IMP Imperial Capital Bcr

LA JOLLA, Calif., Oct. 30 /PRNewswire-FirstCall/ -- Imperial Capital Bancorp, Inc. (NYSE:IMP) today reported net income for the quarter ended September 30, 2007, primarily resulting from the operations of its wholly-owned subsidiary, Imperial Capital Bank (the Bank), of $1.7 million or $0.31 per diluted share compared to $6.8 million or $1.20 per diluted share for the same period last year. President and Chief Executive Officer George W. Haligowski stated: "Our results for the quarter are representative of the weakness currently being experienced in the real estate and credit markets. As a result, we've experienced an increase in the level of our non-performing loans and charge-offs during the quarter, and we recorded an additional loan loss provision to provide reserves in anticipation of possible future losses. Despite the current economic environment, I'm encouraged by the resilience of our loan production team and their ability to consistently identify lending opportunities in a challenging market." Net interest income before provision for loan losses decreased 14.9% to $20.7 million for the quarter ended September 30, 2007, compared to $24.3 million for the same period last year. This decrease was primarily due to the decline in the yield earned on our loan portfolio, as higher yielding loans have continued to pay-off and are being replaced by our current loan production, which was originated at lower spreads over our cost of funds due to competitive pricing pressures. Net interest income was further negatively impacted by the increase in our cost of funds as deposits and other interest bearing liabilities repriced to higher current market interest rates, as well as the addition of new borrowings at higher current market interest rates, partially offset by the growth in the average balance of our loan portfolio. Haligowski commented: "In an effort to improve our net interest margin, we have instituted three lending rate increases totaling approximately 75 basis points during the third quarter. Additionally, the recent rate cut by the Federal Reserve has not had a material impact on our costs of funds due to competitive deposit pricing pressures. However, we anticipate that any potential future rate cuts will have a positive impact on our financial results." The provision for loan losses was $5.3 million and $1.5 million, respectively, for the quarters ended September 30, 2007 and 2006. The increase in provision for loan losses during the quarter was primarily due to the increase in our non-performing loans. Non-performing loans as of September 30, 2007 were $40.8 million, compared to $26.3 million at December 31, 2006. As a percentage of our total loan portfolio, the amount of non-performing loans was 1.28% and 0.88% at September 30, 2007 and December 31, 2006, respectively. The increase in non-performing loans was primarily related to the addition of two lending relationships that in aggregate represented $19.5 million of the total of $26.6 million of loans transferred to non-performing status during the quarter. Although the housing and secondary mortgage markets continue to deteriorate and show no signs of stabilizing in the near future, we continue to aggressively monitor our commercial real estate loan portfolio, including our commercial and residential construction loan portfolio that totaled $395.5 million, of which $267.6 million was residential and multi-family construction loans and represented only 8.4% of our total loan portfolio. At September 30, 2007, we had one non-performing lending relationship within our construction loan portfolio, which consisted of a $16.9 million residential construction project located in Palm Desert, California. General and administrative expenses were $13.3 million for the quarter ended September 30, 2007, compared to $11.5 million for the same period last year. The Company's efficiency ratio (defined as general and administrative expenses as percentage of net revenue) was 61.3% for the quarter ended September 30, 2007, as compared to 46.1% for the same period last year. The fluctuation in our efficiency ratio during the quarter was primarily due to a decline in net interest income earned, which, as discussed above, was caused by a decrease in our net interest rate spread. Loan originations were $340.1 million for the quarter ended September 30, 2007, compared to $265.2 million for the same period last year. During the current quarter, the Bank originated $215.1 million of commercial real estate loans, $90.2 million of small balance multi-family real estate loans, and $34.8 million of entertainment finance loans. Loan originations for the same period last year