Exhibit 99.1
EXHIBIT 99.1
IMPERIAL CREDIT INDUSTRIES, INC.
NEWS RELEASE
Imperial Credit Industries Reports First Quarter 2001 Results of Operations
TORRANCE, Calif., April 24 /PRNewswire/ -- Imperial Credit Industries,
Inc. (Nasdaq: ICII) reports results for the first quarter ended March 31, 2001.
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ICII Returns to Profitability in the First Quarter of 2001
Imperial Credit Industries, Inc., (the "Company" or "ICII") reported net
income for the quarter ended March 31, 2001 of $312,000 or $0.01 diluted net
income per share including an operating loss from discontinued operations of
$200,000 or $0.01 diluted net loss per share and an extraordinary gain on the
early extinguishment of debt of $618,000 or $0.02 diluted net income per share.
The operating results for the quarter ended March 31, 2001 were favorably
impacted by a significant increase in recoveries to $4.1 million of previously
charged off loans, which resulted in a reduction of the provision for loan and
lease losses to $4.6 million as compared to $24.0 million in the same period of
the prior year. The Company has increased its allowance for loan and lease
losses to $64.8 million at March 31, 2001 as compared to $63.6 million at
December 31, 2000. The operating results for the quarter ended March 31, 2001
were negatively impacted by a 150 basis point decrease in the Prime rate and
increased levels of non-accrual loans which reduced Southern Pacific Bank's
("SPB") net interest margin to 4.11% for the quarter ended March 31, 2001 as
compared to 4.89% for the same period of the prior year. The Company recorded no
income tax expense during the quarter ended March 31, 2001 as the Company
currently has $130.0 million of tax net operating loss carry-forwards available
to offset future income. For the same period of the prior year, the Company
reported a net loss of $15.9 million or $0.48 diluted net loss per share after
an extraordinary gain on the extinguishment of debt of $947,000 or $0.03 diluted
net income per share. Net loss for the quarter ended March 31, 2000 included
$9.4 million of severance and other costs related to the Imperial Credit
Commercial Mortgage Investment Corp. ("ICCMIC") acquisition.
Net Interest Income Decreases As a Result of Margin Compression
For the quarter ended March 31, 2001, net interest income before
provisions for loan and lease losses and net interest margin decreased to $14.6
million and 4.11% as compared to $21.1 million and 4.89% for the same period in
the prior year, respectively. Net interest income before provisions for loan and
lease losses and net interest margin decreased primarily as a result of
increased deposit costs coupled with lower yields on our loan and securities
portfolios.
During the quarter ended March 31, 2001, interest income decreased to
$48.6 million as compared to $53.4 million for the same period of the prior
year. Interest income decreased primarily as a result of decreases in the Prime
and Libor interest rates. A majority of the
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Company's loans are indexed to these indices. As a result of the decrease in the
Prime and Libor rates, these loans re-priced to reduced yields during the first
quarter, while a majority of our deposit funding base is expected to re-price
with reduced interest rates over the next six months. As a result of our loans
re-pricing faster than our deposits, SPB's net interest margin decreased during
the quarter ended March 31, 2001. The average yield on loans at SPB decreased to
10.42% during the quarter ended March 31, 2001 as compared to 10.74% in the same
period of the prior year. SPB's yields on its outstanding loans were also
negatively affected by a higher level of non-accrual loans during the quarter
ended March 31, 2001 as compared to the same period of the prior year. Average
non-accrual loans were approximately $78.4 for the quarter ended March 31, 2001
as compared to approximately $65.5 million for the same period of the prior
year. The Company's total loans and leases held for sale and investment, net of
allowance for loan and lease losses increased to $1.6 billion at March 31, 2001
compared to $1.5 billion at December 31, 2000. Interest expense was $34.0
million for the quarter ended March 31, 2001 as compared to $32.3 million for
the same period of the prior year. The increase in interest expense primarily
resulted from an increase in the cost of the Federal Deposit Insurance
Corporation ("FDIC") insured deposits of SPB. The average cost of deposits based
on daily averages at SPB increased to 6.61% during the quarter ended March 31,
2001 as compared to 5.85% in the same period of the prior year. SPB's average
outstanding deposits decreased to $1.6 billion for the quarter ended March 31,
2001 as compared to $1.7 billion at March 31, 2000. Interest on other borrowings
increased as a result of the ICCMIC acquisition on March 28, 2000. Average
outstanding debt and related interest expense at ICCMIC totaled $37.1 million
and $734,000 for the quarter ended March 31, 2001, respectively. The increases
in interest expense on deposits and other borrowings were partially offset by a
decrease in interest expense on long-term debt which decreased 10.0% to $5.7
million for the quarter ended March 31, 2001 as compared to $6.4 million for the
same period in the prior year. The decrease in interest expense on long-term
debt resulted from the repurchase of long-term debt during the previous twelve
months.
Fee and Other Income Decrease As a Result of ICG Deconsolidation
Fee and other income decreased $4.4 million to $6.0 million for the
quarter ended March 31, 2001 as compared to $10.5 million in the same period of
the prior year. Fee and other income decreased primarily due to the
deconsolidation of Imperial Capital Group ("ICG") during the fourth quarter of
2000. As a result of the deconsolidation, the Company will not report any
investment banking and brokerage fees, other income, or expenses of ICG.
