Itla Capital (NASDAQ:ITLA)
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ITLA Capital Corporation Reports Ninth Consecutive Year of Record
Earnings for the Year Ended December 31, 2004
LA JOLLA, Calif., Feb. 8 /PRNewswire-FirstCall/ -- ITLA Capital Corporation
(NASDAQ:ITLA) today reported net income for the year ended December 31, 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 $30.6 million or $4.75 per diluted share compared to $29.6
million or $4.55 per diluted share for the prior year. President and Chief
Executive Officer George W. Haligowski stated that "We are proud to announce
our ninth consecutive year of record earnings. Our balance sheet has grown to
$2.3 billion, and is primarily a reflection of our increasing loan production,
including improving loan production resulting from our national expansion
strategy. I expect the contribution and progress achieved from our expansion
to continue to improve next year."
Net interest income before provision for loan losses decreased 1.9 percent to
$83.5 million for the year ended December 31, 2004, compared to $85.1 million
for the same period last year. The decrease was primarily caused by the effect
of interest expense from our 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 adoption of FIN 46 required that,
beginning on January 1, 2004, we record the expense incurred on our junior
subordinated debentures related to the trust preferred securities as interest
expense 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 were recorded as
minority interest in income of subsidiary during the same period last year.
Excluding the effect of the adoption of FIN 46, net interest income before
provision for loan losses increased by $4.6 million or 5.4 percent as compared
to the same period last year. The increase in net interest income earned,
excluding the effect of the trust preferred securities, was primarily a result
of an increase in the average balance of loans outstanding, reflecting an
increase in loan production and a decline in loan prepayment speeds experienced
during the period, an increase in the average balance of investments
held-to-maturity, partially offset by a general decline in our net interest
spread and an increase in the average balance of interest bearing liabilities.
The decline in net interest spread resulted from deposits repricing to higher
current market interest rates, the addition of new borrowings at higher current
market interest rates, and a decline in the yield of our loan portfolio as
higher yielding loans were repaid and replaced by new loan production at lower
current market interest rates.
Non-interest income was $14.5 million for the year ended December 31, 2004,
compared to $15.2 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). During
2004, the Bank earned $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.
During 2004, Household and its affiliates terminated their RAL and private
label credit card programs with the Bank.
The provision for loan losses was $4.7 million for the year ended December 31,
2004, compared to $7.8 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 our loan portfolio and for specific reserves as of December
31, 2004 and 2003, respectively.
General and administrative expenses increased to $42.0 million for the current
year, compared to $36.7 million for the same period last year. The increase
was attributable to the development and continued national expansion of the
small balance multi-family real estate lending platform. During the current
year, we opened twenty loan production offices, and to date, there are
thirty-one loan production offices open on the west coast, the eastern seaboard
and the southwestern regions of the United States. Our efficiency ratio
(defined as recurring general and administrative expenses as percentage of net
revenue) was 42.9 percent for the year ended December 31, 2004, compared to
36.6 percent for the prior year.
Loan production was $1.02 billion for the year ended December 31, 2004,
compared to $794.8 million for the year ended December 31, 2003. During the
current year, the Bank originated and/or purchased $634.8 million of commercial
real estate loans, $238.0 million of small balance multi-family real estate
loans, $92.2 million of film finance loans and $52.1 million of franchise
loans. Loan originations for the previous year consisted of originations
and/or purchases of $496.1 million of commercial real estate loans, $150.6
million of small balance multi-family real estate loans, $90.5 million of film
finance loans and $57.6 million of franchise loans. Haligowski commented that:
"This year's loan production represents the highest volume of production in the
Company's 30 year history and marks the first time that our production has
exceeded $1 billion. Small balance multi-family loan production has increased
approximately 60% from last year as we continue to expand our footprint across
the nation."
Net income for the quarter ended December 31, 2004 was $5.7 million or $0.93
per diluted share, compared to $5.7 million or $0.87 per diluted share for the
same period last year. Net interest income before provision for loan losses
was $21.1 million in the quarter ended December 31, 2004, compared to $20.0
million for the same period in 2003. The increase in net interest income
earned was due to an increase in average balance of loans and investments
held-to-maturity maintained as compared to the same period last year, partially
offset by a decline in the net interest spread earned during the current
period, an increase in the average balance of interest bearing liabilities, and
the effect of interest expense from our trust preferred securities as a result
of the adoption of FIN 46 at December 31, 2003. The increase in the average
balance of loans outstanding reflects an increase in loan production and a
decline in loan prepayment speeds experienced during the period. The decline
in net interest spread was caused by a general increase in the average cost of
funds, as deposits repriced and other borrowing were entered into at higher
current market interest rates, and a decline in the yield of the loan portfolio
as higher yielding loans were repaid and replaced by new loan production at
lower current market interest rates. As previously discussed, the adoption of
FIN 46 required that, beginning on January 1, 2004, we record the expense
incurred on our junior subordinated debentures related to the trust preferred
securities as interest expense in the consolidated statements of income.
