Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter and Year Ended December...

Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter and Year Ended
December 31, 2007

LA JOLLA, Calif., Feb. 6 /PRNewswire-FirstCall/ -- Imperial Capital
Bancorp, Inc. (NYSE: IMP) today reported net income for the quarter ended
December 31, 2007, primarily resulting from the operations of its wholly-owned
subsidiary, Imperial Capital Bank (the Bank), of $1.1 million or $0.21 per
diluted share compared to $7.0 million or $1.22 per diluted share for the same
period last year. President and Chief Executive Officer George W. Haligowski
stated: "Our results for the quarter reflect the deteriorating economic
conditions currently being experienced in the real estate and credit markets.
Although we have consequently recorded substantial provisions for loan losses
and raised our allowance for loan loss reserve ratio, we have maintained our
profitability and increased our book value during the quarter."
Net interest income before provision for loan losses decreased 13.1% to
$20.2 million for the quarter ended December 31, 2007, compared to $23.2
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 paid-off and were replaced by loan production that 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 all other interest bearing liabilities repriced
to higher market interest rates, partially offset by the growth in the average
balance of our loan portfolio. Haligowski commented: "We continue our effort
started in the third quarter of this year to improve our net interest margins
with an additional 25 basis points in lending rate increases and have
instituted floor rates at appropriate margins over our cost of funds. With
the recent 125 basis points in rate cuts instituted by the Federal Reserve, we
expect some relief in cost of funds despite competitive deposit pricing
pressures in the markets we serve."
The provision for loan losses was $4.6 million and $1.3 million,
respectively, for the quarters ended December 31, 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 December 31,
2007 were $38.0 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
1.20% and 0.88% at December 31, 2007 and 2006, respectively. The increase in
non-performing loans was primarily related to five lending relationships that
in the aggregate represented approximately $15.5 million of the total of $22.5
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 loan portfolio
at December 31, 2007 totaled $421.1 million, of which $209.6 million were
residential construction loans, representing only 6.6% of our total loan
portfolio. At December 31, 2007, we had $8.8 million of non-performing
lending relationships within our construction loan portfolio, consisting of
two residential construction projects located in Corona, California and
Portland, Oregon.
General and administrative expenses were $13.8 million for the quarter
ended December 31, 2007, compared to $11.1 million for the same period last
year. The Company's efficiency ratio (defined as general and administrative
expenses as percentage of net revenue) was 66.2% for the quarter ended
December 31, 2007, as compared to 46.0% for the same period last year. The
increase in our efficiency ratio was primarily caused by the $2.7 million
increase in general and administrative expenses, as well as the $3.0 million
decrease in net interest income, which, as discussed above, was caused by the
decrease in our net interest spread.
Loan originations were $150.6 million for the quarter ended December 31,
2007, compared to $388.3 million for the same period last year. During the
current quarter, the Bank originated $77.5 million of commercial real estate
loans, $50.7 million of small balance multi-family real estate loans, and
$22.4 million of entertainment finance loans. Loan originations for the same
period last year consisted of $203.4 million of commercial real estate loans,
$122.9 million of small balance multi-family real estate loans, and $62.0
million of entertainment finance loans. In addition, the Bank's wholesale
loan operations acquired $150.5 million of commercial and multi-family real
estate loans during the quarter ended December 31, 2006. The Bank did not
have any wholesale loan purchases during the current quarter. Haligowski
commented that: "The pace of commercial real estate investment during the
first half of the year drove our loan production to record levels, however
investor demand has declined precipitously due to the uncertainty of current
economic and market conditions. As we have increased our lending rates and
tightened credit in response to current market conditions our fourth quarter
loan production declined by over 60% as compared to the same period last year.
We anticipate that loan demand will remain soft in the near term, but will
ultimately normalize as the current macroeconomic credit and liquidity
conditions improve and markets stabilize."
Net income for the year ended December 31, 2007 was $15.6 million, or
$2.81 per diluted share, compared to $26.9 million, or $4.71 per diluted
share, for the same period last year. Net interest income before provision
for loan losses decreased 8.2% to $86.7 million for the year ended December
31, 2007, compared to $94.4 million for the prior year. This decrease was
primarily due to the decline in the yield earned on our loan portfolio, as
higher yielding loans have continued to paid-off and were replaced by loan
production that 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 all other
interest bearing liabilities repriced to higher market interest rates,
partially offset by the growth in the average balance of our loan portfolio.