Beginning with the fourth quarter of 2000, ICII's 38.5% equity interest in ICG
will be reported as equity in the net income of ICG. During the quarter ended
March 31, 2000 the Company reported $7.7 million of investment banking and
brokerage fees.
Gain on sale of loans decreased to $102,000 for the quarter ended March
31, 2001, as compared to $133,000 in the same period of the prior year. For the
quarter ended March 31, 2001, the Company sold $44.5 million of Income Property
Lending Division ("IPL") loans and $11.1 million of participations in nationally
syndicated loans generating a gain of $257,000 and a loss of $165,000,
respectively. For the quarter ended March 31, 2000, the Company sold $34.7
million of IPL loans, $51.4 million of nationally syndicated participation
loans, $7.5 million of consumer loans, and securitized $28.2 million of Imperial
Business Credit's ("IBC") equipment leases, generating gains (losses) of
$271,000, ($400,000), zero, and $261,000, respectively.
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Asset management fees were relatively unchanged at $842,000 for the
quarter ended March 31, 2001 as compared to $861,000 in the same period of the
prior year. Asset management fees are derived primarily from the management of
Pacifica Partners I, a $500 million collateralized loan obligation fund. The
balance of assets under management was $484.5 million at March 31, 2001 as
compared to $491.3 million at March 31, 2000.
For the three months ended March 31, 2001, the equity in net income of
ICG was $912,000. The pre-tax income of ICG for the quarter ended March 31,
2000 was $1.0 million.
Gain on sale of securities increased to $130,000 for the quarter ended
March 31, 2001 as compared to a loss of $602,000 in the same period of the prior
year. During the quarter ended March 31, 2001, the Company sold part of its
interest in a high yield bond fund managed by Imperial Capital Group ("ICG").
Rental income increased to $1.9 million for the quarter ended March 31, 2001 as
compared to $120,000 in the same period of the prior year. Rental income
increased as a result of the income producing commercial real estate properties
acquired in the ICCMIC transaction, which was completed on March 28, 2000.
For the quarters ending March 31, 2001 and 2000, mark-to-market losses
were unchanged at $1.8 million. The net mark-to-market losses for the quarter
ended March 31, 2001 primarily related to a $649,000 write-down of IBC's
retained interests in lease securitizations, a $311,000 write-down of other
retained interests, and an $801,000 write-down of loans funded through an off-
balance sheet swap managed by SPB's Loan Participation and Investment Group
("LPIG") division. For the quarter ended March 31, 2000, mark-to-market losses
were primarily related to a decline in the value of the Company's commercial
mortgage-backed securities and investments in total return swaps. The Company
wrote down its commercial mortgage-backed securities by $462,000 and its
investments in total return swaps by $1.0 million as a result of increased
interest spreads and loss assumptions. During the quarter ended March 31, 2000,
the Company also wrote down certain consumer loans held for sale by $770,000.
The write-downs in these securities and loans during the quarter ended March 31,
2000 were partially offset by increases in the value of the Company's retained
interest in residential mortgage loan securitizations of $542,000 as a result of
increased prepayment assumptions.
Noninterest Expenses Decrease 37%
Total noninterest expenses for the quarter ended March 31, 2001 decreased
37% to $16.1 million as compared to $25.5 million for the prior year. The
decrease in expenses primarily resulted from decreases in personnel expense,
amortization of goodwill, and general and administrative expenses in addition to
the deconsolidation of ICG. These decreases were partially offset by increases
in legal and professional services and collection costs associated with non-
accrual loans and non-performing assets, and real property expenses. During the
quarter ended March 31, 2000 noninterest expenses decreased 15% to $16.1 million
as compared to $18.9 million for the same period in the prior year assuming ICG
was accounted for under the equity method. The decrease in expenses occurred in
all expense categories except legal and
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professional services, collection costs associated with non-accrual loans and
non-performing assets, and real property expenses.
Assuming ICG was accounted for under the equity method, during the
quarter ended March 31, 2000, personnel expenses decreased 25% to $6.8 million
as compared to $9.1 million in the same period of the prior year. The decrease
was primarily the result of reduced Full Time Equivalent employees ("FTE") and
reduced bonus expense. At March 31, 2001, the Company had 404 FTE as compared to
520 FTE (excluding ICG) at March 31, 2000.
Assuming ICG was accounted for under the equity method, during the
quarter ended March 31, 2000, legal and professional and collection costs
increased to $3.2 million as compared to $1.7 million in the same period of the
prior year. The increase was primarily the result of increased levels of non-
accrual loans and the Company's efforts to accelerate the resolution of problem
loans.
Assuming ICG was accounted for under the equity method, during the
quarter ended March 31, 2000, general and administrative expenses decreased 12%
to $3.8 million as compared to $4.3 million in the same period of the prior
year. General and administrative expenses decreased in both periods as a result
of the Company's efforts to cut costs and increase operational efficiency.
Assuming ICG was accounted for under the equity method, during the
quarter ended March 31, 2000, amortization of goodwill, net was ($722,000) as
compared to $607,000 in the prior year. Amortization of goodwill decreased as a
result of the amortization of negative goodwill associated with the ICCMIC
acquisition in the first quarter of 2000. During the quarter ended March 31,
2001, amortization of negative goodwill at ICCMIC reduced amortization of
goodwill, net by $1.4 million as compared to $72,000 during the same period of
the prior year.
