UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
IMPERIAL BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2575576
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
9920 SOUTH LA CIENEGA BOULEVARD
INGLEWOOD, CALIFORNIA 90301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 417-5600
Commission file number: 0-7722
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK: Number of Shares of Common Stock outstanding as of March 31,
1995: 13,489,431 shares.
DEBT SECURITIES: Floating Rate Notes Due 1999 and Fixed Rate Debentures Due
1999. As of March 31, 1995, $5,936,000 in principal amount
of such Notes and $2,210,000 in principal amount of such
Debentures were outstanding.
The Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
IMPERIAL BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED MARCH 31, 1995
FINANCIAL REVIEW
The following discussion is intended to provide information
to facilitate the understanding and assessment of
significant changes in trends related to the financial
condition of Imperial Bancorp (the "Company") and its
results of operations for three months ended March 31, 1995.
PERFORMANCE SUMMARY
Net income for the quarter ended March 31, 1995 amounted to
$4,656,000 or $0.33 per share, as compared to $1,125,000 or
$0.09 per share for the same period of 1994. Earnings as
measured by return on average total assets was 0.85% for the
three months ended March 31, 1995 as compared to 0.19% for
the same quarter of 1994. Return on average stockholders'
equity was 9.27% for the first quarter of 1995, a
significant increase from the 2.42% returned on average
stockholders' equity for the same period of 1994. The
increase in net income was attributable to several factors
including overall improvement in asset quality, the
continued growth of the Company's fee based activities and
the Company's efforts to reduce operating costs. In
addition, the Company reversed previously accrued income
taxes during the first quarter of 1995 to reflect the
finalization of certain income tax issues. This adjustment,
as a reduction of the Company's first quarter tax provision,
approximated $0.9 million.
At March 31, 1995, the Company's total assets were $2.3
billion, total loans were $1.5 billion and stockholders'
equity and allowance for loan losses totaled $242 million.
This compares to total assets of $2.4 billion, total loans
of $1.4 billion and stockholders' equity and allowance for
loan losses of $238 million at December 31, 1994.
During the first quarter of 1995, Imperial Bank, (the
"Bank") the Company's principal subsidiary, was selected by
the FDIC to assume the insured deposits of Los Angeles
headquartered Guardian Bank. The Bank paid a premium of
approximately 1% for Guardian's gross deposits of $262
million. In addition to the insured deposits, the Bank was
given the option to acquire certain of Guardian's higher
quality assets. As of March 31, 1995, the Bank had
purchased at a discount approximately $23.6 million of
Guardian's real estate secured loans.
Asset quality improvement was evidenced by an $11.6 million
reduction in nonaccrual loans from March 31, 1994 as well as
a $24.4 million reduction in real estate owned ("REO") from
March 31, 1994. Nonaccrual loans of $18.6 million at March
31, 1995 remained relatively flat from year end 1994 while
REO of $21.8 million at March 31, 1995 decreased $7.1
million from year end 1994. These improvements in asset
quality have resulted in a reduced provision for loan losses
and costs for REO. For the quarter ended March 31, 1995, the
provision for loan losses totaled $1.4 million, a $0.8
million decrease from the same period of 1994 while REO
expenses totaling $1.1 million for the first quarter of 1995
decreased $0.2 million from the quarter ended March 31,
1994.
Net interest income and net interest margin were $25.1
million and 5.3%, respectively, for the quarter ended March
31, 1995 as compared to $24.6 million and 4.9%,
respectively, for the quarter ended March 31, 1994. The
improvement in the Company's net interest margin was offset
by a decrease in average earning assets (see Tables 1 and
2).
Noninterest income for the first quarter of 1995 increased
$0.6 million from the quarter ended March 31, 1994.
Operating expenses amounted to $26.4 million for the quarter
ended March 31, 1995 as compared to $28.5 for the same
period of 1994. This decrease reflects the Company's ongoing
efforts to reduce operating costs.
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EARNINGS PERFORMANCE
NET INTEREST INCOME: The Company's operating results depend
primarily on net interest income. A primary factor affecting
the level of net interest income is the Company's interest
rate margin between the yield earned on interest-earning
assets and interest-bearing liabilities as well as the
difference between the relative amounts of average interest-
earning assets and average interest-bearing liabilities. Net
interest income was $25.1 million for the quarter ended
March 31, 1995 as compared to $24.6 million for the quarter
ended March 31, 1994. Although net interest income has
remained level from period to period, the Company's net
interest margin for the first quarter of 1995 increased from
the same period of 1994 as illustrated in the table below.
