Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter Ended March 31, 2008

Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter Ended March
31, 2008

LA JOLLA, Calif., April 30 /PRNewswire-FirstCall/ -- Imperial Capital
Bancorp, Inc. (NYSE: IMP) today reported net income for the quarter ended
March 31, 2008, primarily resulting from the operations of its wholly-owned
subsidiary, Imperial Capital Bank (the Bank), of $697,000 or $0.13 per diluted
share compared to $6.7 million or $1.19 per diluted share for the same period
last year. President and Chief Executive Officer George W. Haligowski stated:
"Our first quarter results, while clearly disappointing, reflect a
continuation of the challenging economic conditions that currently exist. Our
focus remains on strengthening our balance sheet and addressing any
identifiable credit issues. During the quarter, we increased our loan loss
provision to $4.3 million compared to $750,000 during the same period last
year and increased the ratio of our allowance for loan loss to total loans to
1.55% as compared to 1.51% at the end of December."
Net interest income before provision for loan losses decreased 16.3% to
$20.1 million for the quarter ended March 31, 2008, compared to $24.0 million
for the same period last year. The decrease was primarily due to the decline
in the yield earned on our loan portfolio, as higher yielding loans have
paid-off and were replaced by loan production that was originated at lower
spreads over our cost of funds due to competitive pricing pressures. This
decline was partially offset by a decrease in our average cost of funds, as
deposits have repriced to current market interest rates. Haligowski
commented: "As a result of the Federal Reserve's recent rate reductions,
deposits are beginning to reprice to current interest rates, which should
ultimately provide some relief to our net interest margins and spreads."
The provision for loan losses was $4.3 million and $750,000, respectively,
for the quarters ended March 31, 2008 and 2007. The provision for loan losses
recorded during the quarter was primarily due to the increase in our
non-performing loans. Non-performing loans as of March 31, 2008 were $91.5
million, compared to $38.0 million at December 31, 2007. The increase in
non-performing loans was primarily related to four construction and land
development lending relationships that in the aggregate represented
approximately $54.4 million of the total of $64.2 million of loans transferred
to non-performing status during the quarter. With the housing and secondary
mortgage markets continuing to deteriorate and showing no signs of stabilizing
in the near future, we continue to aggressively monitor our real estate loan
portfolio, including our commercial and residential construction loan
portfolio. Our construction and land loan portfolio at March 31, 2008 totaled
$425.4 million, of which $277.4 million were residential and condominium
conversion construction loans and land development loans, representing 8.9% of
our total loan portfolio. At March 31, 2008, we had $40.3 million of
non-performing lending relationships within our residential and condominium
conversion construction loan portfolio, consisting of three projects located
in California (Huntington Beach, Corona and Indio) and one project located in
Portland, Oregon. In addition, we had a $17.7 million non-performing
residential land development loan located in Cathedral City, California.
General and administrative expenses were $13.5 million for the quarter
ended March 31, 2008, compared to $12.4 million for the same period last year.
The Company's efficiency ratio (defined as general and administrative expenses
as percentage of net revenue) was 66.3% for the quarter ended March 31, 2008,
as compared to 50.3% for the same period last year. The increase in our
efficiency ratio was primarily caused by the $1.1 million increase in general
and administrative expenses, as well as the $3.9 million decrease in net
interest income, which, as discussed above, was primarily caused by the
decrease in our net interest spread.
Loan originations were $88.5 million for the quarter ended March 31, 2008,
compared to $339.4 million for the same period last year. During the current
quarter, the Bank originated $43.8 million of commercial real estate loans,
$19.0 million of small balance multi-family real estate loans, and $25.7
million of entertainment finance loans. Loan originations for the same period
last year consisted of $237.2 million of commercial real estate loans, $74.0
million of small balance multi-family real estate loans, and $28.2 million of
entertainment finance loans. In addition, the Bank's wholesale loan
operations acquired $17.7 million of commercial and multi-family real estate
loans during the quarter ended March 31, 2007. The Bank did not have any
wholesale loan purchases during the current quarter. Haligowski commented
that: "The decline in loan production is consistent with our expectations, as
we continue to focus on our current loan portfolio. Market conditions
remained challenging during the quarter and liquidity has yet to return to a
more normalized level. I expect that our loan production will not improve
until the economy and credit markets begin to stabilize."
Total assets decreased $7.5 million to $3.5 billion at March 31, 2008,
