H. F. AHMANSON & COMPANY HOME SAVINGS OF AMERICA NEWS
SAVINGS OF AMERICA
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
AHMANSON REPORTS RISE IN SECOND QUARTER AND FIRST HALF EARNINGS
- - STOCK REPURCHASE PROGRAM BOOSTS EARNINGS PER SHARE -
Irwindale, CA, July 16, 1996 -- H.F. Ahmanson & Company, (AHM-NYSE),
parent company of Home Savings of America, today reported second quarter
net income of $68.7 million, or $0.50 per fully diluted common share,
compared with $64.4 million, or $0.43 per fully diluted common share, in
the second quarter of 1995, and $64.8 million, or $0.45 per fully diluted
common share, in the first quarter of 1996. The 16% gain in earnings per
share from the second quarter of 1995 is a result of a 7% increase in net
income plus the effects of the stock repurchase program.
For the first six months of the year, the company earned $133.5
million, or $0.94 per fully diluted common share, compared to a loss of
$117.5 million, or $1.22 per fully diluted common share, in the first six
months of 1995. The 1995 loss was due to a charge relating to a change in
accounting for goodwill related to acquisitions prior to September 30,
1982.
Charles R. Rinehart, Chairman and Chief Executive Officer of Ahmanson
and Home Savings, said, "We are pleased with our progress in enhancing
shareholder value. Improving credit costs and stronger fee income offset
the effects of a lower net interest margin to increase earnings while our
stock buyback program demonstrated its effectiveness in boosting
shareholder returns."
RESULTS OF OPERATIONS
Net interest income totaled $311.6 million in the second quarter of
1996 compared to $310.2 million in the second quarter of 1995, and $317.0
million for the first quarter of 1996. The decrease in net interest income
from the first quarter of 1996 is due to contraction of the company's net
interest margin, principally due to the earnings compression on the 11th
District Cost of Funds Index (COFI) assets. As part of the company's
efforts to diversify its loan portfolio, the company added two new
adjustable rate loans to its list of loan products: one loan, 12-MAT, is
tied to the 12-Month Average Treasury Index and the other, LAMA, is tied to
the LIBOR Annual Monthly Average. The company has been offering adjustable
rate mortgages tied to Treasury Bill indices since January 1, 1995. In
addition, the company funded $51 million in consumer loans in the second
quarter of 1996, compared to $.5 million in the second quarter of 1995, and
$16.6 million in the first quarter of 1996.
For the second quarter of 1996, the average net interest margin was
2.66%, compared to 2.38% in the second quarter of 1995 and 2.64% in the
first quarter of 1996. At June 30, 1996, the net interest margin was
2.61%. The average net interest margin for the periods and the net
interest margin at June 30, 1996 reflect a change in the company's method
for calculating these amounts, based upon materials provided by Securities
and Exchange Commission staff at recent accounting seminars regarding the
different methods for addressing the changes in reported balances of
mortgage-backed securities resulting from Statement of Financial Accounting
Standards No. 115. (See page 8 for additional information.)
In the second quarter of 1996, other income was $56.0 million,
compared to $53.4 million in the second quarter of 1995, and $60.5 million
in the first quarter of 1996. Included therein for the respective periods
were gains on sales of loans and MBS of $6.1 million, $10.5 million, and
$15.0 million. Other fee income was $31.3 million in the second quarter of
1996, compared to $26.4 million in the second quarter of 1995 and $26.8
million in the first quarter of 1996. The increase in other fee income
reflects increased sales through the company's Personal Financial Service
Centers and through Griffin Financial Services, which offers discount stock
and bond brokerage, proprietary and third party mutual funds, annuities,
asset management, and property liability and life/health insurance.
CREDIT COSTS
During the second quarter of 1996, the company provided $33.9 million
for loan losses, compared to $25.5 million in the second quarter of 1995
and $45.9 million in the first quarter of 1996. The provision for the
second quarter of 1996 reflects a recovery of $4.3 million for loans
purchased in bulk in 1993. During the first six months of 1996, the
company provided $79.8 million for loan losses compared to $52.0 million in
the first half of 1995.
Expenses for the operations of foreclosed real estate amounted to
$27.3 million in the second quarter of 1996, compared to $19.6 million in
the second quarter of 1995 and $25.7 million in the first quarter of 1996.