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THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
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Interest income $38,599 $32,755
Interest expense 13,535 8,185
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NET INTEREST INCOME $25,064 $24,570
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Net interest margin 5.3% 4.9%
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The Company's net interest margin increased to 5.3% for the
first quarter of 1995 from 4.9% for the same period of 1994
primarily as a result of the increase in the Company's base
lending rate which increased an average of 184 basis points
since the quarter ended March 31, 1994. Concurrently, the
Company's borrowing rates have increased, although not as
rapidly as its lending rates, resulting in part from the
Company's efforts to competitively market its certificates
of deposit ("CD"). Average demand deposit levels for the
quarter ended March 31, 1995 have declined approximately
$293 million from the same quarter in the prior year. as a
result, the Company returned to the CD market to supplement
its funding base.
The improvement in the Company's net interest margin was
offset by a decrease in average interest-earning assets,
primarily highly liquid assets, which declined $130 million
from the quarter ended March 31, 1994 (see Table 2). This
decrease was also a direct result of the decrease in average
demand deposit levels. In addition, the net effect of the
Company's derivative financial instruments was a $3.0
million reduction in net interest income and a 63 basis
point reduction in net interest margin for the quarter ended
March 31, 1995 (see Asset/Liability Management). The impact
of such instruments for the quarter ended March 31, 1994 was
not material.
In conformity with banking industry practice, payments for
accounting, courier and other deposit related services
provided to the Company's real estate related customers are
recorded as noninterest expense. If these deposits were
treated as interest-bearing and the payments reclassified as
interest expense, the Company's reported net interest income
and noninterest expense would have been reduced by $2.0
million and $2.2 million, respectively, for the three months
ended March 31, 1995 and 1994. The net interest margin for
each period would have been 4.9% and 4.4%, respectively.
PROVISION FOR LOAN LOSSES: The provision for loan losses
totaled $1.4 million for the quarter ended March 31, 1995 as
compared to $2.1 million for the same quarter of 1994. Net
charge-offs amounted to $1.9 million and $2.1 million,
respectively, for the three months ended March 31, 1995 and
1994. As a percentage of average loans outstanding, net
charge-offs were 0.53% and 0.59%, respectively, for the
quarters ended March 31, 1995 and 1994. The provision for
loan losses reflects management's ongoing evaluation of the
risk inherent in the loan portfolio, which includes
consideration of numerous factors, such as economic
conditions, relative risks in the loan portfolio, loan loss
experience and review and monitoring of individual loans for
identification and resolution of potential problems.
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NONINTEREST INCOME: Noninterest income amounted to $8.4
million for the first quarter of 1995 up from $7.8 million
recorded for the same period of 1994.
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THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
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Service charges on deposit accounts $1,002 $1,335
Trust fees 1,915 1,643
Gain on origination and sale of loans 531 897
Equity in net (losses) earnings of
Imperial Credit Industries, Inc. (66) 191
Other service charges and fees 1,512 1,487
Merchant and credit card fees 1,439 1,361
Gain on securities available for sale 343 49
Gain on trading account securities 707 210
Other income 1,053 650
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TOTAL $8,436 $7,823
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Investment activity in securities available for sale
resulted in a $294,000 increase in noninterest income.
Trading activities in the first quarter generated $707,000,
an increase of $497,000 from the same period of 1994. Trust
fees have grown $272,000, or 17%, over the same period of
last year as a result of the Company's trust subsidiary's
strategies to develop higher margin business relationships.
Gain on origination and sale of loans for the quarter ended
March 31, 1995 represents earnings on Small Business
Administration ("SBA") lending activities. The decline in
earnings from the prior year related to the dissolution of
the Company's mortgage banking division in the fourth
quarter of 1994. Excluding mortgage banking activity from
prior year earnings, gain on origination and sale of SBA
loans has increased $136,000, or 33%. Service charges on
deposit accounts have declined $333,000 from the prior year
due to the decrease in demand deposits.
Included in the equity pickup from Imperial Credit
Industries, Inc. (NASDAQ-NMS-ICII) for the three months
ended March 31, 1995 was an adjustment to the income
recognized for the year ended December 31, 1994. On April
17, 1995, ICII revised its previously reported earnings for
the year ended December 31, 1994. As a result, the Company
reduced its equity in the net earnings of ICII for the first
quarter of 1995 by recording an after tax adjustment of $0.3
million.
NONINTEREST EXPENSE: Noninterest expense totaled $26.4
million for the quarter ended March 31, 1995 as compared to
$28.5 for the same period of the prior year.