Real property expenses began to be incurred by our company as a result of
the ICCMIC acquisition in the first quarter of 2000. These costs solely relate
to the income producing properties owned by ICCMIC. Real property expenses
totaled $914,000 for the quarter ended March 31, 2001 as compared to $18,000 in
the same period of the prior year.
Non-accrual Loans and Non-Performing Assets
Our non-accrual loans and leases increased to $85.4 million at March 31,
2001 as compared to $78.5 million at December 31, 2000. The increase was
primarily attributable to increased non-accrual loans at SPB's Coast Business
Credit ("CBC") division and its Imperial Warehouse Finance ("IWF") subsidiary.
CBC's non-accrual loans increased to $36.0 million at March 31, 2001 as compared
to $31.8 million at December 31, 2000. The increase in CBC's non-accrual loans
was due to the addition of three new non-accrual loans. IWF's non-accrual loans
increased to $14.4 million at March 31, 2001 as compared to $9.4 million at
December 31, 2000. The increase in IWF's non-accrual loans was due to the
addition of a $6.0 million facility to one customer. Since March 31, 2001, the
outstanding balance of this loan has decreased to $4.0 million as a result of
the sale of underlying loans collateralizing the facility. The overall increase
in non-accrual loans was partially offset by a decrease at SPB's LPIG lending
division
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as a result of the sale of problem loans. During the first quarter, SPB sold
$1.7 million of LPIG problem loans, resulting in a recovery of $379,000. All
unsecured loans related to non-performing credits have been charged off as of
March 31, 2001 and December 31, 2000.
Our non-performing assets increased to $98.8 million at March 31, 2001 as
compared to $87.4 million at December 31, 2000. The increase was primarily
attributable to the increase in non-accrual loans described above, and the
purchase of non-performing entertainment assets with an estimated value of $4.9
million in connection with the Lewis Horwitz Organization ("LHO") acquisition.
This purchase during the quarter ended March 31, 2001 completes the Company's
obligation to purchase non-performing assets under the LHO purchase agreement.
Allowance for Loan and Lease Losses Increases to $64.8 Million
The allowance for loan and lease losses was $64.8 million or 5.10% of
total loans held for investment as compared to $63.6 million or 5.39% of total
loans held for investment at December 31, 2000 and $49.4 million or 3.61% of
total loans held for investment at March 31, 2000, respectively. The ratio of
the allowance for loan and lease losses to non-accrual loans and leases
("coverage ratio") was 75.87% at March 31, 2001 as compared to 81.02% at
December 31, 2000 and 77.67% at March 31, 2000.
For the quarter ended March 31, 2001, the provision for loan and lease
losses was $4.6 million as compared to $24.0 million for the same period of the
prior year. The reduced provision for loan and lease losses for the quarter
ended March 2001 was primarily the result of increased recoveries on previously
charged off CBC loans totaling $4.0 million and a reduced number of performing
credits migrating to potential problem status.
First Step of the Company's Recapitalization Transaction Completed
On March 30, 2001 ICII completed the issuance of $16.2 million of Senior
Secured Debt. The notes bear an interest rate of 12% and mature on April 30,
2002. The issuance of the Senior Secured Debt is the first step in a
recapitalization plan for the Company further explained below. The proceeds from
the Senior Secured Debt offering were invested in SPB to facilitate compliance
with its regulatory orders.
Subsequent to the completed Senior Secured Debt offering, ICII will offer
pro rata a package of the following securities in exchange (the "Debt Exchange")
for our three currently outstanding series of debt securities (the "Old Notes"):
(i) 12% Senior Secured Notes due 2005 (the "Exchange Notes"), (ii) up to 2.0
million shares of our Common Stock (13.952269 shares per $1,000 face amount of
Old Notes), no par value and (iii) warrants (the "Debt Exchange Warrants") to
purchase up to an additional 7.0 million shares of Common Stock at an exercise
price of $2.15 per share (48.832944 warrants per $1,000 face amount of Old
Notes). Concurrently with consummation of the Debt Exchange, we will issue up to
7.04 million shares of Common Stock to the holders of a majority in interest of
our Old Notes who executed the recapitalization agreement. We further intend to
issue and sell at least $10.0 million principal amount of 12% Convertible
Subordinated Notes due 2005 to accredited investors in a private
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placement. The Convertible Subordinated Notes will be convertible after three
years into Common Stock of the Company at a price of $1.25 per share.
The holders of Old Notes will be offered Exchange Notes as follows: (i)
the holders of our 10.25% Remarketed Par Securities due 2002 will be offered to
convert into Exchange Notes at $0.80 per dollar of face amount of such Old
Notes, (ii) the holders of our 9.875% Senior Notes due 2007 will be offered to
convert into Exchange Notes at $0.65 per dollar of face amount of such Old
Notes, and (iii) the holders of our 9.75% Senior Notes due 2004 will be offered
to convert into Exchange Notes at $0.50 per dollar of face amount of such Old
Notes.