During the first half of 1996, expenses for the operations of foreclosed
real estate amounted to $53.0 million, compared to $40.7 million in the
first six months of 1995.
ASSET QUALITY
At June 30, 1996, nonperforming assets totaled $953.7 million, or
1.93% of total assets, compared to $898.4 million or 1.69% of total assets
at June 30, 1995, and $977.4 million, or 1.96% of total assets, at March
31, 1996. Nonaccrual loans declined by $58.5 million from the first
quarter of 1996, and REO increased by $34.8 million in the same period.
Troubled debt restructurings (TDRs) totaled $178.0 million at June 30,
1996.
The company's ratio of reserves to nonperforming assets was 42.4% at
June 30, 1996, compared to 45.6% at June 30, 1995, and 41.7% at March 31,
1996.
Net loan charge-offs for the second quarter totaled $36.7 million,
compared to $26.6 million in the second quarter of 1995, and $41.5 million
in the first quarter of 1996. For the first six months of 1996, net
charge-offs totaled $78.2 million compared to $62.3 million in the first
six months of 1995.
Real estate development assets, net of reserves, totaled $212.6
million at June 30, 1996, compared to $313.9 million at June 30, 1995, and
$230.4 million at March 31, 1996. The reserves for real estate development
operations totaled $144.4 million, or 40.5% of gross real estate assets at
June 30, 1996. During the second quarter of 1996, the company sold
approximately $20 million in real estate development assets.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses (G&A) totaled $189.7 million in
the second quarter of 1996, compared to $201.3 million in the second
quarter of 1995 and $193.0 million in the first quarter of 1996. Included
in the first quarter of 1996 were $5.0 million in severance expenses. In
the second quarter of 1996, the company incurred $9.8 million in expenses
for its major business initiatives: Project HOME Run, consumer lending and
electronic banking. In addition, in preparation for the acquisition of 61
California branches of First Interstate Bank, which is expected to close in
the third quarter, the company incurred approximately $2.0 million in
expenses in the second quarter of 1996. The company anticipates
preconversion expenses of approximately $0.06 to $0.09 per share in the
third quarter of 1996, including the previously announced one time charge.
The operating efficiency ratio, G&A expenses as a percentage of net
interest income plus loan servicing and other fee income, improved to 52.8%
in the second quarter of 1996, versus 57.3% in the second quarter of 1995
and 53.8% in the first quarter of 1996.
LOAN ORIGINATIONS
Home Savings funded $1.4 billion of residential mortgages in the
second quarter of 1996. Production was $1.6 billion in the second quarter
of 1995, and $1.3 billion in the first quarter of 1996. Of the second
quarter 1996 production, 64% were Adjustable Rate Mortgages (ARMs),
compared to 82% in the second quarter of 1995 and 43% in the first quarter
of 1996.
Purchase loans represented 71% of the total second quarter 1996
originations, compared to 74% in the second quarter of 1995, and 56% in the
first quarter of 1996.
Home Savings funded $51.7 million in consumer loans during the second
quarter of 1996 compared to $16.6 million in the first quarter of 1996.
The monthly fundings in the consumer loan portfolio have increased each
month since the program began in May 1995.
CAPITAL
At June 30, 1996, Home Savings of America's capital ratios exceeded
all regulatory requirements for well-capitalized institutions, the highest
regulatory standard.
Requirement for
Well-Capitalized Home Savings
Status at 6/30/96
---------------- ------------
Tangible: - 6.00%
Core Capital: 5.00% 6.01%
Core Capital to Risk-
Weighted Assets: 6.00% 9.65%
Risk-Based Capital: 10.00% 11.81%
On June 30, 1996, core capital exceeded the well-capitalized standard
by $499 million.
STOCK REPURCHASE PROGRAM
In the second quarter of 1996, the company completed its initial stock
repurchase program. During that program, the company purchased 10.4
million shares or 9% of the outstanding common shares. In addition, on May
14, 1996, the company announced a new program to purchase an additional
$150 million of its common stock. Through June 30, 1996, under the new
program, the company had purchased 717,000 shares of its common stock at an
average price of $26.32 per share.
At June 30, 1996, the parent company had $198 million in cash.
SERIES B PREFERRED STOCK TO BE CALLED
During the quarter, the company announced that on Sept. 3, 1996 it
will redeem its 9.60% Preferred Stock, Series B, at $25.00 per Depositary
Share, plus accrued and unpaid dividends to and including the redemption
date.
