H. F. AHMANSON & COMPANY - Home Savings of America - Savings of America NEWS
4900 Rivergrade Road
Irwindale, California 91706
(818) 814-7922
FOR IMMEDIATE RELEASE Contacts:
Media: Mary Trigg
818-814-7922
Investor: Steve Swartz
818-814-7986
H.F. AHMANSON & COMPANY REPORTS THIRD QUARTER EARNINGS
- - Sale of New York Branches Causes Sharp Increase in Third Quarter Income;
Company Adopts Accounting Change Resulting in Goodwill Write-off -
IRWINDALE, CA, October 19, 1995 -- H.F. Ahmanson & Company (AHM-
NYSE) parent company of Home Savings of America, today reported third
quarter net earnings of $273.0 million, or $2.03 per fully diluted common
share, compared with $68.5 million, or $.47 per fully diluted common share,
in the same 1994 period.
Third quarter net earnings include an after tax gain of $252.7
million from the sale of its New York branch system on September 22, 1995.
The earnings also reflect charges resulting from the planned sale of
certain Company premises, as well as from its previously announced program
to streamline its loan origination process. In addition, the Company added
$40 million to its reserve for real estate investments during the quarter.
Excluding the New York gain and these charges, net earnings would have been
$65.6 million, or $.44 per fully diluted common share.
Commenting on the Company's third quarter results, Charles R.
Rinehart, Chairman and Chief Executive Officer, said, "The steps we have
taken are in keeping with our Company's two primary objectives: increasing
shareholder value and positioning the Company to aggressively compete as a
full-service consumer bank. During the third quarter, we increased
tangible book value per share by $3.00. And our position as a well-
capitalized financial services company has been significantly enhanced as a
result of these actions."
Accounting Change
In the third quarter, the Company also adopted an accounting
change, retroactive to the first quarter of 1995, which eliminated $234.7
million of its goodwill from acquisitions prior to 1982, or $1.80 per fully
diluted common share, and resulted in a restatement of its 1995 first and
second quarter earnings. As a result of adopting Statement of Financial
Accounting Standards No. 72, Accounting for Certain Acquisitions of Banking
or Thrift Institutions (SFAS 72) for pre-1982 goodwill, the Company
restated its 1995 first quarter earnings of $50.7 million, or $0.33 per
fully diluted common share, to a loss of $181.9 million, or $1.66 per fully
diluted common share after the accounting change. Its 1995 second quarter
earnings of $62.2 million, or $0.42 per fully diluted common share, have
been restated to $64.4 million, or $0.43 per fully diluted common share.
At September 30, 1995, the Company had $152.5 million remaining in goodwill
and other intangible assets, all from recent deposit purchases in
California.
For the first nine months of the year, Ahmanson's earnings
before the accounting change were $390.2 million, or $2.80 per fully
diluted common share. Including the accounting change, earnings were
$155.5 million, or $1.00 per fully diluted common share. This compares to
$197.4 million, or $1.33 per fully diluted common share, for the first nine
months of 1994.
Kevin M. Twomey, Senior Executive Vice President and Chief
Financial Officer, said, "The adoption of SFAS 72 will have no effect on
tangible capital or on Home Savings' status as a well-capitalized financial
institution. In addition, future annual earnings are expected to be
enhanced by approximately $0.07 per fully diluted common share, as a result
of a reduction in goodwill expense. Adoption of SFAS 72 and the
elimination of pre-1982 goodwill will better enable future income to
reflect growth in tangible stockholder equity."
Results of Operations
Net interest income totaled $314.4 million for the third quarter of
1995, compared to $317.9 million in the third quarter of 1994, and $310.2
million in the second quarter of 1995. The increase in net interest income
from the second quarter of 1995 is due mainly to the widening of the net
interest margin.
For the third quarter of 1995, the net interest margin was 2.47%,
compared to 2.56% in the third quarter of 1994 and 2.38% in the second
quarter of 1995. At September 30, 1995, the net interest margin was 2.60%.