compared to $3.6 billion at December 31, 2007. The change in total assets was
primarily due to a $55.2 million decrease in our loan portfolio, partially
offset by a $49.5 million increase in investment securities held-to-maturity.
During the quarter, we purchased approximately $57.6 million of triple-A rated
corporate sponsored collateral mortgage obligations, which we classified as
held-to-maturity. In addition, we increased our FHLB advances by $114.5
million during the quarter, as we replaced higher interest bearing deposits
with these advances. The decline in deposits of $115.3 million during the
quarter primarily related to callable brokered deposits, as well as other time
deposits that matured during the period.
Non-performing assets were $110.0 million and $57.4 million, representing
3.10% and 1.62% of total assets as of March 31, 2008 and December 31, 2007,
respectively. The increase in non-performing assets during the quarter ended
March 31, 2008 consisted of the addition of $64.2 million of non-performing
loans, partially offset by paydowns received of $1.9 million, charge-offs of
$3.9 million and loan upgrades of $347,000 from non-performing to performing
status. As of March 31, 2008 as compared to December 31, 2007, the net
increase in non-performing loans primarily consisted of $32.7 million
residential and condominium construction real estate loans, representing two
lending relationships, a $17.7 million residential land development loan, and
a $4.0 million mixed-use construction loan. The allowance for loan loss
coverage ratio (defined as the allowance for loan losses divided by
non-accrual loans) was 52.7% at March 31, 2008 as compared to 125.9% at
December 31, 2007. In addition, our other real estate and other assets owned
decreased by $1.0 million during the current quarter to $18.4 million as
compared to $19.4 million at December 31, 2007.
The allowance for loan losses as a percentage of our total loans was 1.55%
and 1.51% at March 31, 2008 and December 31, 2007, respectively. We believe
that these reserves levels were adequate to support known and inherent losses
in our loan portfolio and for specific reserves as of March 31, 2008 and
December 31, 2007, respectively. The allowance for loan losses is impacted by
inherent risk in the loan portfolio, including the level of our non-performing
loans and other loans of concern, as well as specific reserves and charge-off
activity. Other loans of concern increased from $27.4 million at December 31,
2007 to $115.7 million at March 31, 2008. The increase was primarily caused
by the addition of $44.8 million of single-family and condominium construction
and land development loans, $15.7 million of commercial and retail
construction projects, and $28.0 million of commercial and multi-family real
estate loans. Other loans of concern consist of performing loans which have
known information that has caused management to be concerned about the
borrower's ability to comply with present loan repayment terms. During the
quarter ended March 31, 2008, we had net charge-offs of $3.8 million as
compared to net recoveries of $380,000 during the same period last year.
At March 31, 2008, shareholders' equity totaled $226.5 million or 6.4% of
total assets. The Company's book value per share of common stock was $44.38
as of March 31, 2008, an increase of 0.4% and 2.7%, respectively, from $44.22
per share as of December 31, 2007 and from $43.22 per share as of March 31,
2007.
The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based
capital ratios at March 31, 2008 of 8.34%, 9.68% and 10.94%, respectively,
which represents $116.9 million, $111.0 million and $28.3 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 March 31, 2008 of 8.44%, 9.81% and 11.38%, respectively,
which represents $121.3 million, $115.5 million and $41.8 million,
respectively, of capital in excess of the amount required to be "well
capitalized".
Haligowski concluded: "Despite the challenges presented by the current
economic environment, we've been able to remain profitable during this period
and have continued to consistently grow our book value per share. We expect
the economy and the credit market to remain stressed in the near term, and as
a result, our Board made the decision this quarter to temporarily suspend our
regular quarterly dividend in order to preserve capital and maintain our
liquidity until economic conditions normalize."
"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 our market areas, changes in policies by regulatory agencies,
the impact of competitive loan products, loan demand risks, the quality or
composition of our 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 any terrorist actions
and other risks detailed from time to time in our filings with the Securities
and Exchange Commission. We caution readers not to place undue reliance on
any forward-looking statements. We do not undertake and specifically disclaim
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 our actual results for 2008
and beyond to differ materially from those expressed in any forward-looking
statements by, or on behalf of, us, and could negatively affect the Company's
operating and stock price performance.
Imperial Capital Bancorp, Inc. 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 nine retail branch locations and
22 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