The redemption of the Series B Preferred Stock will contribute
approximately $0.09 to annualized earnings per share.
H.F. Ahmanson & Company, with $49.5 billion in assets, is the parent
company of Home Savings of America. Home Savings' deposit base is $33.3
billion. It operates 347 personal financial service centers in four states
and 106 mortgage lending offices in nine states.
********
Additional information, including monthly financial data, about H.F.
Ahmanson & Company and Home Savings of America can be retrieved free of
charge by 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 June 30, 1996 March 31, 1996 June 30, 1995
- ---------------- --------------- ---------------- ---------------
Total assets $ 49,506,630 $ 49,781,986 $ 53,242,694
Investment portfolio $ 1,124,122 $ 707,045 $ 1,864,471
Loans receivable and mortgage-backed
securities (MBS) $ 45,855,263 $ 46,530,610 $ 48,809,352
ARMs included in loans receivable and MBS $ 44,365,520 $ 44,870,834 $ 46,428,415
Allowance for loan losses $ 382,485 $ 385,367 $ 389,927
Deposits $ 33,281,931 $ 33,947,928 $ 42,988,665
Borrowings $ 12,351,740 $ 11,601,867 $ 6,699,546
Stockholders' equity $ 2,777,356 $ 2,952,702 $ 2,831,012
Book value per common share $ 19.78 $ 20.40 $ 18.50
Tangible book value per common share $ 18.47 $ 19.12 $ 16.20
Total common shares outstanding 107,188,014 112,512,418 117,482,087
Home Savings of America Capital Ratios (Fully Phased-in):
Tangible capital (to adjusted total assets) 6.00% 6.10% 5.20%
Core capital (to adjusted total assets) 6.01% 6.11% 5.22%
Core capital (to risk-weighted assets) 9.65% 9.84% 8.33%
Risk-based capital 11.81% 11.98% 11.37%
For the Three Months Ended
- --------------------------
Net interest income $ 311,574 $ 316,982 $ 310,175
Provision for loan losses $ 33,901 $ 45,942 $ 25,465
Net earnings $ 68,734 $ 64,755 $ 64,389
Net earnings per fully diluted
common share $ 0.50 $ 0.45 $ 0.43
Dividends per common share $ 0.22 $ 0.22 $ 0.22
Loans originated and purchased $ 1,438,941 $ 1,339,779 $ 1,582,398
Average Interest Rates:
Yield on loans and MBS 7.41% 7.48% 7.34%
Yield on investment portfolio 6.06% 5.83% 6.10%
Yield on interest-earning assets 7.39% 7.46% 7.28%
Cost of deposits 4.45% 4.57% 4.64%
Cost of borrowings 6.20% 6.28% 6.77%
Cost of interest-costing liabilities 4.91% 5.02% 5.02%
Interest rate spread 2.48% 2.44% 2.26%
Net interest margin 2.66% 2.64% 2.38%
For the Six Months Ended
- ------------------------
Net interest income $ 628,556 $ 605,419
Provision for loan losses $ 79,843 $ 52,009
Net earnings (loss) $ 133,489 $ (117,503)
Net earnings (loss) per fully diluted
common share $ 0.94 $ (1.22)
Dividends per common share $ 0.44 $ 0.44
Loans originated and purchased $ 2,778,720 $ 3,290,542
Average Interest Rates:
Yield on loans and MBS 7.45% 7.12%
Yield on investment portfolio 5.94% 6.09%
Yield on interest-earning assets 7.43% 7.07%
Cost of deposits 4.51% 4.44%
Cost of borrowings 6.24% 6.66%
Cost of interest-costing liabilities 4.96% 4.85%
Interest rate spread 2.47% 2.22%
Net interest margin 2.65% 2.32%
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
NET INTEREST MARGIN EXCLUDING EFFECT OF FAIR VALUE ADJUSTMENTS (UNAUDITED)
In December 1995, the company reclassified $10.4 billion of mortgage-backed
securities ("MBS") from the held-to-maturity designation to the available-
for-sale designation and adjusted the reported balance of such MBS from
amortized cost to fair value in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115. The adjustment to the reported
balance of the MBS did not affect the actual principal balance of such MBS
or the income actually generated by such MBS.