During the third quarter of 1995, the Company provided $29.2 million
for loan losses, compared to $29.4 million in the third quarter of 1994 and
$25.5 million in the second quarter of 1995.
In the third quarter of 1995, other income was $560.8 million,
compared to $42.5 million in the year ago quarter and $53.4 million in the
second quarter of 1995. Other income in the third quarter of 1995 would
have been $46.1 million without the gain from the sale of the New York
branch system.
The Company added $40 million to its reserve for real estate
investments due largely to a deterioration, during the quarter, in the
value of a major commercial real estate investment project in California.
A recent review of project plans led to a change in the Company's
assessment of the continued viability of such plans.
General and Administrative Expenses
General and administrative expenses totaled $235.3 million in the
third quarter of 1995, compared to $184.7 million in the third quarter of
1994 and $201.3 million in the second quarter of 1995.
In the third quarter of 1995, the Company took a pretax charge of
$11.0 million as a result of planned personnel reductions and other costs
associated with Project HOME Run, the streamlining of its mortgage loan
origination process. As a part of Project HOME Run, the Company plans to
consolidate the processing and underwriting in its nationwide loan offices
into two loan service centers.
In addition, as a result of changes in business plans, the Company has
decided to sell certain of its premises, resulting in a third quarter
pretax charge of $25.7 million to bring the affected properties to market
value. Pending sale, certain of these assets were transferred from Home
Savings to a real estate investment subsidiary of the parent company.
General and administrative expenses as a percentage of average assets
were 1.76% in the third quarter of 1995, reflecting the charges discussed
above, compared to 1.40% in the third quarter of 1994, and 1.47% in the
second quarter of 1995. Without these charges of
$36.7 million, the G&A ratio would have been 1.48%.
Expressed as an efficiency ratio that measures G&A expenses as a
percentage of net interest income and loan servicing and other fee income,
the operating efficiency ratio was 65.8% in the third quarter of 1995,
compared to 51.3% in the third quarter of 1994 and 57.3% in the second
quarter of 1995. Excluding the adjustments discussed above, the efficiency
ratio in the third quarter of 1995 would have been 55.5%.
Asset Quality
Nonperforming assets increased by $18.1 million during the quarter.
At September 30, 1995, nonperforming assets totaled $916.5 million, or
1.81% of total assets, compared to $889.8 million or 1.65% of total assets
at September 30, 1994, and $898.4 million, or 1.68% of total assets at June
30, 1995. The increase in the ratio of nonperforming assets to total
assets principally reflects a decrease in total assets at the end of the
quarter resulting from the sale of the New York branches.
The Company's ratio of reserves to nonperforming assets was 44.3%
at September 30, 1995, compared to 52.0% at September 30, 1994, and 45.6%
at June 30, 1995. Troubled debt restructurings totaled $149.8 million at
September 30, 1995.
Net chargeoffs were $33.8 million for the quarter compared to $39.3
million a year ago and $26.6 million in the second quarter of 1995.
Expenses for the operations of foreclosed real estate for the third
quarter of 1995 amounted to $21.0 million, compared to the $20.9 million in
the third quarter of 1994. These expenses totaled $19.6 million in the
second quarter of 1995 and $21.1 million in the first quarter of 1995.
Loan Originations
Home Savings funded $1.5 billion of residential mortgages in the third
quarter of 1995. Production was $2.6 billion in the third quarter of 1994
and $1.6 billion in the second quarter of 1995. Of the third quarter 1995
production, 66% were Adjustable Rate Mortgages, compared to 99% in the
third quarter of 1994 and 82% in the second quarter of 1995. All fixed
rate production is originated for sale. Consumer loan production totaled
$15.7 million during the quarter.
Purchase loans represented 61.7% of the total third quarter 1995
originations, compared to 69.5% in the third quarter of 1994 and 74.4% in
the second quarter of 1995. Home Savings' pipeline of loans in process
totaled $1.4 billion at September 30, 1995.