consisted of $201.2 million of commercial real estate loans, $54.3 million of small balance multi-family real estate loans, and $9.7 million of entertainment finance loans. In addition, the Bank's wholesale loan operations acquired $120.9 million of multi-family real estate loans during the quarter ended September 30, 2006. The Bank did not have any wholesale loan purchases during the current period. Haligowski commented that: "Our loan production was robust during the third quarter, and is indicative of the low rate environment that existed prior to the credit and liquidity crisis that commenced in August of this year. We have responded responsibly by raising our lending rates and being more selective in granting credit. As a result, we expect production to slow during the remainder of 2007, however, we remain cautiously optimistic that the underlying economic strength of our lending markets will continue to provide opportunities to deliver solid commercial real estate loan originations in the future." Net income for the nine months ended September 30, 2007 decreased to $14.5 million or $2.58 per diluted share, compared to $19.9 million or $3.49 per diluted share for the same period last year. Net interest income before provision for loan losses decreased 6.6% to $66.5 million for the nine months ended September 30, 2007, compared to $71.2 million for the same period last year. This decrease was primarily due to the decline in the yield earned on our loan portfolio, as higher yielding loans have continued to pay-off and are being replaced by our current loan production, which was originated at lower spreads over our cost of funds due to competitive pricing pressures. Net interest income was further negatively impacted by the increase in our cost of funds as deposits and other interest bearing liabilities repriced to higher current market interest rates, as well as the addition of new borrowings at higher current market interest rates, partially offset by the growth in the average balance of our loan portfolio. The provision for loan losses was $6.5 million and $3.8 million, respectively, for the nine months ended September 30, 2007 and 2006. Refer to the quarterly discussion above for additional information regarding the provision for loan losses and non-performing loans. General and administrative expenses were $37.6 million for the nine months ended September 30, 2007, compared to $35.3 million for the same period last year. The Company's efficiency ratio was 54.5% for the nine months ended September 30, 2007, as compared to 48.4% for the same period last year. Loan originations were $1.0 billion for the nine months ended September 30, 2007, compared to $701.2 million for the same period last year. During the current nine month period, the Bank originated $644.0 million of commercial real estate loans, $281.2 million of small balance multi-family real estate loans, and $92.0 million of entertainment finance loans. Loan originations for the same period last year consisted of $489.7 million of commercial real estate loans, $170.8 million of small balance multi-family real estate loans, and $40.7 million of entertainment finance loans. In addition, the Bank's wholesale loan operations acquired $47.3 million and $347.3 million of commercial and multi-family real estate loans during the nine months ended September 30, 2007 and 2006, respectively. Total assets increased $146.6 million to $3.6 billion at September 30, 2007, compared to $3.4 billion at December 31, 2006. The increase in total assets was primarily due to a $159.6 million increase in our loan portfolio, a $16.7 million increase in investment securities available-for-sale and an $11.6 million increase in other real estate and other assets owned, partially offset by a $28.5 million decline in investment securities held-to-maturity and an $18.3 million decrease in cash and cash equivalents. Non-performing assets were $59.1 million and $33.0 million, representing 1.66% and 0.97% of total assets as of September 30, 2007 and December 31, 2006, respectively. The increase in non-performing assets during the nine months ended September 30, 2007 consisted of the addition of $62.7 million of non-performing loans, partially offset by paydowns received of $24.9 million, charge-offs of $8.5 million and loan upgrades of $714,000 from non-performing to performing status. During the nine month period ended September 30, 2007, the net increase in non-performing loans primarily consisted of the increase of a $16.9 million residential construction real estate loan and $9.7 million of commercial and multi-family loans, partially offset by decreases of $4.5 million of franchise loans and $7.6 million