In prior reports, the company gave effect to SFAS No. 115 adjustments in
computing the yield on MBS, and therefore net interest margin, so that the
reported yield and margin would be consistent with the reported principal
balance. The Securities and Exchange Commission (SEC) staff have provided
materials at a recent seminar indicating their preference for excluding
SFAS No. 115 adjustments and using amortized cost for purposes of computing
yields and margins. Accordingly, the company has elected to report net
interest margin for the periods ending June 30, 1996 and at June 30, 1996
without giving effect to SFAS No. 115 adjustments.
For purposes of comparability, set forth below is the net interest margin
data which the company would have reported had it been using this method of
calculation previously.
Under previous Under new method
method of calculation of calculation
--------------------- ----------------
At:
June 30, 1995 2.45% 2.48%
December 31, 1995 2.62% 2.66%
March 31, 1996 2.74% 2.77%
June 30, 1996 N/A 2.61%
For:
Three months ended June 30, 1995 2.38% 2.38%
Six months ended June 30, 1995 2.32% 2.32%
Three months ended March 31, 1996 2.64% 2.64%
Three months ended June 30, 1995 N/A 2.66%
Six months ended June 30, 1995 N/A 2.65%
H. F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(IN THOUSANDS)
Assets June 30, 1996 March 31, 1996 December 31, 1995 June 30, 1995
- ------ ------------- --------------- ----------------- -------------
Cash and amounts due from banks $ 722,581 $ 683,480 $ 752,878 $ 687,257
Securities purchased under
agreements to resell 690,200 278,000 381,000 1,099,000
Other short-term investments 13,797 14,364 13,278 24,108
----------- ------------ ------------ -----------
Total cash and cash equivalents 1,426,578 975,844 1,147,156 1,810,365
Other investment securities held to
maturity 2,443 2,445 2,448 259,332
Other investment securities available
for sale 9,912 9,809 9,908 9,159
Investment in stock of Federal Home
Loan Bank (FHLB) 407,770 402,427 485,938 472,872
Mortgage-backed securities (MBS)
held to maturity 5,436,023 5,649,418 5,825,276 17,358,836
MBS available for sale 9,923,982 10,410,053 10,326,866 881,146
Loans receivable less allowance
for losses of
$382,485 (June 30, 1996),
$385,367 (March 31, 1996),
$380,886 (December 31, 1995) and
$389,927 (June 30, 1995) 30,375,794 30,211,898 30,273,514 30,445,955
Loans held for sale 119,464 259,241 981,865 123,415
Accrued interest receivable 218,529 223,968 228,111 153,699
Real estate held for development and
investment (REI) less allowance
for losses of
$144,441 (June 30, 1996),
$286,327 (March 31, 1996),
$283,748 (December 31, 1995) and
$331,143 (June 30, 1995) 212,561 230,445 234,855 313,918
Real estate owned held for sale (REO)
less allowance for losses of
$37,493 (June 30, 1996),
$37,137 (March 31, 1996),
$38,080 (December 31, 1995) and
$35,824 (June 30, 1995) 260,735 225,870 225,566 191,524
Premises and equipment 412,602 413,487 410,947 624,988
Goodwill and other intangible assets 140,022 143,981 147,974 270,787
Other assets 560,215 623,100 229,162 270,339
Income taxes - - - 56,359
----------- ----------- ----------- -----------
$49,506,630 $49,781,986 $50,529,586 $53,242,694
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits $33,281,931 $33,947,928 $34,244,481 $42,988,665
Securities sold under agreements to
repurchase 2,689,000 1,998,431 3,519,311 526,389
Other short-term borrowings 200,000 50,000 - 3,452
FHLB and other borrowings 9,462,740 9,553,436 8,717,117 6,169,705
Other liabilities 1,035,557 1,170,026 873,313 723,471
Income taxes 60,046 109,463 118,442 -
----------- ----------- ----------- -----------
Total liabilities 46,729,274 46,829,284 47,472,664 50,411,682
Stockholders' equity 2,777,356 2,952,702 3,056,922 2,831,012
----------- ----------- ----------- -----------
$49,506,630 $49,781,986 $50,529,586 $53,242,694
=========== =========== =========== ===========
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 Six Months Ended
----------------------------------------- June 30,
June 30, March 31, June 30, ----------------------------
