ITLA Capital Corporation Reports Quarterly Earnings for the Third
Quarter Ended September 30, 2004 LA JOLLA, Calif., Nov. 3
/PRNewswire-FirstCall/ -- ITLA Capital Corporation (NASDAQ:ITLA)
today reported net income for the third quarter of 2004, primarily
resulting from the operations of its wholly-owned subsidiaries,
Imperial Capital Bank (the Bank) and Imperial Capital Real Estate
Investment Trust (the REIT) of $5.5 million or $0.86 per diluted
share compared to $5.4 million or $0.83 per diluted share for the
third quarter of 2003. President and Chief Executive Officer George
W. Haligowski stated, "We are pleased with the Company's
performance during the third quarter with total assets exceeding
$2.0 billion for the first time in the Company's 30 year history.
Our long term strategy to expand our small balance multi-family
lending platform is beginning to contribute to the Company's
performance, driving future growth and shareholder value." Net
interest income before provision for loan losses was $20.1 million
in the third quarter of 2004, compared to $20.0 million for the
same period in 2003. Despite the minimal change in net interest
income before provision for loan losses, the Bank's net interest
income increased $2.4 million, or 12.8%, compared to the same
period last year. This increase was offset by a decline in net
interest income earned at the REIT and the effect of interest
expense from the Company's trust preferred securities as a result
of the adoption of FASB Interpretation Number 46 (FIN 46),
Consolidation of Variable Interest Entities, at December 31, 2003.
The increase in the net interest income of the Bank was primarily a
result of an increase in the average balance of loans outstanding,
reflecting an increase in loan production, and the increase in the
average balance of investment securities held-to-maturity. The
Bank's net interest income also increased as a result of a general
decline in the average cost of funds, which was caused by deposits
repricing to lower current market interest rates. The increase in
the Bank's net interest income was partially offset by a decline in
the yield of its loan portfolio as higher yielding loans were
repaid and replaced by new loan production at lower current market
interest rates, as well as an increase in the average balance of
interest bearing liabilities. The decline in the REIT's net
interest income was primarily attributable to a reduction in the
average balance of its loan portfolio partially offset by a
corresponding decline in the average balance of its collateralized
mortgage obligations. The adoption of FIN 46 required that,
beginning on January 1, 2004, the Company record the interest
expense incurred on its junior subordinated debentures related to
its trust preferred securities in the consolidated statements of
income. Prior period financial information has not been restated
for the adoption of FIN 46, and as a result, amounts recorded
relating to interest payments to the trusts are recorded as
minority interest income of subsidiary during the same period last
year. The Bank's loan originations for the three months ended
September 30, 2004 were $231.5 million, which consisted of $139.6
million of commercial real estate loans, $59.8 million of Imperial
Capital Express (ICE) small balance multi-family loans, $27.3
million of film finance loans and $4.8 million of franchise loans.
The Bank's loan originations for the same period last year were
$228.8 million, which consisted of $143.7 million of commercial
real estate loans, $40.0 million of ICE small balance multi-family
loans, $27.6 million of film finance loans and $17.5 million of
franchise loans. During the same period last year, the Bank also
purchased loans of $50.8 million. Haligowski commented: "We are
particularly encouraged by the growth in our ICE production, which
represents the highest level of small balance multi-family loan
production since establishing this lending platform. During the
quarter, ICE production represented over 25 percent of our current
period production." The provision for loan losses was $1.1 million
during the current quarter as compared to $750,000 for the same
period last year. The current period provision was recorded to
provide for reserves adequate to support the known and inherent
risks of loss in the loan portfolio and for specific charge-offs
experienced during the quarter. The provision for loan losses for
the same period last year was recorded to provide reserves adequate
to support the known and inherent risks of loss in the loan
portfolio and the valuation of certain non-performing loans and
other loans of concern as of September 30, 2003. General and
administrative expenses increased to $9.9 million in the current
quarter, compared to $9.0 million for the same period in the
previous year. The increase was primarily attributable to the
Bank's continued national expansion of the ICE small balance
multi-family real estate lending platform. The Company's efficiency
ratio (defined as recurring general and administrative expenses as
a percentage of net revenue) was 49.5 percent in the third quarter
of 2004 as compared to 43.2 percent for the same period last year.