March 31,
2008 December 31,
(unaudited) 2007
(in thousands, except share amounts)
Assets

Cash and cash equivalents $7,678 $8,944
Investment securities
available-for-sale, at fair value 118,348 117,924
Investment securities
held-to-maturity, at amortized cost 208,527 159,023
Stock in Federal Home Loan Bank 54,208 53,497
Loans, net (net of allowance for loan
losses of $48,271 and $47,783 as of
March 31, 2008 and December 31, 2007,
respectively) 3,069,400 3,125,072
Interest receivable 20,715 20,841
Other real estate and other assets
owned, net 18,438 19,396
Other assets 46,413 46,522

Total assets $3,543,727 $3,551,219

Liabilities and Shareholders' Equity

Liabilities:
Deposit accounts $2,066,546 $2,181,858
Federal Home Loan Bank advances and
other borrowings 1,135,783 1,021,235
Accounts payable and other
liabilities 28,288 33,959
Junior subordinated debentures 86,600 86,600

Total liabilities 3,317,217 3,323,652

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, 9,145,256 and
9,142,256 issued as of March 31,
2008 and December 31, 2007,
respectively 85,188 85,009
Retained earnings 255,776 255,947
Accumulated other comprehensive
income, net 316 267
341,280 341,223
Less treasury stock, at cost -
4,041,824 and 3,995,634 shares
as of March 31, 2008 and
December 31, 2007, respectively (114,770) (113,656)
Total shareholders' equity 226,510 227,567

Total liabilities and
shareholders' equity $3,543,727 $3,551,219

IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

For the Three Months Ended
March 31,
2008 2007
(in thousands, except per share amounts)
Interest income:
Loans receivable, including fees $54,835 $58,763
Cash, cash equivalents and
investment securities 4,249 4,569
Total interest income 59,084 63,332

Interest expense:
Deposit accounts 25,083 26,588
Federal Home Loan Bank advances and
other borrowings 11,918 10,677
Junior subordinated debentures 2,005 2,078
Total interest expense 39,006 39,343

Net interest income before
provision for loan losses 20,078 23,989
Provision for loan losses 4,250 750
Net interest income after
provision for loan losses 15,828 23,239

Non-interest income:
Late and collection fees 219 303
Other 49 413
Total non-interest income 268 716

Non-interest expense:
Compensation and benefits 6,864 6,182
Occupancy and equipment 1,942 1,943
Other 4,684 4,296
Total general and administrative 13,490 12,421

Real estate and other assets owned
expense, net 428 163
Provision for losses on real estate
and other assets owned 627 -
Loss on sale of real estate and
other assets owned, net 400 -
Total real estate and other
assets owned expense, net 1,455 163

Total non-interest expense 14,945 12,584

Income before provision for income
taxes 1,151 11,371
Provision for income taxes 454 4,634

NET INCOME $697 $6,737

BASIC EARNINGS PER SHARE $0.13 $1.22

DILUTED EARNINGS PER SHARE $0.13 $1.19

SOURCE Imperial Capital Bancorp, Inc.

Timothy M. Doyle, Executive Managing Director and Chief Financial Officer of
Imperial Capital Bancorp, Inc., +1-858-551-0511