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
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