ITLA Itla Capital

LA JOLLA, Calif., Oct. 17 /PRNewswire-FirstCall/ -- ITLA Capital Corporation (NASDAQ:ITLA) today reported net income for the quarter ended September 30, 2006, primarily resulting from the operations of its wholly-owned subsidiary, Imperial Capital Bank (the Bank), of $6.8 million or $1.20 per diluted share compared to $6.3 million or $1.06 per diluted share for the same period last year. President and Chief Executive Officer George W. Haligowski stated: "I'm proud to report our third quarter results, which continues our string of record quarterly profitability despite a challenging and competitive market environment. We've been able to sustain this financial performance by consistently growing our internal loan originations and increasing our loan footings by over $200 million since the beginning of the fiscal year." Net interest income before provision for loan losses increased 1.9 percent to $24.3 million for the quarter ended September 30, 2006, compared to $23.8 million for the same period last year. The increase was primarily caused by additional interest income earned due to the growth in the average balance of our loan portfolio and variable rate loans repricing to higher current market interest rates, partially offset by additional interest expense incurred due to the growth in the average balance of interest bearing liabilities, deposits and other interest bearing liabilities repricing to higher current market interest rates, and the addition of new borrowings at higher current market interest rates. The provision for loan losses remained unchanged, totaling $1.5 million for the quarters ended September 30, 2006 and 2005. These provisions for loan losses were recorded to provide reserves adequate to support the known and inherent risk of loss in our loan portfolio and for specific reserves as of September 30, 2006 and 2005, respectively. General and administrative expenses decreased to $11.5 million during the current quarter, compared to $12.0 million for the same period last year. Our efficiency ratio (defined as general and administrative expenses as percentage of net revenue) was 46.1 percent for the quarter ended September 30, 2006, as compared to 49.2 percent for the same period last year. Loan originations were $265.2 million for the quarter ended September 30, 2006, compared to $253.8 million for the same period last year. During the current quarter, the Bank originated $201.2 million of commercial real estate loans, $54.3 million of small balance multi-family real estate loans, and $9.7 million of entertainment finance loans. Loan originations for the same period last year consisted of $153.4 million of commercial real estate loans, $83.0 million of small balance multi-family real estate loans, and $17.4 million of entertainment finance loans. In addition, the Bank's wholesale loan operations acquired $120.9 million of multi-family real estate loans during the quarter ended September 30, 2006, and a $128.5 million single-family residential loan portfolio during the quarter ended September 30, 2005. Haligowski commented that: "We continue to establish ourselves as a national real estate lender. During the quarter, our offices located outside of California represented almost 40% of our commercial real estate production and 70% of our multi-family production. These contributions are having a substantial impact on our financial performance and the geographical diversification of our loan portfolio." Net income for the nine months ended September 30, 2006 increased to $19.9 million or $3.49 per diluted share, compared to $17.8 million or $2.96 per diluted share for the same period last year. Net interest income before provision for loan losses increased 5.1 percent to $71.2 million for the nine months ended September 30, 2006, compared to $67.7 million for the same period last year. This increase was primarily due to the growth in the average balance of our loan portfolio, and variable rate loans repricing to higher current market interest rates, partially offset by additional interest expense incurred due to the growth in the average balance of interest bearing liabilities, deposits and other interest bearing liabilities repricing to higher current market interest rates, and the addition of new borrowings at higher current market interest rates. The provision for loan losses was $3.8 million for the nine months ended September 30, 2006 and 2005, respectively. 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 September 30, 2006 and 2005, respectively. General and administrative expenses increased to $35.3 million for the nine months ended September 30, 2006, compared to $34.3 million for the same period last year. The Company's efficiency ratio was 48.4 percent for the nine months ended September 30, 2006, compared to 49.9 percent for the same period last year. Loan originations were $701.2 million for the nine months ended September 30, 2006, compared to $639.1 million for the same period last year. During the current nine month period, the Bank originated $489.7 million of commercial real estate loans, $170.8 million of small balance multi-family real estate loans, and $40.7 million of entertainment finance loans. Loan originations for the same period last year consisted of $339.8 million of commercial real estate loans, $232.5 million of small balance multi-family real estate loans, $64.4 million of entertainment finance loans, and $2.4 million of franchise loans. In addition, the Bank's wholesale loan operations acquired $347.3 million and $493.1 million of commercial and multi-family real estate loans during the nine months ended September 30, 2006 and 2005, respectively. As discussed above, the Bank's wholesale loan operations also acquired a $128.5 million single-family residential loan portfolio during the nine months ended September 30, 2005. Total assets increased $225.1 million to $3.3 billion at September 30, 2006, compared to $3.1 billion at December 31, 2005. The increase in total assets was primarily due