A majority-in-interest of the 10.25% Remarketed Par Securities due 2002
and our 9.875% Senior Notes due 2007 have agreed to participate in the Debt
Exchange, and to strip the Old Notes of all existing financial covenants.
Supplemental indentures related to the Old Notes were executed on March 29,
2001.
Subject to the occurrence of certain conditions (including the closing of
the Debt Exchange and the issuance of Convertible Subordinated Notes), all of
the Senior Secured Debt will be automatically exchanged into (i) $18.2 million
principal amount of Exchange Notes, (ii) 249,052 shares of Common Stock, and
(iii) warrants to purchase up to an additional 871,681 shares of Common Stock at
an exercise price of $2.15 per share. Such Exchange Note holders also have
limited price protection. Each of the Senior Secured Debt purchasers will
further have the right during the period following the Debt Exchange and ending
March 31, 2002 to elect to exchange all or a portion of their Exchange Notes and
related shares of Common Stock and Debt Exchange Warrants into $18.2 million
principal amount of Convertible Subordinated Notes. The Convertible Subordinated
Notes will have a 12% coupon and will be convertible into Common Stock at $1.25
per share.
Upon successful completion of the recapitalization transaction, ICII will
receive gross proceeds of approximately $26.2 million of new capital, most of
which will be invested in Tier I capital of SPB. We believe that this new
capital will assist our company in its attempt to increase capital levels at SPB
in order to meet regulatory requirements. Furthermore, the future exercise of
warrants issued in connection with the Debt Exchange is expected to provide
approximately an additional $15.0 million of capital for the Company at the time
of their exercise approximately three years from the date of issuance of the
Exchange Notes.
The impact of the Debt Exchange will primarily be to reduce the principal
amount of ICII's Old Notes by approximately $36.6 million to $71.7 million based
on the success of the exchange offer. ICII expects to complete the Debt Exchange
by June 30, 2001.
Southern Pacific Bank's Regulatory Capital Increased to "Adequately Capitalized"
Levels
The Company's largest subsidiary is SPB, an FDIC insured depository
institution. On March 30, 2001, the Company contributed $21.2 million of cash to
the Bank in the form of new equity capital and converted $22.0 million of SPB's
subordinated debt into non-cumulative perpetual preferred stock of SPB. Such
capital infusions and conversions, in addition to SPB's earnings through March
31, 2001, restored SPB's capital to amounts above the "adequately
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capitalized" regulatory minimums as defined in banking regulations. However, the
restoration of SPB's capital was not sufficient to meet the capital levels
required by its regulatory orders at March 31, 2001. SPB had Tier 1 Leverage and
Total Risk-based Capital ratios of 6.11% and 8.40%, at March 31, 2001 as
compared to 3.46% and 6.59% at December 31, 2000, respectively. The Company is
in the process of revising SPB's capital plan that was submitted to the FDIC and
the DFI. Such capital plan has not yet been approved by the FDIC and the DFI.
The capital plan indicates that the Bank will not meet any of the above cited
capital ratio targets at the indicated dates. However, the preliminary revised
plan does indicate that the Bank's capital ratios at December 31, 2001, should
qualify it to be categorized as "well capitalized" at that time.
Liquidity and Capital Resources
On a consolidated basis, our cash and interest bearing deposits decreased
to $153.7 million at March 31, 2001 as compared to $214.1 million at December
31, 2000. At our parent company, cash and interest bearing deposits decreased to
$2.2 million at March 31, 2001 as compared to $15.9 million at December 31,
2000. Liquidity at our holding company was reduced primarily due to the
additional capital investment of $5.0 million into SPB, the repayment of inter-
company advances to consolidated subsidiaries, and the purchase of single family
residential mortgage loans from a securitization trust established by the
Company in 1994. Cash available to our parent company including its consolidated
subsidiaries other than SPB totaled $7.4 million at March 31, 2001.
Long Term Debt
Our long term debt increased to $234.0 million at March 31, 2001 as
compared to $219.6 million at December 31, 2000 as a result of the issuance of
$16.2 million of Senior Secured Debt on March 30, 2001. The notes bear an
interest rate of 12% and mature on April 30, 2002. During the quarter ended
March 31, 2001, we repurchased $1.9 million of our company obligated mandatorily
redeemable preferred securities of subsidiary trust holding solely debentures of
the company ("ROPES"), resulting in an extraordinary gain on the early
extinguishment of debt of $618,000.
Shareholders' Equity
At March 31, 2001 our shareholders' equity increased to $40.1 million as
compared to $39.4 million at December 31, 2000. The increase in shareholders'
equity was primarily the result of net income recorded during the quarter ended
March 31, 2001 and due to an increase in the valuation allowance for securities
available for sale. Our book value per share and tangible book value per share
increased to $1.25 and decreased to $1.35 at March 31, 2001 as compared to $1.23
and $1.37 at December 31, 2000, respectively.
General Description of the Company
Imperial Credit Industries, Inc., a diversified financial services
holding company, was formed in 1991 and is headquartered in Torrance,
California. The Company's major business activities are primarily conducted
through Southern Pacific Bank, a wholly owned subsidiary.
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The Company also owns an equity interest in Imperial Capital Group, LLC
(approximately 38% ownership). Imperial Credit Industries, Inc. and its
subsidiaries and affiliates offer a wide variety of financial services,
investment products, and asset management services.