Net income for the nine months ended September 30, 2004 increased
to $24.9 million or $3.80 per diluted share, compared to $23.9
million or $3.69 per diluted share for the same period last year.
Net interest income before provision for loan losses decreased 4.1
percent to $62.4 million for the nine months ended September 30,
2004, compared to $65.1 million for the same period last year. The
decrease was caused by a decline in net interest income earned at
the REIT and the effect of interest expense from the Company's
trust preferred securities as a result of the adoption of FIN 46 at
December 31, 2003, partially offset by an increase in the Bank's
net interest income. The decline in the REIT's net interest income
was primarily attributable to the reduction in the average balance
of its loan portfolio offset partially by the decline in the
average balance of its collateralized mortgage obligations. As
previously discussed, the adoption of FIN 46 required that,
beginning on January 1, 2004, the Company record the interest
expense incurred on its junior subordinated debentures related to
its trust preferred securities in the consolidated statements of
income. The increase in the Bank's net interest income was
primarily a result of an increase in the average balance of loans
outstanding, reflecting an increase in loan production, an increase
in the average balance of investments held-to- maturity, and a
general decline in average cost of funds. The decline in average
cost of funds resulted from deposits repricing to lower current
market interest rates, as well as the addition of new interest
bearing FHLB advances at lower current market interest rates. The
increase in the Bank's net interest income was partially offset by
a decline in the yield of its loan portfolio as higher yielding
loans were repaid and replaced by new loan production at lower
current market interest rates, as well as the increase in the
average balance of interest bearing liabilities. Non-interest
income was $14.3 million for the nine months ended September 30,
2004, compared to $14.6 million for the same period last year.
Non-interest income primarily consists of fee income earned in
connection with the Bank's refund anticipation loan program ("RAL")
with Household International, Inc. (Household), a wholly-owned
subsidiary of HSBC Holdings plc (HSBC), consisting of $9.3 million
of net premiums on the sale of RAL loans and $4.6 million of
processing and administrative fees. RAL income earned during the
same period last year was $9.0 million of net premiums on the sale
of RAL loans and $4.6 million of processing and administrative
fees, respectively. On June 24, 2004, the Company announced that it
received final confirmation that Household and its affiliates
would, effective this year, terminate their RAL and private label
credit card programs with the Bank. Pursuant to the agreement, this
termination comes without penalty to Household. The provision for
loan losses was $3.5 million for the nine months ended September
30, 2004, compared to $7.1 million for the same period last year.
These provisions for loan losses were recorded to provide reserves
adequate to support known and inherent losses in the portfolio and
for specific charge-offs experienced through the nine months ended
September 30, 2004 and 2003, respectively. General and
administrative expenses increased to $31.7 million for the nine
months ended September 30, 2004, compared to $28.0 million for the
same period last year. The increase was attributable to the
development and continued national expansion of the ICE small
balance multi-family real estate lending platform. During nine
months ended September 30, 2004, the Company opened thirteen ICE
loan production offices, and to date, there are eighteen ICE loan
production offices open on the west coast, the eastern seaboard and
the southwestern regions of the United States. The Company's
efficiency ratio (defined as recurring general and administrative
expenses as percentage of net revenue) was 41.4 percent for the
nine months ended September 30, 2004, compared to 35.2 percent for
the same period last year. Loan originations for the nine months
ended September 30, 2004 were $644.7 million, which consisted of
$375.7 million of commercial real estate loans, $153.7 million of
ICE small balance multi-family real estate loans, $69.2 million of
film finance loans and $46.1 million of franchise loans. Loan
originations for the same period last year were $471.3 million,
which consisted of $294.4 million of commercial real estate loans,
$98.3 million of ICE small balance multi-family real estate loans,
$52.0 million of film finance loans and $26.6 million of franchise
loans. During the same period last year, the Bank also purchased
loans of $54.1 million. Total assets increased to $2.0 billion at
September 30, 2004 from $1.8 billion at December 31, 2003. The
increase in total assets was due primarily to a $146.1 million
increase in the Bank's loan portfolio, and a $198.0 million
increase in investments held-to-maturity, partially offset by a
$111.9 million decrease in cash and cash equivalents, and a $28.1
million decrease in the REIT's portfolio of loans held in trust.
