ITLA Itla Capital

LA JOLLA, Calif., July 31 /PRNewswire-FirstCall/ -- ITLA Capital Corporation (NASDAQ:ITLA) today reported net income for the quarter ended June 30, 2006, primarily resulting from the operations of its wholly-owned subsidiary, Imperial Capital Bank (the Bank), of $6.7 million or $1.18 per diluted share compared to $5.8 million or $0.98 per diluted share for the same period last year. President and Chief Executive Officer George W. Haligowski stated: "The strength of our second quarter results was attributable to our ability to sustain loan production and our steadfast commitment to maintaining credit quality. Despite challenging market conditions and the prolonged flattening of the yield curve, we've continued to implement our national expansion strategy, while increasing earnings by over 15% for the quarter." Net interest income before provision for loan losses increased 8.4 percent to $24.0 million for the quarter ended June 30, 2006, compared to $22.1 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 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 June 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 June 30, 2006 and 2005, respectively. General and administrative expenses increased to $11.8 million during the current quarter, compared to $11.1 million for the same period last year. Our efficiency ratio (defined as general and administrative expenses as percentage of net revenue) was 48.1 percent for the quarter ended June 30, 2006, as compared to 48.9 percent for the same period last year. Loan originations were $238.7 million for the quarter ended June 30, 2006, compared to $258.8 million for the same period last year. During the current quarter, the Bank originated $168.0 million of commercial real estate loans, $50.4 million of small balance multi-family real estate loans, and $20.3 million of entertainment finance loans. Loan originations for the same period last year consisted of $145.1 million of commercial real estate loans, $80.1 million of small balance multi-family real estate loans, $31.6 million of entertainment finance loans, and $2.0 million of franchise loans. In addition, the Bank's wholesale loan operations acquired $122.9 million and $301.0 million of commercial and multi-family real estate loans during the quarters ended June 30, 2006 and 2005, respectively. Haligowski commented that: "I continue to be encouraged by our loan production team's ability to maintain production through market conditions that include increased competition and economic uncertainty regarding monetary policies. The contribution from our expansion offices continues to improve and, for the first time since the inception of our national expansion, the commercial real estate loan production from these offices exceeded its production of multi-family loans." Net income for the six months ended June 30, 2006 increased to $13.1 million or $2.28 per diluted share, compared to $11.5 million or $1.90 per diluted share for the same period last year. Net interest income before provision for loan losses increased 6.9 percent to $46.9 million for the six months ended June 30, 2006, compared to $43.9 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 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 $2.3 million for the six months ended June 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 June 30, 2006 and 2005, respectively. General and administrative expenses increased to $23.9 million for the six months ended June 30, 2006, compared to $22.3 million for the same period last year. The Company's efficiency ratio was 49.5 percent for the six months ended June 30, 2006, compared to 50.3 percent for the same period last year. Loan originations were $436.0 million for the six months ended June 30, 2006, compared to $385.1 million for the same period last year. During the current six month period, the Bank originated $288.6 million of commercial real estate loans, $116.4 million of small balance multi-family real estate loans, and $31.0 million of entertainment finance loans. Loan originations for the same period last year consisted of $186.3 million of commercial real estate loans, $149.4 million of small balance multi-family real estate loans, $47.0 million of entertainment finance loans, and $2.4 million of franchise loans. In addition, the Bank's wholesale loan operations acquired $226.4 million and $493.2 million of commercial and multi-family real estate loans during the six months ended June 30, 2006 and 2005, respectively. Total assets increased $151.0 million to $3.2 billion at June 30, 2006, compared to $3.1 billion at December 31, 2005. The increase in total assets was primarily due to a $112.1 million increase in our loan portfolio and a $50.4 million increase in cash and cash equivalents, partially offset by a $16.4 million decline in investment securities held-to-maturity and a $2.8 million increase in the allowance for loan losses. Non-performing assets increased to $29.7 million or 0.93 percent of total assets as of June 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 June 30, 2006 was 194.7 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 June 30, 2006, and December 31, 2005. During the quarter