1996 1996 1995 1996 1995
------------ ------------- ------------ ----------- -----------
Interest income:
Interest on loans $ 559,078 $ 574,855 $ 615,281 $ 1,133,933 $ 1,246,072
Interest on MBS 296,927 308,354 294,383 605,281 514,470
Interest and dividends on investments 11,231 11,661 39,901 22,892 83,006
----------- ----------- ----------- ----------- -----------
Total interest income 867,236 894,870 949,565 1,762,106 1,843,548
----------- ----------- ----------- ----------- -----------
Interest expense:
Deposits 372,997 387,173 484,778 760,170 924,236
Short-term borrowings 36,334 40,230 45,143 76,564 94,661
FHLB and other borrowings 146,331 150,485 109,469 296,816 219,232
----------- ----------- ----------- ----------- -----------
Total interest expense 555,662 577,888 639,390 1,133,550 1,238,129
----------- ----------- ----------- ----------- -----------
Net interest income 311,574 316,982 310,175 628,556 605,419
Provision for loan losses 33,901 45,942 25,465 79,843 52,009
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 277,673 271,040 284,710 548,713 553,410
----------- ----------- ----------- ----------- -----------
Other income:
Gain (loss) on sales of MBS (29) - 8,677 (29) 9,280
Gain on sales of loans 6,166 15,028 1,779 21,194 2,010
Loan servicing income 16,657 15,145 14,896 31,802 27,862
Other fee income 31,291 26,819 26,382 58,110 50,354
Gain on sales of investment securities - - 102 - 112
Other operating income 1,915 3,538 1,584 5,453 (216)
----------- ----------- ----------- ----------- -----------
56,000 60,530 53,420 116,530 89,402
----------- ----------- ----------- ----------- -----------
Other expenses:
General and administrative expenses (G&A) 189,652 193,048 201,305 382,700 384,057
Operations of REI 7,535 6,743 2,621 14,278 3,708
Operations of REO 27,302 25,689 19,605 52,991 40,658
Amortization of goodwill and other intangible assets 3,958 3,994 6,934 7,952 13,845
----------- ----------- ----------- ----------- -----------
228,447 229,474 230,465 457,921 442,268
----------- ----------- ----------- ----------- -----------
Earnings before provision for income taxes and
cumulative effect of accounting change 105,226 102,096 107,665 207,322 200,544
Provision for income taxes 36,492 37,341 43,276 73,833 83,305
----------- ----------- ----------- ----------- -----------
Earnings before cumulative effect of accounting change 68,734 64,755 64,389 133,489 117,239
Cumulative effect of change in accounting for goodwill - - - - (234,742)
----------- ----------- ----------- ----------- -----------
Net earnings (loss) $ 68,734 $ 64,755 $ 64,389 $ 133,489 $ (117,503)
=========== =========== =========== =========== ===========
Earnings (loss) per common share - primary:
Earnings before cumulative effect of accounting change $ 0.51 $ 0.45 $ 0.44 $ 0.96 $ 0.78
Cumulative effect of change in accounting for goodwill - - - - (2.00)
----------- ----------- ----------- ----------- -----------
Net earnings (loss) $ 0.51 $ 0.45 $ 0.44 $ 0.96 $ (1.22)
=========== =========== =========== =========== ===========
Earnings (loss) per common share - fully diluted:
Earnings before cumulative effect of accounting change $ 0.50 $ 0.45 $ 0.43 $ 0.94 $ 0.78
Cumulative effect of change in accounting for goodwill - - - - (2.00)
----------- ----------- ----------- ----------- -----------
Net earnings (loss) $ 0.50 $ 0.45 $ 0.43 $ 0.94 $ (1.22)
=========== =========== =========== =========== ===========
Common shares outstanding, weighted average:
Primary 110,016,213 114,781,516 118,054,317 112,432,758 117,329,168
Fully diluted 122,098,197 126,651,898 129,932,055 124,585,694 117,329,168
Return on average assets 0.56% 0.51% 0.47% 0.54% (0.43)%
Return on average equity 9.73% 8.60% 9.17% 9.16% (8.35)%
Return on average tangible equity* 10.84% 9.60% 11.05% 10.22% 10.14 %
Efficiency ratio 52.75% 53.78% 57.28% 53.27% 56.18 %
*Net earnings excluding amortization of goodwill and other intangible assets, and cumulative effect of change in accounting for
goodwill, as a percentage of average equity excluding goodwill and other intangible assets.