Capital
Home Savings of America's capital ratios continue to exceed regulatory
requirements for well-capitalized institutions, the highest regulatory
standard.
Requirement for Home Savings
Well-Capitalized Home Savings Fully Phased-In
Status at 9/30/95 at 9/30/95
Tangible - 6.31% 6.29%
Core Capital 5.00% 6.32% 6.30%
Core Capital to Risk-
Weighted Assets: 6.00% 10.03% 9.99%
Risk-Based Capital: 10.00% 12.97% 12.93%
**********
H.F. Ahmanson & Company, with $50.6 billion in assets, is the
parent company of Home Savings of America. Home's deposit base is $34.6
billion. It operates 339 retail branches in four states and 117 mortgage
lending offices in 11 states.
**********
Additional information about H.F. Ahmanson & Company and Home
Savings of America can be retrieved free of charge using the following
services:
- Internet: http://www.investquest.com
- Fax-on-Demand: (614) 844-3860
- On-line BBS: (614) 844-3868
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
(dollars in thousands except per share data)
At End of Period September 30, 1995 June 30, 1995 September 30, 1994
- ---------------- ------------------ ------------- ------------------
Total assets $ 50,594,790 $ 53,241,683 $ 53,906,195
Investment portfolio $ 791,969 $ 1,864,471 $ 3,321,199
Loans receivable and mortgage-backed
securities (MBS) $ 47,465,463 $ 48,809,352 $ 47,406,202
ARMs included in loans receivable and MBS $ 45,877,571 $ 46,428,415 $ 44,939,587
Allowance for loan losses $ 385,289 $ 389,927 $ 437,209
Deposits $ 34,617,805 $ 42,988,665 $ 40,323,677
Borrowings $ 11,757,400 $ 6,699,546 $ 9,595,793
Stockholders' equity $ 3,071,081 $ 2,831,012 $ 2,982,988
Book value per common share $ 20.50 $ 18.50 $ 19.86
Tangible book value per common share $ 19.20 $ 16.20 $ 15.66
Total common shares outstanding 117,737,673 117,482,087 117,090,158
Home Savings of America Capital Ratios:
Tangible capital 6.31% 5.26% 4.92%
Core capital to total assets 6.32% 5.28% 5.29%
Core capital to risk-weighted assets 10.03% 8.41% 8.59%
Risk-based capital 12.97% 11.45% 11.88%
For the Three Months Ended:
- --------------------------
Net interest income $ 314,444 $ 310,175 $ 317,909
Provision for loan losses $ 29,175 $ 25,465 $ 29,432
Net earnings $ 272,998 $ 64,389 $ 68,527
Net earnings per fully diluted
common share $ 2.03 $ 0.43 $ 0.47
Dividends per common share $ 0.22 $ 0.22 $ 0.22
Loans originated and purchased $ 1,545,219 $ 1,571,623 $ 2,591,048
Average Interest Rates:
Yield on loans and MBS 7.50% 7.34% 6.35%
Yield on investment portfolio 6.33% 6.10% 5.42%
Yield on interest-earning assets 7.44% 7.28% 6.29%
Cost of deposits 4.76% 4.64% 3.38%
Cost of borrowings 6.92% 6.77% 5.48%
Cost of interest-costing liabilities 5.08% 5.02% 3.82%
Interest rate spread 2.36% 2.26% 2.47%
Net interest margin 2.47% 2.38% 2.56%
For the Nine Months Ended:
- -------------------------
Net interest income $ 919,863 $ 1,005,395
Provision for loan losses $ 81,184 $ 138,013
Earnings before cumulative effect of
accounting change $ 390,237 $ 197,423
Net earnings $ 155,495 $ 197,423
Net earnings per fully diluted
common share $ 1.00 $ 1.33
Dividends per common share $ 0.66 $ 0.66
Loans originated and purchased $ 4,835,761 $ 7,749,188
Average Interest Rates:
Yield on loans and MBS 7.25% 6.34%
Yield on investment portfolio 6.17% 4.63%
Yield on interest-earning assets 7.19% 6.24%
Cost of deposits 4.55% 3.18%
Cost of borrowings 6.74% 5.04%
Cost of interest-costing liabilities 4.93% 3.55%
Interest rate spread 2.26% 2.69%
Net interest margin 2.37% 2.77%