The provision for loan losses was $11.1 million and $5.0 million,
respectively, for the years ended December 31, 2007 and 2006. Refer to the
discussion above for additional information regarding the provision for loan
losses and non-performing loans.
General and administrative expenses were $51.4 million for the year ended
December 31, 2007, compared to $46.4 million for the prior year. The
Company's efficiency ratio was 57.2% for the year ended December 31, 2007, as
compared to 47.8% for the prior year. The fluctuation in our efficiency ratio
during the year 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 $1.2 billion for the year ended December 31, 2007,
compared to $1.1 billion for the prior year. During the current year, the
Bank originated $721.5 million of commercial real estate loans, $331.9 million
of small balance multi-family real estate loans, and $114.4 million of
entertainment finance loans. Loan originations for the prior year consisted
of $693.1 million of commercial real estate loans, $293.7 million of small
balance multi-family real estate loans, and $102.7 million of entertainment
finance loans. In addition, the Bank's wholesale loan operations acquired
$47.3 million and $497.8 million of multi-family real estate loans during the
years ended December 31, 2007 and 2006, respectively. The decline in
wholesale loan acquisitions during the current year primarily related to a
reduction in loan pools being offered in the secondary market that met our
pricing and credit requirements.
Total assets increased $135.7 million to $3.6 billion at December 31,
2007, compared to $3.4 billion at December 31, 2006. The increase in total
assets was primarily due to a $153.4 million increase in our loan portfolio,
an $18.4 million increase in investment securities available-for-sale and a
$12.7 million increase in other real estate and other assets owned, partially
offset by a $34.5 million decline in investment securities held-to-maturity
and a $21.5 million decrease in cash and cash equivalents.
Non-performing assets were $57.4 million and $33.0 million, representing
1.62% and 0.97% of total assets as of December 31, 2007 and December 31, 2006,
respectively. The increase in non-performing assets during the year ended
December 31, 2007 consisted of the addition of $85.3 million of non-performing
loans, partially offset by paydowns received of $27.0 million, charge-offs of
$10.9 million and loan upgrades of $17.8 million from non-performing to
performing status. As of December 31, 2007 as compared to December 31, 2006,
the net increase in non-performing loans primarily consisted of $8.8 million
of residential construction real estate loans and $15.0 million of commercial
and multifamily loans, partially offset by decreases of $4.5 million of
franchise loans and $7.6 million of entertainment finance loans. In addition,
our other real estate and other assets owned increased by $12.7 million during
the current year to $19.4 million. At December 31, 2007, we owned 19
properties, consisting of $2.8 million of commercial real estate, $9.5 million
of multi-family real estate, $2.0 million of residential construction and $5.1
million of entertainment finance assets. The allowance for loan loss coverage
ratio (defined as the allowance for loan losses divided by non-accrual loans)
was 125.9% at December 31, 2007 as compared to 175.4% at December 31, 2006.
The allowance for loan losses as a percentage of our total loans was 1.5%
at December 31, 2007 and 2006, 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 December 31, 2007 and December 31,
2006, 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. During the year, the level of other loans of concern declined by
59.1%, from $67.0 million at December 31, 2006 to $27.4 million at December
31, 2007. Other loans of concern consist of performing loans which have known
information that has 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 years ended
December 31, 2007 and 2006, we had net charge-offs of $9.3 million and $2.8
million, respectively.
At December 31, 2007, shareholders' equity totaled $227.6 million or 6.4%
of total assets. During the current quarter, we did not repurchase any shares
under the Company's share repurchase program. For the year ended December 31,
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 $44.22 as of December 31, 2007, an increase of 5.1%, from $42.07 per share
as of December 31, 2006.
The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based
capital ratios at December 31, 2007 of 8.31%, 9.60% and 10.85%, respectively,
which represents $116.7 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 December 31, 2007 of 8.44%, 9.73% and 11.29%, respectively,
which represents $121.8 million, $114.7 million and $39.6 million,
respectively, of capital in excess of the amount required to be "well
capitalized".
Haligowski concluded: "2007 has turned out to be a year of extremes for
our company with record profitability during the first half of the year and
then being faced with the current credit and liquidity crisis commencing
during the second half of the year. Through all these challenges we have
maintained our profitability and have grown book value while some of our
competitors and peers have experienced staggering losses. Although the banking
industry and our commercial real markets certainly face challenges in the
short term, we plan to diligently manage our portfolio, and focus on
continuing to strengthen our balance sheet, while we position the company to
take advantage of opportunities that will become available in the future."
"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 2008 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