Not an Offer of Securities
This press release does not constitute an offer of any securities for
sale. It is expected that the securities referred to herein will not initially
be registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from the
registration requirements of such Act.
Safe Harbor Statement
Certain statements contained herein are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
may be identified by reference to a future period(s) or by the use of forward-
looking terminology, such as "may," "will," "intend," "should," "expect,"
"anticipate," "estimate" or "continue" or the negatives thereof or other
comparable terminology. The Company's actual results could differ materially
from those anticipated in such forward-looking statements due to a variety of
factors. These factors include but are not limited to: the demand for our
products; competitive factors in the businesses in which we compete; adverse
changes in the securities markets; inflation and changes in the interest rate
environment that reduce margins or the fair value of financial instruments;
changes in national, regional or local business conditions or economic
environments; government fiscal and monetary policies; legislative or regulatory
changes that affect our business; factors inherent in the valuation and pricing
of commercial loans; other factors generally understood to affect the value of
commercial loans and commercial real estate; and the other risks detailed in the
Company's 8-K dated May 17, 1999 as filed with the Securities and Exchange
Commission (the "SEC"); periodic reports on Forms 10-Q, 8-K and 10-K and any
amendments with respect thereto filed with the SEC; and other filings made by
the Company with the SEC.
ICII's news releases are available at no charge through PR Newswire's
Company News on Call by dialing (800) 758-5804 Ext. 420763. Additional
corporate information relating to the Company's SEC filings and corporate news
releases are available on the internet. The web site address is
http://www.icii.com. The Company will hold a conference call at 8:00 A.M.
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Pacific Time, 11:00 A.M. Eastern Time today. The phone number for the
conference call is (913) 981-5542, confirmation number 554862. Audio of the
call will be broadcast live on the Internet and will be available on the
Investor Relations section of Imperial Credit's web site, located at
http://www.icii.com and at http://www.videonewswire.com/ICII/042401.
- ------------------- ----------------------------------------
For further information contact: Brad Plantiko/CFO 310-791-8096 or Karen
Montandon/IR 310-791-8022
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IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
ASSETS March 31, December 31,
2001 2000
Cash $ 56,622 $ 30,938
Interest bearing deposits 97,068 183,193
Investment in Federal Home Loan Bank stock 4,216 4,148
Securities held for trading, at market 105,080 164,050
Securities available for sale, at market 61,466 63,684
Loans and leases held for sale, net 380,132 386,469
Loans and leases held for investment, net of unearned income 1,260,308 1,186,119
and deferred loan fees
less: allowance for loan and lease losses (64,785) (63,625)
Loans held for investment, net 1,195,523 1,122,494
Real property 38,694 53,198
Retained interest in loan and lease securitizations 3,635 6,330
Accrued interest receivable 13,975 15,744
Premises and equipment, net 12,335 10,433
Other real estate owned and other repossessed assets, net 13,332 8,778
Goodwill 31,645 32,330
Other assets 31,201 28,158
Net assets of discontinued operations 11,569 17,630
Total assets $2,056,493 $2,127,577
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $1,623,657 $1,632,704
Borrowings from Federal Home Loan Bank 50,000 65,000
Other borrowings 34,978 84,118
Company obligated mandatorily redeemable preferred
securities of Subsidiary trust holding solely debentures
of the company
("ROPES") 41,035 42,885
Senior secured notes 16,200 --
Senior notes 176,765 176,757
Accrued interest payable 16,421 18,992
Accrued income taxes payable 20,507 20,522
Minority interest in consolidated subsidiaries 1,141 1,116
Goodwill 22,103 23,797
Other liabilities. 13,614 22,244
Total liabilities 2,016,421 2,088,135
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Shareholders' equity:
Preferred stock, 8,000,000 shares authorized; none issued -- --
outstanding
Common stock, no par value.
