With its investments and loans in the high-tech industry paying off handsomely, GBC Bancorp, the parent company of General Bank, has posted record earnings.

For the year ended Dec. 31, 1999, GBC reported net income of $30.0 million ($2.37 cents per share), compared with $28.1 million ($1.96) a year earlier. While that represented only a 6.8 percent increase in net income, earnings per share jumped 20.9 percent because of a stock repurchase program.

The strong results caused GBC shares, which were mired in the $19-to-$20 range for most of last year, to reach as high as $28.25 on Feb. 18. It had settled back to $25.31 as of Feb. 23.

Behind the strong earnings and investor enthusiasm is the bank's deepening involvement in the high-tech industry, especially in Silicon Valley. Since its inception in 1995, the high-tech division has opened four branches in Northern California, which all specialize in making loans to Internet, telecommunications and fiber-optic startups, as well as to more-established companies.

"The high-tech division is an important component in the bank's success, there's no question about it," said Chairman and Chief Executive Li-Pei Wu.

The bank's high-tech division is seeing particularly good returns from the warrants it receives as part of the loan deals it makes with start-up companies.

The warrants give the bank the right to purchase a certain number of shares of the startup at a predetermined price. If and when the company goes public and its share price skyrockets, the bank can exercise the warrants and turn a huge profit.

Through its subsidiary GBC Venture Capital Inc., GBC provides venture funding to startups that have a banking relationship with General Bank, and it also invests in other venture capital funds as an indirect means of plugging into the growth of new technology companies. GBC Venture Capital has $12 million invested in five funds, $4 million of which is invested in Idealab, the tech incubator in Pasadena.

The income GBC expects to generate from such investments and warrants this year is greater than it had initially anticipated.

"The primary reason behind the high activity of the shares is the disclosure last week that the company has significant higher potential income this year than was expected," said Lana Chan, an analyst with CIBC World Market. "I still think that this potential is not fully reflected in the company's share price."

Chan says GBC's shares have been relatively flat in the past because the bank is still seen as a newcomer to high-tech lending. Compared with such banks as Greater Bay Bank and Silicon Valley Bank, which have been active in this niche for much longer, GBC is a relative unknown. That's likely to change, however. Chan is currently revising her original $28 target share price for GBC in light of the recent announcements.

Although most of the high-tech lending activity has been concentrated in Northern California, Wu is preparing to open an additional high-tech branch in Los Angeles to serve the growing Southern California market. In addition, the bank last month opened its first full-service branch in Bellevue, Wash. It already had been operating a loan production office there, as well as in New York.

Like many other small or mid-sized banks these days, GBC has to worry about becoming a takeover target, particularly as its profile rises and it becomes more nationally focused. Although Wu believes that right now the bank can better enhance its shareholders' value by staying independent, he would not close the door to a merger or acquisition.

But Wu is more interested in acquiring other niche players than in being acquired.

"We are traditionally an immigrants' bank, founded by people from Taiwan, and we serve other immigrants," said Wu. "Immigrants are still an under-served market in the U.S., and any further geographical expansion we'd be interested in would take into consideration whether we can provide our three core services in a market where there are a large number of immigrants, such as Seattle and New York."

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