Loan production for the three months ended December 31, 2004 was $372.4
million, compared to $269.5 million for the same period in the prior year. The
current period loan production consisted of originations and/or purchases of
$259.1 million of commercial real estate loans, $84.3 million of small balance
multi-family loans, $22.9 million of film finance loans and $6.1 million of
franchise loans. Loan production for the same period last year was $269.5
million, which consisted of $154.9 million of commercial real estate loans,
$52.3 million of small balance multi-family loans, $38.6 million of film
finance loans and $23.7 million of franchise loans.
The provision for loan losses was $1.3 million during the current quarter as
compared to $660,000 for the same period last year. The provisions for loan
losses were recorded to provide for reserves adequate to support the known and
inherent risks of loss in our loan portfolio and for specific reserves as of
December 31, 2004 and 2003, respectively.
General and administrative expenses increased to $10.3 million in the current
quarter, compared to $8.7 million for the same period last year. The increase
was primarily attributable to the continued national expansion of our small
balance multi-family real estate lending platform. Our efficiency ratio
(defined as recurring general and administrative expenses as a percentage of
net revenue) was 48.4 percent in the fourth quarter of 2004 as compared to 42.1
percent for the same period last year.
Total assets increased $500.0 million to $2.3 billion at December 31, 2004,
compared to $1.8 billion at December 31, 2003. The increase in total assets
was due primarily to a $288.4 million increase in our loan portfolio, and a
$296.0 million increase in investments held-to-maturity, partially offset by a
$90.7 million decrease in cash and cash equivalents. 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. Haligowski commented
that: "Our growth in total assets achieved during the year of $500 million is
equal to the total assets of the Company when we went public in October 1995.
We have virtually created that $500 million bank during the year through our
organic asset origination capability."
At December 31, 2004, nonperforming assets totaled $14.7 million or 0.63
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 December 31, 2004,
was 242.2 percent as compared to 392.3 percent at December 31, 2003.
The allowance for loan losses as a percentage of our total loans was 1.9
percent at December 31, 2004, as compared to 2.2 percent at December 31, 2003.
During the year ended December 31, 2004, we had net charge-offs of $2.6
million, compared to $7.4 million during the same period last year.
At December 31, 2004, shareholders' equity totaled $194.7 million or 8.4
percent of total assets. During 2004, we continued our stock repurchase
program with the recent announcements of the eighth and ninth extensions of the
stock repurchase program on August 12, 2004 and September 30, 2004,
respectively. For the year ended December 31, 2004, we repurchased 678,601
shares at an average price of $44.72 per share. Since beginning share
repurchases in April 1997, a total of 2,869,502 shares were repurchased
returning approximately $67.2 million of capital to our shareholders at an
average price of $23.43 per share. Through our stock repurchase program,
approximately 97.0 percent of our contributed capital has been returned to
shareholders. The Company's book value per share of common stock was $35.09 as
of December 31, 2004, an increase of 12.1 percent from $31.30 per share as of
December 31, 2003.
The Bank had Tier 1 leverage, Tier 1 risk based and total risk-based capital
ratios at December 31, 2004 of 11.02 percent, 12.21 percent and 13.47 percent,
respectively, which represents $141.5 million, $149.4 million and $99.5
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, 2004 of 12.30 percent, 13.07 percent, and 16.00
percent, respectively, which represents $172.3 million, $180.6 million and
$149.5 million, respectively, of capital in excess of the amount required to be
"well capitalized."
Haligowski concluded: "I am proud of our 2004 financial performance. Our stock
ended the year reaching a 52-week high, closing at $58.79, an increase of over
17% from the closing price of $50.10 at December 31, 2003. We've achieved
record earnings and loan production during the year and our balance sheet has
grown by over 25%, while returning approximately $30 million of capital to
shareholders' during the year through our common stock repurchase program."