Authorized 80,000,000 shares;
32,096,361 shares issued and outstanding
at March 31, 2001 and December 31, 2000 97,778 97,668
Accumulated deficit (64,577) (64,889)
Shares held in deferred executive
compensation plan 5,635 5,745
Accumulated other comprehensive income-unrealized
gain on securities available for sale, net 1,236 918
Total shareholders' equity 40,072 39,442
Total liabilities and shareholders' equity $2,056,493 $2,127,577
IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
Interest Income: 2001 2000
Interest on loans and leases. $43,268 $ 45,401
Interest on investments. 5,020 7,345
Interest on other finance activities 330 614
Total interest income 48,618 53,360
Interest Expense:
Interest on deposits. 26,589 24,293
Interest on other borrowings. 1,701 1,582
Interest on long term debt. 5,740 6,378
Total interest expense 34,030 32,253
Net interest income 14,588 21,107
Provision for loan and lease losses 4,625 24,019
Net interest income (expense) after
provision for loan and lease losses 9,963 (2,912)
Fee and Other Income:
Gain on sale of loans and leases 102 133
Asset management fees 842 861
Investment banking and brokerage fees -- 7,654
Loan servicing income 1,368 1,526
Gain (loss) on sale of securities 130 (602)
Equity in net income of Imperial Capital Group 912 --
Mark to market losses on securities and loans (1,822) (1,773)
held for sale
Rental income 1,912 120
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Other income 2,595 2,544
Total fee and other income 6,039 10,463
Noninterest Expenses:
Personnel expense 6,826 11,919
Commission expense 487 2,753
Amortization of servicing rights 106 136
Occupancy expense 1,034 1,349
Net expenses of other real estate owned 92 556
Legal and professional services 1,499 1,392
Legal (recoveries) settlements (1) 13
Collection costs 1,662 484
Telephone and other communications 364 871
Amortization of goodwill, net (722) 631
Real property expense 914 18
General and administrative expense 3,815 5,344
Noninterest expenses 16,076 25,466
Acquisition costs -- 9,397
Total expenses 16,076 34,863
Loss from continuing operations before income taxes, (74) (27,312)
minority interest and extraordinary item
Income taxes -- (10,835)
Minority interest in income of consolidated 32 393
subsidiaries
Loss from continuing operations (106) (16,870)
Operating losses from discontinued operations of AMN, (200) --
net of income taxes
Loss before extraordinary item (306) (16,870)
Extraordinary item-Gain on early extinguishment of 618 947
debt, net of income taxes
Net income (loss) $ 312 $(15,923)
Comprehensive income (loss):
Other comprehensive income (loss), net 318 (1,958)
Comprehensive income (loss) $ 630 $(17,881)
Basic income per share:
Income (loss) from continuing operations $ 0.00 $ (0.51)
Operating loss from discontinued operations, net (0.01) --
of income taxes
Extraordinary item-Gain on early extinguishment of 0.02 0.03
debt, net of income taxes
Net income (loss) per common share $ 0.01 $ (0.48)
Diluted income per share:
Income (loss) from continuing operations $ 0.00 $ (0.51)
Operating loss from discontinued operations, net of (0.01) --
income taxes
Extraordinary item-Gain on early extinguishment of 0.02 0.03
debt, net of income taxes
Net income (loss) per common share $ 0.01 $ (0.48)
11
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
Other Selected Financial Data: At or for the Three Months Ended
March 31, December 31, March 31,
2001 2000 2000
Book value per share $ 1.25 $ 1.23 $ 5.65
Tangible book value per share $ 1.35 $ 1.37 $ 6.17
Ratio of earnings to fixed charges 1.0x (0.7x) 0.2x
Pre-tax interest coverage ratio 1.1x (10.0x) (3.3x)
(Loss) earnings before interest,
taxes, depreciation and amortization
("EBITDA") 7,089 $(56,419) $(19,518)
Return on average equity (ROE) 3.14% (457.76%) (32.42%)
Return on average assets (ROA) 0.06% (19.06%) (2.86%)
Net interest margin at SPB 4.11% 4.47% 4.89%
Basic weighted average shares outstanding 32,096 32,096 33,212
Diluted weighted average shares outstanding 32,123 32,096 33,212
12
At March 31, At December 31,
Selected Credit Data: 2001 2000
Core Business Nonperforming Assets
Coast Business Credit $36,041 $31,795
Acquired Entertainment Assets and
LHO Loans 12,393 7,998
Loan Participation and Investment Group 22,998 26,206
Imperial Warehouse Finance 14,365 9,404
Income Property Lending Division 1,341 1,650
Other core businesses 645 9
Total core business nonperforming assets 87,783 77,062
Non-Core Business Nonperforming Assets
Former mortgage banking operations 268 431
Auto Marketing Network, Inc. 596 778
Single Family Loans 3,451 3,949
Other non-core businesses 6,677 5,149
Total non-core business nonperforming 10,992 10,307
assets
Total nonperforming assets $98,775 $87,369
Core Business Non-accrual Loans
Coast Business Credit 36,041 31,795
Lewis Horwitz Organization Loans 246 246
Loan Participation and Investment Group 22,998 26,206
Imperial Warehouse Finance 14,365 9,404
Income Property Lending Division 1,341 1,650
Other core businesses 645 7
Total core business non-accrual loans 75,636 69,308
Non-Core Business Non-accrual Loans
Former mortgage banking operations 268 431
Auto Marketing Network, Inc. 545 716
Single Family Loans 2,483 3,133
Other non-core businesses 6,462 4,941
Total non-core business non-accrual loans 9,758 9,221
Total non-accrual loans $85,394 $78,529
At or for At or for At or for
the Three the Three the Three
Months Months Months
Ended Ended Ended
March 31, December 31, March 31,
13
2001 2000 2000
Allowance for loan and lease losses
to non-accrual loans and leases 75.87% 81.02% 77.67%
Allowance for loan and lease losses
to gross LHFI 5.10% 5.39% 3.61%
Nonperforming assets to total assets 4.80% 4.11% 3.33%
Nonperforming assets to LHFI, OREO
and other repossessed assets 7.77% 7.39% 5.58%
Annualized net charge-offs to average
LHFI, net 1.18% 19.52% 2.13%
Imperial Credit Industries, Inc.