December 31,
2007 December 31,
(unaudited) 2006
(in thousands, except share amounts)

Assets

Cash and cash equivalents $8,944 $30,448
Investment securities available-for-
sale, at fair value 117,924 99,527
Investment securities held-to-
maturity, at amortized cost 159,023 193,512
Stock in Federal Home Loan Bank 53,497 48,984
Loans, net (net of allowance for loan
losses of $47,783 and
$46,049 as of December 31, 2007
and 2006, respectively) 3,125,072 2,973,368
Interest receivable 20,841 20,753
Other real estate and other assets
owned, net 19,396 6,729
Other assets 46,522 42,189

Total assets $3,551,219 $3,415,510

Liabilities and Shareholders'
Equity

Liabilities:
Deposit accounts $2,181,858 $2,059,405
Federal Home Loan Bank advances
and other borrowings 1,021,235 1,010,000
Accounts payable and other
liabilities 33,959 38,168
Junior subordinated debentures 86,600 86,600

Total liabilities 3,323,652 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, 9,142,256 and
9,065,672 issued as of
December 31, 2007
and 2006, respectively 85,009 82,073
Retained earnings 255,947 243,823
Accumulated other comprehensive
income, net 267 35
341,223 325,931
Less treasury stock, at cost -
3,995,634 and 3,803,969 shares
as of December 31, 2007 and 2006,
respectively (113,656) (104,594)
Total shareholders' equity 227,567 221,337

Total liabilities and
shareholders' equity $3,551,219 $3,415,510

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

For the Three Months Ended For the Year Ended
December 31, December 31,
2007 2006 2007 2006
(in thousands, except per share amounts)

Interest income:
Loans receivable,
including fees $58,072 $55,496 $233,749 $207,320
Cash and investment
securities 4,185 4,687 17,522 19,181
Total interest
income 62,257 60,183 251,271 226,501

Interest expense:
Deposit accounts 27,559 25,097 110,111 85,156
Federal Home Loan
Bank advances and
other borrowings 12,424 9,735 46,134 38,722
Junior subordinated
debentures 2,070 2,109 8,338 8,197
Total interest
expense 42,053 36,941 164,583 132,075

Net interest
income before
provision
for loan losses 20,204 23,242 86,688 94,426
Provision for loan
losses 4,561 1,250 11,077 5,000
Net interest
income after
provision
for loan losses 15,643 21,992 75,611 89,426

Non-interest income:
Late and collection
fees 271 278 1,119 970
Other 354 592 2,014 1,802
Total non-interest
income 625 870 3,133 2,772

Non-interest expense:

Compensation
and benefits 6,694 4,735 23,899 21,265
Occupancy and
equipment 1,904 1,871 7,832 7,439
Other 5,187 4,497 19,633 17,743
Total general and
administrative 13,785 11,103 51,364 46,447

Real estate and
other assets
owned expense, net 154 118 780 334
Provision for losses
on other real
estate owned 300 - 300 -
Loss on sale of
other real estate
owned, net 114 35 45 35
Total real estate
owned expense, net 568 153 1,125 369

Total
non-interest
expense 14,353 11,256 52,489 46,816

Income before
provision for
income taxes 1,915 11,606 26,255 45,382
Provision for
income taxes 784 4,643 10,635 18,493

NET INCOME $1,131 $6,963 $15,620 $26,889

BASIC EARNINGS
PER SHARE $0.21 $1.26 $2.85 $4.83

DILUTED EARNINGS
PER SHARE $0.21 $1.22 $2.81 $4.71

SOURCE Imperial Capital Bancorp, Inc.

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