of entertainment finance loans. In addition, during the nine months ended September 30, 2007, the Bank foreclosed on 11 properties representing $14.3 million, and sold two properties representing $2.6 million. The allowance for loan loss coverage ratio (defined as the allowance for loan losses divided by non-accrual loans) was 109.5% at September 30, 2007 as compared to 175.4% at December 31, 2006. The allowance for loan losses as a percentage of our total loans was 1.4% at September 30, 2007 compared to 1.5% at December 31, 2006. We believe that these reserves levels were adequate to support known and inherent losses in our loan portfolio and for specific reserves as of September 30, 2007 and December 31, 2006, respectively. The allowance for loan losses to loans, net, is impacted by inherent risk in the loan portfolio, specific reserves and charge-off activity. The decrease in the percentage of the allowance for loan losses to loans, net, primarily reflects reserves that were allocated to specific credits at December 31, 2006, that were subsequently charged-off, foreclosed upon or repaid during the current period and the decrease in the level of other loans of concern, which declined by 52.4%, from $67.0 million at December 31, 2006 to $31.9 million at September 30, 2007. Other loans of concern consist of performing loans which have known information that have caused management to be concerned about the borrowers ability to comply with present loan repayment terms. In addition, this ratio was further impacted by the higher concentration of small balance multi-family loans in our portfolio, which has improved our geographic diversity and lowered our average loan size due to the national expansion of our lending platform, as well as the Bank's aggressive recognition of charge-offs and the identification of problem credits in a timely manner. During the quarters ended September 30, 2007 and 2006, we had net charge-offs of $3.6 million and $1.0 million, respectively. At September 30, 2007, shareholders' equity totaled $227.3 million or 6.4% of total assets. During the current quarter, we repurchased 52,900 shares at an average price of $34.98 per share. For the nine months ended September 30, 2007, we repurchased 187,475 shares at an average price of $47.42 per share. Since beginning share repurchases in April 1997, a total of 3.7 million shares have been repurchased under our stock repurchase program, returning approximately $110.0 million of capital to our shareholders at an average price of $29.59 per share. The Company's book value per share of common stock was $44.19 as of September 30, 2007, an increase of 5.0% and 7.9%, respectively, from $42.07 per share as of December 31, 2006 and from $40.96 per share as of September 30, 2006. The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at September 30, 2007 of 8.43%, 9.60% and 10.85%, respectively, which represents $119.1 million, $109.8 million and $26.0 million, respectively, of capital in excess of the amount required to be "well capitalized" for regulatory purposes. In addition, the Company, the Bank's holding company, had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at September 30, 2007 of 8.54%, 9.72% and 11.28%, respectively, which represents $123.7 million, $114.2 million and $39.4 million, respectively, of capital in excess of the amount required to be "well capitalized." Haligowski concluded: "We recognize that there is substantial fear and concern in the financial and credit markets today as evidenced by the recent decline in our stock price. Although we believe we're taking a conservative approach to the valuation and management of problem credits, we do not believe that the macro-economic conditions will deteriorate to a point where our current market valuation implies. However, we will remain focused on strengthening our balance sheet and closely monitoring our operating expenses, while we await opportunities that we believe will become apparent in the future. Despite the decline in our current market valuation, the Company's book value increased during the third quarter to $44.19 per share." "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, changes in economic conditions in the Company's market areas, changes in policies by regulatory agencies, the impact of competitive loan products, loan demand risks, the quality or composition of the loan or investment portfolios, increased costs from pursuing the national expansion of our lending platform and operational challenges inherent in implementing this expansion strategy, fluctuations in interest rates, and changes in the relative differences between short- and long-term interest rates, levels of non-performing