Financial and Operating Highlights
Consolidated 2001 2000
Operating Results
(In millions, except
per share amounts First Fourth Third Second First
and percentages) Quarter Quarter Quarter Quarter Quarter
Revenue
Interest income $ 48.6 $ 53.0 $ 57.4 $ 61.0 $ 53.4
Interest expense (34.0) (35.4) (37.1) (35.4) (32.3)
Net interest income 14.6 17.6 20.3 25.6 21.1
Provision for loan
and lease losses 4.6 66.3 27.5 63.2 24.0
Net interest income
(expense) after
provision 10.0 (48.7) (7.2) (37.6) (2.9)
Gain (loss) on sale
of loans and leases 0.1 1.1 (2.3) 0.2 0.1
Asset management fees 0.8 0.8 0.8 0.8 0.9
Investment banking
and brokerage fees -- -- 6.2 7.2 7.7
Loan servicing
income 1.4 1.5 1.5 1.5 1.5
Gain (loss) on sale of
securities 0.1 (0.1) 0.2 13.5 (0.6)
Equity in net (loss)
income of ICG 0.9 0.5 -- -- --
Mark to market loss on
securities and loans
held for sale (1.8) (4.8) (4.3) (2.0) (1.7)
Rental income 1.9 2.6 2.9 2.6 0.1
Other income 2.6 3.5 2.6 3.7 2.5
Total fee and other
14
income 6.0 5.1 7.6 27.5 10.5
Expenses
Personnel expense 7.3 10.1 11.613.7 14.7
Occupancy expense 1.0 1.2 1.3 1.5 1.3
Legal and
professional 3.2 3.3 9.4 1.5 1.6
Amortization of
goodwill, net (0.7) (0.8) 2.9 (1.3) 0.6
Net expense of real
estate owned 0.1 0.1 0.2 0.5 0.6
Real property expense 0.9 1.1 1.6 1.5 --
Other expenses 4.3 5.2 6.4 6.5 6.7
Merger costs -- -- -- -- 9.4
Total expenses 16.1 20.2 33.4 23.9 34.9
(Loss) from continuing
operations before
income taxes and
minority interest (0.1) (63.8) (33.0) (34.0) (27.3)
Income taxes -- 37.8 (10.0) (14.6) (10.8)
Minority interest in
income of consolidated
subsidiaries -- -- 0.2 0.5 0.4
Loss from continuing
operations (0.1) (101.6) (23.2) (19.9) (16.9)
Operating loss from
discontinued
operations
and disposal of AMN (0.2) (4.1) (1.1) -- --
Extraordinary item
- gain on early
extinguishment of debt 0.6 1.1 0.3 1.1 1.0
Net income (loss) $ 0.3 $ (104.6) $ (24.0) $ (18.8) $ (15.9)
Weighted average number
of common and common
equivalent shares
(diluted) 32.1 32.1 32.8 33.7 33.2
Net (Loss) Income per
Diluted Share:
Income (loss) from
continuing
operations $ -- $ (3.17) $ (0.73) $ (0.61) $ (0.51)
Operating loss from
discontinued
operations of AMN (0.01) (0.13) (0.03) -- --
Extraordinary item
- gain on early
extinguishments
15
of debt 0.02 0.04 0.01 0.03 0.03
Net income (loss)
per diluted share $ 0.01 $ (3.26) $ (0.75) $ (0.58) $ (0.48)
Consolidated Financial
Condition (at
quarter end):
Loans and leases
held for sale $ 380.1 $ 386.5 $ 400.6 $ 392.0 $ 344.4
Loans held for
investment, net $1,195.5 $1,122.5 $ 1,232.1 $1,311.6 $1,307.3
Securities, at
market $ 166.5 $ 227.7 $ 219.6 $ 231.2 $ 252.7
Retained interest
in loan and lease
securitizations $ 3.6 $ 6.3 $ 10.0 $ 12.1 $ 12.4
Total assets $2,056.4 $2,127.6 $ 2,263.7 $2,403.5 $2,288.3
Deposits $1,623.7 $1,632.7 $ 1,699.3 $1,826.5 $1,681.3
Borrowings from
FHLB and other
borrowings $ 85.0 $ 149.1 $ 117.4 $ 99.3 $ 68.1
ROPES $ 41.0 $ 42.9 $ 47.0 $ 48.3 $ 60.5
Senior notes $ 193.0 $ 176.8 $ 176.9 $ 176.9 $ 179.0
Total shareholders'
equity $ 40.1 $ 39.4 $ 143.4 $ 165.5 $ 187.5
Asset Quality
Other real estate
owned and other
repossessed
assets, net $ 13.3 $ 8.8 $ 11.8 $ 14.6 $ 12.8
Non-accrual loans $ 85.4 $ 78.5 $ 81.3 $ 90.8 $ 72.6
Allowance for loan
and lease losses $ 64.8 $ 63.6 $ 57.8 $ 50.1 $ 49.4
Ratio of the loan
loss allowance to
gross loans held
for investment 5.10% 5.39% 4.69% 3.82% 3.78%
Ratio of the loan
loss allowance to
non-accrual loans 81.02% 71.14% 55.21% 77.67% 75.87%
Charge-offs $ 7.6 $ 61.5 $ 20.4 $ 62.9 $ 7.9
Recoveries 4.1 1.2 0.5 0.5 0.8
Net Charge-offs $ 3.5 $ 60.3 $ 19.9 $ 62.4 $ 7.1
16
Performance and
Valuation
Return on average
shareholders'
equity 3.14% -457.76% -62.16% -42.56% -32.42%
Return on average
assets 0.06% -19.06% -4.11% -3.20% -2.84%
After-tax profit
margin 1.95% n/a n/a n/a n/a
Shareholders' equity 1.95% 1.85% 6.33% 6.88% 8.20%
to total assets
Book value per
share $ 1.25 $ 1.23 $ 4.47 $ 5.12 $ 5.65
Tangible book value
per share $ 1.35 $ 1.37 $ 4.71 $ 5.52 $ 6.17
Full Time Equivalent
Employees 404 428 536 566 591