The increase in the loan portfolio was primarily due to the
increased loan production and a decline in prepayment speeds
experienced during the current period. At September 30, 2004,
nonperforming assets totaled $16.9 million or 0.83 percent of total
assets as compared to $15.6 million or 0.86 percent as of December
31, 2003. The allowance for loan loss coverage ratio (defined as
the allowance for loan losses divided by non-accrual loans) at
September 30, 2004, was 205.2 percent as compared to 392.3 percent
at December 31, 2003. The allowance for loan losses as a percentage
of the Company's total loans was 2.1 percent at September 30, 2004,
as compared to 2.2 percent at December 31, 2003. During the quarter
ended September 30, 2004, the Company had net loan charge-offs of
$2.3 million compared to net charge-offs of $1.1 million for the
same period last year. During the nine month period ended September
30, 2004, the Company had net charge-offs of $2.2 million, compared
to $6.9 million during the same period last year. At September 30,
2004, shareholders' equity totaled $193.7 million or 9.5 percent of
total assets. The Company continued its stock repurchase program
with the recent announcements of its eighth and ninth extensions of
its stock repurchase program on August 12, 2004 and September 30,
2004, respectively. During the third quarter of 2004, the Company
repurchased 364,083 shares at an average price of $41.33 per share.
For the nine months ended September 30, 2004, the Company
repurchased 491,128 shares at an average price of $42.02 per share.
Since beginning share repurchases in April 1997, the Company has
repurchased a total of 2,682,029 shares or 31.3 percent of the
outstanding shares of common stock, returning approximately $57.5
million of capital to its shareholders at an average price of
$21.45 per share. Through our stock repurchase program,
approximately 90.0 percent of the Company's contributed capital has
been returned to our shareholders. The Company's book value per
share of common stock was $34.62 as of September 30, 2004, an
increase of 10.6 percent and 11.3 percent from $31.30 per share as
of December 31, 2003 and $31.10 per share as of September 30, 2003,
respectively. The Bank had Tier 1 leverage, Tier 1 risk based and
total risk-based capital ratios at September 30, 2004 of 12.34
percent, 13.80 percent and 15.06 percent, respectively, which
represents $134.9 million, $128.2 million and $83.1 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,
2004 of 13.38 percent, 15.00 percent, and 17.48 percent,
respectively, which represents $159.0 million, $152.3 million and
$126.5 million, respectively, of capital in excess of the amount
required to be "well capitalized". Haligowski concluded: "Through
the nine months ended September 30, 2004, we have continued to
demonstrate our resilience to market and economic challenges. Our
ability to drive earnings and asset growth, while continuing to
invest in the national expansion of our small balance multi-family
lending platform has been achieved without compromising our credit
quality and asset pricing disciplines to meet competitive market
pressures. We are also committed to maximizing shareholder value
through our stock repurchase program, which has been accretive to
earnings per share and return on equity, while providing orderly
liquidity in the open market for the Company's outstanding common
stock." "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, fluctuations in interest rates, and changes in the
relative differences between short and long term interest rates,
levels of nonperforming assets, 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 2004 and beyond to differ materially from those expressed in
any forward looking statements by, or on behalf of, the Company.
