Per Share Data) 2003 2002 2003 2002 ---------------------------------------------------------------------- Interest Income: Loans and Leases, Including Fees $19,862 $20,434 $39,591 $40,259 Securities Available-for-Sale 8,439 17,984 19,523 34,901 Federal Funds Sold & Securities Purchased Under Agreements to Resell 477 244 966 636 Other 2 5 5 8 ----------- ----------- ----------- ----------- Total Interest Income 28,780 38,667 60,085 75,804 Interest Expense Deposits 7,460 9,154 15,291 18,726 Federal Funds Purchased and Securities Sold under Repurchase Agreements 1 4 3 7 Borrowings from the Federal Home Loan Bank 2,771 3,433 5,851 6,082 Subordinated Debt 870 870 1,741 1,741 ----------- ----------- ----------- ----------- Total Interest Expense 11,102 13,461 22,886 26,556 Net Interest Income 17,678 25,206 37,199 49,248 Provision for Credit Losses 3,568 39,150 8,186 57,664 ----------- ----------- ----------- ----------- Net Interest Income After Provision for Credit Losses 14,110 (13,944) 29,013 (8,416) Non-Interest Income Service Charges and Commissions 1,825 1,837 3,555 3,611 Gain on Sale of Securities Available for Sale, Net - 10,127 - 10,127 Gain on Sale of Fixed Assets 25 - 25 - Trading Account Revenue 127 (3) 127 16 Expense from Other Investments (668) (1,261) (1,451) (4,624) Other 43 51 73 118 ----------- ----------- ----------- ----------- Total Non-Interest Income 1,352 10,751 2,329 9,248 Non-Interest Expense Salaries and Employee Benefits 26,913 5,304 32,157 10,336 Occupancy Expense/ Furniture and Equipment 1,785 1,796 3,434 3,656 Net Other Real Estate Owned (Income)/Expense 13 (4) 13 (29) Other 2,126 2,979 4,626 4,624 (Increase)/Decrease of Fair Value of Derivatives 94 (467) 351 (371) ----------- ----------- ----------- ----------- Total Non-Interest Expense 30,931 9,608 40,581 18,216 Loss Before Income Taxes (15,469) (12,801) (9,239) (17,384) Benefit for Income Taxes (2,397) (4,791) (287) (6,468) ----------- ----------- ----------- ----------- Net Loss $(13,072) $(8,010) $(8,952) $(10,916) =========== =========== =========== =========== Loss Per Share-Basic & Diluted $(1.12) $(0.69) $(0.77) $(0.94) =========== =========== =========== =========== Return on Average Assets -2.13% -1.25% -0.73% -0.88% Return on Average Equity -24.97% -15.93% -8.63% -10.67% Average Number of Basic and Diluted Shares 11,656,182 11,611,238 11,642,070 11,600,594 GBC BANCORP CONSOLIDATED FINANCIAL HIGHLIGHTS CONDENSED AVERAGE BALANCE SHEETS (Unaudited) For the Three Months Ended For the Six Months Ended June 30, June 30, ---------------------------------------------------------------------- (In Thousands) 2003 2002 2003 2002 ---------------------------------------------------------------------- Assets Cash and Due From Banks $33,097 $38,737 $35,731 $38,566 Federal Funds Sold & Securities Purchased Under Agreements to Resell 146,010 52,776 147,080 69,043 ----------- ----------- ----------- ----------- Cash and Cash Equivalents 179,107 91,513 182,811 107,609 Securities Available-for-Sale at Fair Value 1,049,725 1,253,884 1,062,137 1,202,660 Trading Securities 1 3 1 17 Loans and Leases 1,230,745 1,212,244 1,227,461 1,184,318 Less: Allowance for Credit Losses (27,678) (35,764) (26,738) (29,958) Deferred Loan Fees (6,292) (7,912) (6,288) (7,578) ----------- ----------- ----------- ----------- Loans and Leases, net 1,196,775 1,168,568 1,194,435 1,146,782 Bank Premises and Equipment, net 5,923 6,717 6,043 6,697 Other Real Estate Owned, net - 383 - 387 Other Investments 6,919 4,980 7,229 7,379 Accrued Interest Receivable and Other Assets 27,774 37,327 27,694 32,689 ----------- ----------- ----------- ----------- Total Assets $2,466,224 $2,563,375 $2,480,350 $2,504,220 =========== =========== =========== =========== Liabilities and Stockholders' Equity Deposits Noninterest-Bearing Demand $244,831 $228,705 $243,849 $223,232 Interest-Bearing Demand and Savings 631,941 648,273 625,536 628,805 Time Deposits 1,016,833 1,080,501 1,024,683 1,076,770 ----------- ----------- ----------- ----------- Total Deposits 1,893,605 1,957,479 1,894,068 1,928,807 Federal Funds Purchased and Securities Sold under Repurchase Agreements 473 777 473 736 Borrowings from the Federal Home Loan Bank 281,466 333,191 295,190 294,179 Subordinated Debt 39,445 39,314 39,428 39,297 Accrued Expenses and Other Liabilities 41,226 30,875 41,924 34,963 ----------- ----------- ----------- ----------- Total Liabilities 2,256,215 2,361,636 2,271,083 2,297,982 Total Stockholders' Equity 210,009 201,739 209,267 206,238 ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $2,466,224 $2,563,375 $2,480,350 $2,504,220 =========== =========== =========== =========== Non-accrual Loans $24,142 $47,828 $23,478 $39,771 CONTACT: GBC Bancorp John Getzelman, 213-972-4293