Cash Flow Information:
Earnings before
interest, taxes,
depreciation and
amortization
(EBITDA) $ 7.1 $ (35.4) $ (24.8) $ (28.5) $ (19.5)
Pre-tax interest
coverage ratio 1.1x (10.0x) (4.6x) (4.7x) (3.3x)
Ratio of earnings to
fixed charges 1.0x (0.7x) 0.1x 0.1x 0.2x
Capital Ratios
Risk-based Capital 8.40% 6.59% 9.35% 9.31% 10.33%
Risked-based Tier 1
Capital 6.04% 3.54% 5.23% 5.97% 7.18%
Tier 1 FDIC Leverage
Ratio 6.11% 3.46% 5.47% 6.50% 8.25%
Loan Portfolio
Multifamily real
estate $ 268.9 $ 281.3 $ 310.5 $ 294.2 $ 248.2
Commercial real
estate 156.8 151.6 169.5 183.4 179.4
Asset-based loans 742.9 752.9 832.9 844.7 810.3
Loan participations 108.9 123.5 150.6 172.9 183.7
Mortgage warehouse
lines 131.5 50.6 33.8 52.1 69.5
Film and television
production loans 113.7 83.7 76.7 75.2 24.9
Other 36.9 28.6 17.9 18.2 61.3
17
Total Core
Loans 1,559.6 1,472.2 1,591.9 1,640.7 1,577.3
Non Core Loans 90.2 95.1 99.9 119.1 127.1
Gross Loans $1,649.8 $1,567.3 $ 1,691.8 $1,759.8 $1,704.4
Yield on earning
assets at SPB 10.04% 10.40% 10.65% 11.18% 10.15%
Cost of borrowings
at SPB 6.61% 6.66% 6.50% 6.21% 5.85%
Net interest margin
at SPB 4.11% 4.47% 4.82% 5.69% 4.89%
Deconsolidation of ICG
During the fourth quarter of 2000, the Company reduced its ownership
percentage in ICG from 63.2% to 38.5% through the sale of a part of its equity
interest to ICG and certain management members of ICG. The income from ICG is
accounted for by the equity method of accounting beginning with the quarter
ended December 31, 2000. For the three months ended March 31, 2001, the equity
in net income of ICG was $912,000. As a result of the deconsolidation of ICG,
certain components of the Company's first quarter results of operations are not
comparable to the same period of the prior year. Therefore, the following
proforma statements of operations present the Company's results of operations as
if ICG had been accounted for as an equity investment for all periods presented.
IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS - ICG UNDER THE EQUITY METHOD
(Dollars in thousands - unaudited)
Three Months Ended
March 31,
2001 2000
Interest Income:
Interest on loans and leases $43,268 $ 45,533
Interest on investments 5,020 7,213
Interest on other finance activities 330 614
Total interest income 48,618 53,360
Interest Expense:
Interest on deposits 26,589 24,293
Interest on other borrowings 1,701 1,457
Interest on long term debt 5,740 6,378
Total interest expense 34,030 32,128
Net interest income 14,588 21,232
Provision for loan and lease losses 4,625 24,019
Net interest income (expense) after provision
for loan and lease losses 9,963 (2,787)
18
Fee and Other Income:
Gain on sale of loans and leases 102 133
Asset management fees 842 861
Loan servicing income 1,368 1,526
Gain (loss) on sale of securities 130 (602)
Equity in net income of Imperial Capital Group 912 640
Mark to market losses on securities and loans
held for sale (1,822) (1,773)
Rental income 1,912 120
Other income 2,595 2,544
Total fee and other income 6,039 3,449
Noninterest Expenses:
Personnel expense 6,826 9,093
Commission expense 487 804
Amortization of servicing rights 106 136
Occupancy expense 1,034 1,140
Net expenses of other real estate owned 92 556
Legal and professional services 1,499 1,198
Lawsuit (recoveries) settlements (1) 13
Collection costs 1,662 484
Telephone and other communications 364 555
Amortization of goodwill, net (722) 607
Real property expense 914 18
General and administrative expense 3,815 4,334
Noninterest expenses 16,076 18,938
Acquisition costs -- 9,397
Total expenses 16,076 28,335
Loss from continuing operations before income
taxes, minority interest and extraordinary item (74) (27,673)
Income taxes -- (10,835)
Minority interest in income of consolidated
subsidiaries 32 32
Loss from continuing operations (106) (16,870)
Operating losses from discontinued operations
of AMN, net of income taxes (200) --
Loss before extraordinary item (306) (16,870)
Extraordinary item-Gain on early extinguishments
of debt, net of income taxes 618 947
Net income (loss) $ 312 $(15,923)
19