"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 small balance multi-family 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 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 2005 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, Nevada, Arizona, Texas, the Southeast, the Mid
Atlantic states, the Metro New York area, and New England.
For further information, please contact Timothy M. Doyle, Senior Managing
Director and Chief Financial Officer of ITLA Capital Corporation,
+1-858-551-0511.
ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2004 December 31,
(unaudited) 2003
(in thousands except share amounts)
Assets
Cash and cash equivalents $87,580 $178,318
Investment securities available for sale,
at fair value 66,845 53,093
Investment securities held to maturity,
at amortized cost 296,028 --
Stock in Federal Home Loan Bank 23,200 17,966
Loans, net (net of allowance for loan losses
of $35,483 and $33,401 in 2004 and 2003,
respectively) 1,793,815 1,505,424
Interest receivable 10,695 8,958
Other real estate owned, net -- 7,048
Premises and equipment, net 6,645 5,766
Deferred income taxes 10,468 11,609
Goodwill 3,118 3,118
Other assets 19,677 26,915
Total assets $2,318,071 $1,818,215
Liabilities and Shareholders' Equity
Liabilities:
Deposit accounts $1,432,032 $1,147,017
Federal Home Loan Bank advances and
other borrowings 584,224 362,135
Collateralized mortgage obligations -- 15,868
Accounts payable and other liabilities 20,491 19,696
Junior subordinated debentures 86,600 86,600
Total liabilities 2,123,347 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, 8,703,894 and 8,447,294
issued in 2004 and 2003, respectively 69,327 61,704
Retained earnings 196,032 165,407
Accumulated other comprehensive income, net 78 155
265,437 227,266
Less treasury stock, at cost - 3,154,290
and 2,475,689 shares in 2004 and 2003,
respectively (70,713) (40,367)
Total shareholders' equity 194,724 186,899
Total liabilities and shareholders'
equity $2,318,071 $1,818,215
ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months Ended For the Year Ended
December 31, December 31,
(in thousands except per share amounts)
2004 2003 2004 2003
Interest income:
Loans, including fees $30,277 $26,665 $115,663 $110,578
Cash and investment
securities 3,728 802 9,291 5,399
Total interest income 34,005 27,467 124,954 115,977
Interest expense:
Deposit accounts 8,285 5,935 27,916 24,616
Federal Home Loan Bank
advances and other
borrowings 3,024 1,320 7,272 5,175
Collateralized mortgage
obligations -- 191 71 1,076
Junior subordinated
debentures 1,600 -- 6,159 --
Total interest expense 12,909 7,446 41,418 30,867
Net interest income
before provision
for loan losses 21,096 20,021 83,536 85,110
Provision for loan losses 1,275 660 4,725 7,760
Net interest income
after provision
for loan losses 19,821 19,361 78,811 77,350
Non-interest income:
Premium on sale of loans,
net -- -- 9,284 8,983
Late and collection fees 79 60 338 252
Other 155 626 4,886 6,005
Total non-interest
income 234 686 14,508 15,240
Non-interest expense:
Compensation and benefits 4,904 4,135 21,444 18,870
Occupancy and equipment 1,603 1,337 5,924 4,839
Other 3,806 3,251 14,666 13,006
Total general and
administrative 10,313 8,723 42,034 36,715
Real estate owned expense,
net 14 9 127 382
Provision for losses
on other real estate
owned -- 500 1,000 870
(Gain) loss on sale
of other real estate
owned, net -- (100) (415) (40)
Total real estate
owned expense, net 14 409 712 1,212
Total non-interest
expense 10,327 9,132 42,746 37,927
Income before provision
for income taxes and
minority interest in
income of subsidiary 9,728 10,915 50,573 54,663
Minority interest in
income of subsidiary -- 1,577 -- 6,083
Income before provision
for income taxes 9,728 9,338 50,573 48,580
Provision for income taxes 4,015 3,622 19,948 18,946
NET INCOME $5,713 $5,716 $30,625 $29,634
BASIC EARNINGS PER SHARE $0.98 $0.94 $5.04 $4.91
DILUTED EARNINGS PER SHARE $0.93 $0.87 $4.75 $4.55
DATASOURCE: ITLA Capital Corporation
CONTACT: Timothy M. Doyle, Senior Managing Director and Chief Financial
Officer of ITLA Capital Corporation, +1-858-551-0511