assets and other loans of concern, and operating results, the economic impact of terrorist actions and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause the Company's actual results for 2007 and beyond to differ materially from those expressed in any forward looking statements by, or on behalf of, the Company. Imperial Capital Bancorp, Inc. (formerly ITLA Capital Corporation) is a publicly traded diversified bank holding company specializing in commercial real estate lending on a national basis and is headquartered in San Diego, California. The Company conducts its operations through Imperial Capital Bank and Imperial Capital Real Estate Investment Trust. Imperial Capital Bank has eight retail branch locations and 25 loan origination offices serving the Western United States, the Southeast, the Mid-Atlantic States, the Ohio Valley, the Metro New York area and New England. For additional information, contact Timothy M. Doyle, Executive Managing Director and Chief Financial Officer, at (858) 551-0511. IMPERIAL CAPITAL BANCORP, INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2007 December 31, (unaudited) 2006 (in thousands, except share amounts) Assets Cash and cash equivalents $12,102 $30,448 Investment securities available-for-sale, at fair value 116,205 99,527 Investment securities held-to-maturity, at amortized cost 165,045 193,512 Stock in Federal Home Loan Bank 50,938 48,984 Loans, net (net of allowance for loan losses of $44,665 and $46,049 as of September 30, 2007 and December 31, 2006, respectively) 3,134,321 2,973,368 Interest receivable 21,203 20,753 Other real estate and other assets owned, net 18,333 6,729 Premises and equipment, net 8,583 7,851 Deferred income taxes 11,269 11,513 Goodwill 3,118 3,118 Other assets 20,993 19,707 Total assets $3,562,110 $3,415,510 Liabilities and Shareholders' Equity Liabilities: Deposit accounts $2,184,397 $2,059,405 Federal Home Loan Bank advances and other borrowings 1,029,447 1,010,000 Accounts payable and other liabilities 34,361 38,168 Junior subordinated debentures 86,600 86,600 Total liabilities 3,334,805 3,194,173 Commitments and contingencies Shareholders' equity: Preferred stock, 5,000,000 shares authorized, none issued - - Contributed capital - common stock, $.01 par value; 20,000,000 shares authorized, 9,138,256 and 9,065,672 issued as of September 30, 2007 and December 31, 2006, respectively 84,805 82,073 Retained earnings 255,684 243,823 Accumulated other comprehensive income, net 428 35 340,917 325,931 Less treasury stock, at cost - 3,993,869 and 3,803,969 shares as of September 30, 2007 and December 31 2006, respectively (113,612) (104,594) Total shareholders' equity 227,305 221,337 Total liabilities and shareholders' equity $3,562,110 $3,415,510 IMPERIAL CAPITAL BANCORP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Nine Months Ended Ended September 30, September 30, 2007 2006 2007 2006 (in thousands, except per share amounts) Interest income: Loans receivable, including fees $58,450 $53,605 $175,677 $151,824 Cash and investment securities 4,249 5,525 13,337 14,494 Total interest income 62,699 59,130 189,014 166,318 Interest expense: Deposit accounts 28,479 23,088 82,552 60,059 Federal Home Loan Bank advances and other borrowings 11,440 9,648 33,710 28,987 Junior subordinated debentures 2,102 2,104 6,268 6,088 Total interest expense 42,021 34,840 122,530 95,134 Net interest income before provision for loan losses 20,678 24,290 66,484 71,184 Provision for loan losses 5,266 1,500 6,516 3,750 Net interest income after provision for loan losses 15,412 22,790 59,968 67,434 Non-interest income: Late and collection fees 309 208 848 692 Other 640 370 1,660 1,210 Total non-interest income 949 578 2,508 1,902 Non-interest expense: Compensation and benefits 5,967 5,435 17,205 16,530 Occupancy and equipment 1,987 1,886 5,928 5,568 Other 5,301 4,153 14,446 13,246 Total general and administrative 13,255 11,474 37,579 35,344 Real estate and other assets owned expense, net 268 287 626 216 Gain on sale of other real estate owned, net (69) - (69) - Total real estate owned expense, net 199 287 557 216 Total non-interest expense 13,454 11,761 38,136 35,560 Income before provision for income taxes 2,907 11,607 24,340 33,776 Provision for income taxes 1,193 4,759 9,851 13,850 NET INCOME $1,714 $6,848 $14,489 $19,926 BASIC EARNINGS PER SHARE $0.31 $1.24 $2.64 $3.58 DILUTED EARNINGS PER SHARE $0.31 $1.20 $2.58 $3.49 DATASOURCE: Imperial Capital Bancorp, Inc. CONTACT: Timothy M. Doyle, Executive Managing Director and Chief Financial Officer of Imperial Capital Bancorp, Inc., +1-858-551-0511 Web site: http://www.itlacapital.com/

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