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands)
Assets September 30, 1995 June 30, 1995 December 31, 1994 September 30, 1994
- ------ ------------------ ------------- ----------------- ------------------
Cash and amounts due from banks $ 645,369 $ 687,257 $ 782,678 $ 906,102
Securities purchased under
agreements to resell 258,000 1,099,000 952,000 2,554,365
Other short-term investments 13,840 24,108 311,942 41,548
----------- ----------- ----------- -----------
Total cash and cash equivalents 917,209 1,810,365 2,046,620 3,502,015
Other investment securities held to
maturity 4,941 259,332 276,945 280,378
Other investment securities available
for sale 35,460 9,159 10,117 10,256
Investment in stock of Federal Home
Loan Bank (FHLB) 479,728 472,872 439,891 434,652
Mortgage-backed securities (MBS)
held to maturity 16,461,464 17,358,836 10,339,864 10,535,397
MBS available for sale 34,236 881,146 2,449,556 2,567,857
Loans receivable less allowance
for losses of
$385,289 (September 30, 1995),
$389,927 (June 30, 1995),
$400,232 (December 31, 1994) and
$437,209 (September 30, 1994) 30,830,642 30,445,955 35,992,566 34,292,259
Loans held for sale 139,121 123,415 9,179 10,689
Accrued interest receivable 158,139 153,699 212,947 205,329
Real estate held for development and
investment (REI) less allowance
for losses of
$321,209 (September 30, 1995),
$331,143 (June 30, 1995),
$333,825 (December 31, 1994) and
$271,327 (September 30, 1994) 321,467 313,918 313,316 396,604
Real estate owned held for sale (REO)
less allowance for losses of
$37,387 (September 30, 1995),
$35,824 (June 30, 1995),
$44,726 (December 31, 1994) and
$53,069 (September 30, 1994) 212,612 191,524 161,948 193,243
Premises and equipment 483,546 624,988 614,817 658,879
Goodwill and other intangible assets 152,497 270,787 468,542 491,771
Other assets 363,728 289,926 314,853 317,029
Income taxes - 35,761 74,621 9,837
----------- ----------- ----------- -----------
$50,594,790 $53,241,683 $53,725,782 $53,906,195
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits $34,617,805 $42,988,665 $40,655,016 $40,323,677
Short-term borrowings under agreements
to repurchase securities sold 5,487,682 526,389 2,253,805 2,824,833
Other short-term borrowings - 3,452 100,000 -
FHLB and other borrowings 6,269,718 6,169,705 6,822,280 6,770,960
Other liabilities 921,647 722,460 930,080 1,003,737
Income taxes 226,857 - - -
----------- ----------- ----------- -----------
Total liabilities 47,523,709 50,410,671 50,761,181 50,923,207
Stockholders' equity 3,071,081 2,831,012 2,964,601 2,982,988
----------- ----------- ----------- -----------
$50,594,790 $53,241,683 $53,725,782 $53,906,195
=========== =========== =========== ===========
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars in thousands except per share data)
For the Three Months Ended For the Nine Months Ended
----------------------------------------- September 30,
September 30, June 30, September 30, ----------------------------
1995 1995 1994 1995 1994
------------- ----------- ------------- ----------- -----------
Interest income:
Interest on real estate loans $ 576,205 $ 615,281 $ 546,431 $ 1,822,277 $ 1,682,146
Interest on MBS 333,978 294,383 196,440 848,448 481,012
Interest and dividends on investments 38,983 39,901 39,645 121,989 100,810
----------- ----------- ----------- ----------- -----------
Total interest income 949,166 949,565 782,516 2,792,714 2,263,968
----------- ----------- ----------- ----------- -----------
Interest expense:
Deposits 504,241 484,778 324,441 1,428,477 902,803