ended June 30, 2006, we had net charge-offs of $297,000, compared to net charge-offs of $15,000 for the same period last year. At June 30, 2006, shareholders' equity totaled $208.9 million or 6.5 percent of total assets. During the current quarter, we repurchased 22,775 shares at an average price of $50.40 per share. For the six months ended June 30, 2006, we repurchased 155,556 shares at an average price of $47.29 per share. Since beginning share repurchases in April 1997, a total of 3.5 million shares have been repurchased, returning approximately $97.2 million of capital to our shareholders at an average price of $28.12 per share. The Company's book value per share of common stock was $39.75 as of June 30, 2006, an increase of 5.0 percent and 10.0 percent, respectively, from $37.85 per share as of December 31, 2005 and $36.14 per share as of June 30, 2005. The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at June 30, 2006 of 9.1 percent, 11.1 percent and 12.3 percent, respectively, which represents $125.7 million, $127.9 million and $58.8 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 June 30, 2006 of 8.9 percent, 10.9 percent and 12.7 percent, respectively, which represents $120.8 million, $123.0 million and $68.8 million, respectively, of capital in excess of the amount required to be "well capitalized". Haligowski concluded: "We are encouraged by our second quarter results, and as we enter the second half of our fiscal year, we are cautiously optimistic that as economic conditions fluctuate, we will continue to successfully adapt to these changes to sustain our financial performance. During the quarter, we also delivered shareholder value through the announcement of our second consecutive quarterly cash dividend." "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 20 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 June 30, 2006 December 31, (unaudited) 2005 (in thousands except share amounts) Assets Cash and cash equivalents $144,097 $93,747 Investment securities available-for-sale, at fair value 93,084 92,563 Investment securities held-to-maturity, at amortized cost 217,460 233,880 Stock in Federal Home Loan Bank 47,719 43,802 Loans, net (net of allowance for loan losses of $46,655 and $43,817 as of June 30, 2006 and December 31, 2005, respectively) 2,632,749 2,523,480 Interest receivable 17,323 16,287 Other real estate owned, net 5,707 3,960 Premises and equipment, net 7,290 6,718 Deferred income taxes 12,828 12,717 Goodwill 3,118 3,118 Other assets 20,775 20,924 Total assets $3,202,150 $3,051,196 Liabilities and Shareholders' Equity Liabilities: Deposit accounts $1,811,009 $1,735,428 Federal Home Loan Bank advances and other borrowings 1,075,891 992,557 Accounts payable and other liabilities 19,727 32,130 Junior subordinated debentures 86,600 86,600 Total liabilities 2,993,227 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, 8,987,998 and 8,978,998 issued as of June 30, 2006 and December 31, 2005, respectively 78,458 78,004 Retained earnings 231,509 220,095 Accumulated other comprehensive loss, net (434) (364) 309,533 297,735 Less treasury stock, at cost - 3,732,251 and 3,576,695 shares as of June 30, 2006 and December 31, 2005, respectively (100,610) (93,254) Total shareholders' equity 208,923 204,481 Total liabilities and shareholders' equity $3,202,150 $3,051,196 ITLA CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended For the Six Months Ended June 30, June 30, 2006 2005 2006 2005 (in thousands except per share amounts) Interest income: Loans, including fees $51,082 $37,210 $98,219 $69,121 Cash and investment securities 4,678 4,470 8,969 9,311 Total interest income 55,760 41,680 107,188 78,432 Interest expense: Deposit accounts 19,773 11,897 36,971 21,395 Federal Home Loan Bank advances and other borrowings 9,977 5,900 19,339 9,732 Junior subordinated debentures 2,026 1,754 3,984 3,434 Total interest expense 31,776 19,551 60,294 34,561 Net interest income before provision for loan losses 23,984 22,129 46,894 43,871 Provision for loan losses 1,500 1,500 2,250 2,250 Net interest income after provision for loan losses 22,484 20,629 44,644 41,621 Non-interest income: Late and collection fees 261 130 484 203 Other 346 379 840 286 Total non-interest income 607 509 1,324 489 Non-interest expense: Compensation and benefits 5,075 5,376 11,095 11,267 Occupancy and equipment 1,876 1,750 3,682 3,401 Other 4,882 3,943 9,093 7,631 Total general and administrative 11,833 11,069 23,870 22,299 Real estate owned expense, net (177) -- (71) -- Gain on sale of other real estate owned, net -- -- -- (11) Total real estate owned expense, net (177) -- (71) (11) Total non-interest expense 11,656 11,069 23,799 22,288 Income before provision for income taxes 11,435 10,069 22,169 19,822 Provision for income taxes 4,689 4,230 9,091 8,332 NET INCOME $6,746 $5,839 $13,078 $11,490 BASIC EARNINGS PER SHARE $1.22 $1.01 $2.34 $1.99 DILUTED EARNINGS PER SHARE $1.18 $0.98 $2.28 $1.90 DATASOURCE: ITLA Capital Corporation CONTACT: Timothy M. Doyle, Executive Managing Director and Chief Financial Officer of ITLA Capital Corporation, +1-858-551-0511 Web site: http://www.itlacapital.com/

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