to a $201.0 million increase in our loan portfolio and a $47.7 million increase in cash and cash equivalents, partially offset by a $30.2 million decline in investment securities held-to-maturity. Non-performing assets remained substantially unchanged at $28.4 million or 0.87 percent of total assets as of September 30, 2006, as compared to $28.2 million or 0.92 percent as of December 31, 2005, respectively. The allowance for loan loss coverage ratio (defined as the allowance for loan losses divided by non-accrual loans) at September 30, 2006 was 224.9 percent as compared to 180.6 percent at December 31, 2005. The allowance for loan losses as a percentage of our total loans was 1.7 percent at September 30, 2006, and December 31, 2005. During the quarter ended September 30, 2006, we had net charge-offs of $1.0 million, compared to net charge-offs of $241,000 for the same period last year. At September 30, 2006, shareholders' equity totaled $215.6 million or 6.6 percent of total assets. During the current quarter, we repurchased 34,175 shares at an average price of $51.21 per share. For the nine months ended September 30, 2006, we repurchased 189,731 shares at an average price of $48.00 per share. Since beginning share repurchases in April 1997, a total of 3.5 million shares have been repurchased, returning approximately $99.0 million of capital to our shareholders at an average price of $28.35 per share. The Company's book value per share of common stock was $40.96 as of September 30, 2006, an increase of 8.2 percent and 11.0 percent, respectively, from $37.85 per share as of December 31, 2005 and $36.91 per share as of September 30, 2005. The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at September 30, 2006 of 9.1 percent, 10.9 percent and 12.1 percent, respectively, which represents $128.2 million, $127.8 million and $55.8 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, 2006 of 9.0 percent, 10.7 percent and 12.5 percent, respectively, which represents $125.4 million, $125.1 million and $65.9 million, respectively, of capital in excess of the amount required to be "well capitalized". Haligowski concluded: "As we enter the fourth quarter, I'm encouraged by the contributions and diversification provided by our national expansion, which continue to improve each quarter. I believe these offices provide us the flexibility to respond to economic changes and have strategically positioned us for future growth." "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 2006 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 21 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. ITLA CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2006 December 31, (unaudited) 2005 (in thousands except share amounts) Assets Cash and cash equivalents $141,417 $93,747 Investment securities available-for- sale, at fair value 92,493 92,563 Investment securities held-to- maturity, at amortized cost 203,714 233,880 Stock in Federal Home Loan Bank 48,312 43,802 Loans, net (net of allowance for loan losses of $47,141 and $43,817 as of September 30, 2006 and December 31, 2005, respectively) 2,721,134 2,523,480 Interest receivable 18,430 16,287 Other real estate owned, net 7,459 3,960 Premises and equipment, net 7,163 6,718 Deferred income taxes 12,633 12,717 Goodwill 3,118 3,118 Other assets 20,456 20,924 Total assets $3,276,329 $3,051,196 Liabilities and Shareholders' Equity Liabilities: Deposit accounts $1,946,570 $1,735,428 Federal Home Loan Bank advances and other borrowings 992,734 992,557 Accounts payable and other liabilities 34,816 32,130 Junior subordinated debentures 86,600 86,600 Total liabilities 3,060,720 2,846,715 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, 9,027,672 and 8,978,998 issued as of September 30, 2006 and December 31, 2005, respectively 80,459 78,004 Retained earnings 237,650 220,095 Accumulated other comprehensive loss, net (101) (364) 318,008 297,735 Less treasury stock, at cost - 3,764,038 and 3,576,695 shares as of September 30, 2006 and December 31, 2005, respectively (102,399) (93,254) Total shareholders' equity 215,609 204,481 Total liabilities and shareholders' equity $3,276,329 $3,051,196 ITLA CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three For the Nine Months Months Ended Ended September 30, September 30, 2006 2005 2006 2005 (in thousands except per share amounts) Interest income: Loans, including fees $53,605 $44,278 $151,824 $113,399 Cash and investment securities 5,525 4,552 14,494 13,863 Total interest income 59,130 48,830 166,318 127,262 Interest expense: Deposit accounts 23,088 15,527 60,059 36,922 Federal Home Loan Bank advances and other borrowings 9,648 7,634 28,987 17,366 Junior subordinated debentures 2,104 1,830 6,088 5,264 Total interest expense 34,840 24,991 95,134 59,552 Net interest income before provision for loan losses 24,290 23,839 71,184 67,710 Provision for loan losses 1,500 1,500 3,750 3,750 Net interest income after provision for loan losses 22,790 22,339 67,434 63,960 Non-interest income: Late and collection fees 208 181 692 384 Other 370 304 1,210 590 Total non-interest income 578 485 1,902 974 Non-interest expense: Compensation and benefits 5,435 5,048 16,530 16,315 Occupancy and equipment 1,886 1,980 5,568 5,381 Other 4,153 4,945 13,246 12,576 Total general and administrative 11,474 11,973 35,344 34,272 Real estate owned expense, net 287 -- 216 -- Gain on sale of other real estate owned, net -- -- -- (11) Total real estate owned expense, net 287 -- 216 (11) Total non-interest expense 11,761 11,973 35,560 34,261 Income before provision for income taxes 11,607 10,851 33,776 30,673 Provision for income taxes 4,759 4,583 13,850 12,915 NET INCOME $6,848 $6,268 $19,926 $17,758 BASIC EARNINGS PER SHARE $1.24 $1.09 $3.58 $3.08 DILUTED EARNINGS PER SHARE $1.20 $1.06 $3.49 $2.96 DATASOURCE: ITLA Capital Corporation CONTACT: Timothy M. Doyle, Executive Managing Director and Chief Financial Officer of ITLA Capital Corporation, +1-858-551-0511

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