ITLA Capital Corporation is the largest financial services company
headquartered in San Diego, California, and conducts its operations
through Imperial Capital Bank and Imperial Capital Real Estate
Investment Trust. Imperial Capital Bank has seven retail branch
locations and thirty-one lending offices located in California,
Washington, Nevada, Arizona, Texas, the Southeast, the Mid Atlantic
states, the Metro New York area, and New England. For additional
information, contact Timothy M. Doyle, Senior Managing Director and
Chief Financial Officer at (858) 551-0511. ITLA CAPITAL CORPORATION
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December
31, 2004 2003 (unaudited) (in thousands except share amounts)
Assets Cash and cash equivalents $66,461 $178,318 Investment
securities available for sale, at fair value 64,421 53,093
Investment securities held to maturity, at amortized cost 198,028
-- Stock in Federal Home Loan Bank 23,008 17,966 Loans, net (net of
allowance for loan losses of $33,655 and $31,573 as of September
30, 2004 and December 31, 2003, respectively) 1,583,657 1,436,849
Real estate loans held in trust (net of allowance for loan losses
of $1,028 and $1,828 as of September 30, 2004 and December 31,
2003, respectively) 40,508 68,575 Interest receivable 8,994 8,958
Other real estate owned, net -- 7,048 Premises and equipment, net
6,250 5,766 Deferred income taxes 11,999 11,609 Goodwill 3,118
3,118 Other assets 23,392 26,915 Total assets $2,029,836 $1,818,215
Liabilities and Shareholders' Equity Liabilities: Deposit accounts
$1,236,059 $1,147,017 Federal Home Loan Bank advances 489,535
362,135 Collateralized mortgage obligations -- 15,868 Accounts
payable and other liabilities 23,935 19,696 Junior subordinated
debentures 86,600 86,600 Total liabilities 1,836,129 1,631,316
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, 8,562,196 and 8,447,294 issued as of September 30, 2004
and December 31, 2003, respectively 64,161 61,704 Retained earnings
190,319 165,407 Accumulated other comprehensive income, net 233 155
254,713 227,266 Less treasury stock, at cost - 2,966,817 and
2,475,689 shares as of September 30, 2004 and December 31, 2003,
respectively (61,006) (40,367) Total shareholders' equity 193,707
186,899 Total liabilities and shareholders' equity $2,029,836
$1,818,215 ITLA CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED) For the For the Three Months Ended
Nine Months Ended September 30, September 30, (in thousands except
per share amounts) 2004 2003 2004 2003 Interest income: Loans,
including fees $27,983 $24,802 $83,321 $78,877 Real estate loans
held in trust 543 1,407 2,065 5,036 Cash and investment securities
2,152 866 5,563 4,597 Total interest income 30,678 27,075 90,949
88,510 Interest expense: Deposit accounts 6,632 5,544 19,631 18,681
Federal Home Loan Bank advances 2,343 1,367 4,248 3,855
Collateralized mortgage obligations -- 204 71 885 Junior
subordinated debentures 1,569 -- 4,559 -- Total interest expense
10,544 7,115 28,509 23,421 Net interest income before provision for
loan losses 20,134 19,960 62,440 65,089 Provision for loan losses
1,100 750 3,450 7,100 Net interest income after provision for loan
losses 19,034 19,210 58,990 57,989 Non-interest income: Premium on
sale of loans, net -- -- 9,284 8,983 Late and collection fees 74 61
259 192 Other (239) 716 4,731 5,379 Total non-interest income (165)
777 14,274 14,554 Non-interest expense: Compensation and benefits
4,938 4,610 16,540 14,735 Occupancy and equipment 1,471 1,236 4,321
3,502 Other 3,472 3,112 10,860 9,755 Total general and
administrative 9,881 8,958 31,721 27,992 Real estate owned expense,
net 32 220 113 373 Provision for losses on other real estate owned
-- -- 1,000 370 (Gain) loss on sale of other real estate owned, net
(61) 389 (415) 60 Total real estate owned expense, net (29) 609 698
803 Total non-interest expense 9,852 9,567 32,419 28,795 Income
before provision for income taxes and minority interest in income
of subsidiary 9,017 10,420 40,845 43,748 Minority interest in
income of subsidiary -- 1,540 -- 4,506 Income before provision for
income taxes 9,017 8,880 40,845 39,242 Provision for income taxes
3,519 3,473 15,933 15,324 NET INCOME $5,498 $5,407 $24,912 $23,918
BASIC EARNINGS PER SHARE $0.91 $0.90 $4.04 $3.97 DILUTED EARNINGS
PER SHARE $0.86 $0.83 $3.80 $3.69 DATASOURCE: ITLA Capital
Corporation CONTACT: Timothy M. Doyle, Senior Managing Director and
Chief Financial Officer of ITLA Capital Corporation,
+1-858-551-0511 Web site: http://www.itlacapital.com/
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