Short-term borrowings 37,669 45,143 47,911 132,330 143,687
FHLB and other borrowings 92,812 109,469 92,255 312,044 212,083
----------- ----------- ----------- ----------- -----------
Total interest expense 634,722 639,390 464,607 1,872,851 1,258,573
----------- ----------- ----------- ----------- -----------
Net interest income 314,444 310,175 317,909 919,863 1,005,395
Provision for loan losses 29,175 25,465 29,432 81,184 138,013
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 285,269 284,710 288,477 838,679 867,382
----------- ----------- ----------- ----------- -----------
Other income:
Gain on sales of MBS 2,586 8,677 - 11,866 4,868
Gain (loss) on sales of loans (1,021) 1,779 (943) 989 (10,978)
Loan servicing income 16,688 14,896 14,091 44,550 45,109
Other fee income 26,542 26,382 28,053 76,896 82,352
Gain on sale of New York retail deposit branch system 514,671 - - 514,671 -
Gain on sales of investment securities 142 102 147 254 195
Other operating income 1,179 1,584 1,128 963 3,230
----------- ----------- ----------- ----------- -----------
560,787 53,420 42,476 650,189 124,776
----------- ----------- ----------- ----------- -----------
Other expenses:
General and administrative expenses (G&A) 235,305 201,305 184,717 619,362 562,399
Operations of REI 42,148 2,621 6,093 45,856 16,385
Operations of REO 21,007 19,605 20,942 61,665 69,877
Amortization of goodwill and other intangible assets 8,103 6,934 5,760 21,948 17,741
----------- ----------- ----------- ----------- -----------
306,563 230,465 217,512 748,831 666,402
----------- ----------- ----------- ----------- -----------
Earnings before provision for income taxes and
cumulative effect of accounting change 539,493 107,665 113,441 740,037 325,756
Provision for income taxes 266,495 43,276 44,914 349,800 128,333
----------- ----------- ----------- ----------- -----------
Earnings before cumulative effect of accounting change 272,998 64,389 68,527 390,237 197,423
Cumulative effect of change in accounting for goodwill - - - (234,742) -
----------- ----------- ----------- ----------- -----------
Net earnings $ 272,998 $ 64,389 $ 68,527 $ 155,495 $ 197,423
=========== =========== =========== =========== ===========
Earnings (loss) per common share - primary:
Earnings before cumulative effect of accounting
change $ 2.20 $ 0.44 $ 0.48 $ 2.99 $ 1.36
Cumulative effect of change in accounting for
goodwill - - - (1.99) -
----------- ----------- ----------- ----------- -----------
Net earnings $ 2.20 $ 0.44 $ 0.48 $ 1.00 $ 1.36
=========== =========== =========== =========== ===========
Earnings (loss) per common share - fully diluted:
Earnings before cumulative effect of accounting
change $ 2.03 $ 0.43 $ 0.47 $ 2.80 $ 1.33
Cumulative effect of change in accounting for
goodwill - - - (1.80) -
----------- ----------- ----------- ----------- -----------
Net earnings $ 2.03 $ 0.43 $ 0.47 $ 1.00 $ 1.33
=========== =========== =========== =========== ===========
Common shares outstanding, weighted average:
Primary 118,507,477 118,054,317 117,603,333 118,059,572 117,389,875
Fully diluted 130,541,379 129,932,055 129,422,951 130,427,469 129,410,249
Return on average assets 2.04% 0.47% 0.52% 0.38% 0.51%
Return on average equity 37.72% 9.17% 9.21% 7.28% 8.89%
Return on average tangible equity* 42.71% 11.05% 11.63% 9.08% 11.29%
Ratio of G&A expenses to average assets 1.76% 1.47% 1.40% 1.52% 1.46%
[FN]
*Net earnings excluding amortization of goodwill and other intangible assets as
a percentage of average equity excluding goodwill and other intangible assets.