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THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
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Salary and employee benefits $11,667 $11,983
Net occupancy expense 2,109 2,363
Furniture and equipment 1,238 1,247
Data processing 2,082 2,162
Customer services 2,041 2,215
Net real estate owned expense 1,114 1,321
Regulatory assessments 1,270 1,641
Professional and consulting 819 1,103
Business development 815 786
Other expense 3,264 3,643
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TOTAL $26,419 $28,464
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As evidenced by the above table, the $2.1 million decrease
in noninterest expense was primarily due to a reduction in
the Company's operating expenses which declined $1.3 million
from the same period of the prior year. The Company's cost
of REO has decreased $0.2 million or 16% from the prior year
as a result of the lower REO balances experienced during the
first quarter of 1995. Average total deposit levels have
declined from the quarter ended March 31, 1994.
Correspondingly, noninterest costs including customer
services and deposit insurance premiums have declined $0.5
million from the same period of 1994.
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INCOME TAXES: The Company recorded income tax expense of
$1.0 million for the quarter ended March 31, 1995
representing an effective tax rate of approximately 18%. For
the same period of 1994, the Company's effective tax rate
approximated 37%. During the first quarter of 1995, the
Company recorded a $0.9 million reduction of tax expense to
reflect the finalization of prior years income tax issues.
Excluding this one time reduction of income tax expense, the
Company's effective tax rate would have been 34% for the
first quarter of 1995. At March 31, 1995, the Company had a
net deferred tax receivable of $7.9 million, net of a $1.9
million valuation allowance as compared to a $7.1 million
net deferred tax receivable, net of a $2.3 million valuation
allowance at December 31, 1994. The Company's net deferred
tax receivable is supported by carryback and carryforward
provisions of the tax laws as well as the Company's
projection of taxable income for 1995. The $0.4 million net
change in the valuation allowance for deferred tax assets
from year end 1994 is primarily related to the level of
taxable income for the first quarter of 1995 and the
projection of taxable income for the remainder of 1995.
ASSET/LIABILITY MANAGEMENT
LIQUIDITY: For the Company, as with most commercial banking
institutions, liquidity is the ability to roll over
substantial amounts of maturing liabilities and to acquire
new liabilities at levels consistent with management's
financial targets. The key to this on-going replacement
activity is the Company's reputation in the domestic money
markets, which is based upon its financial condition and its
capital base.
The overall liquidity position of the Company has been
enhanced by a sizable base of demand deposits resulting from
the Company's long standing relationships with the real
estate services industry which have provided a relatively
stable and low cost funding base. Demand deposits averaged
$772 million and $1.1 billion, respectively, for the
quarters ended March 31, 1995 and 1994. The Company's
average demand deposits and average shareholders' equity
funded 44% of average total assets for the first quarter of
1995 and 52% for the same period of 1994. These funding
sources are augmented by payments of principal and interest
on loans and the routine liquidation of securities from the
trading and available for sale portfolios and Federal funds
sold and securities purchased under resale agreements.
During the first quarter, the Company experienced a net cash
inflow from its investing activities of $38.4 million
primarily from the sale and maturity of its securities
available for sale partially offset by purchases of
available for sale securities and an increase in loans. The
inflows were offset by the $39.0 million net cash used by
the Company's financing activities consisting both of
deposit outflows and the repayment of short-term borrowings
partially offset by the increase in time deposits.
INTEREST RATE SENSITIVITY MANAGEMENT: The primary objectives
of the asset liability management process are to provide a
stable net interest margin, generate net interest income to
meet the Company's earnings objectives, and manage balance
sheet risks. These risks include liquidity risk, capital
adequacy and overall interest rate risk inherent in the
Company's balance sheet. In order to manage its interest
rate sensitivity, the Company has adopted policies which
attempt to limit the change in pre-tax net interest income
to 5% assuming various interest rate scenarios. This is
accomplished by adjusting the repricing characteristics of
the Company's assets and liabilities as interest rates
change. The Company's Asset Liability Committee chooses
strategies in conformance with its policies to achieve an
appropriate trade off between interest rate sensitivity and
the volatility of pre-tax net interest income and net
interest margin.
Each month the Company assesses its overall exposure to
potential changes in interest rates and the impact such
changes may have on pre-tax interest income and net interest
margin by simulating various interest rate scenarios over
future time periods. Through the use of these simulations,
the Company can approximate the impact of these projected
rate changes on its entire on and off-balance sheet position
or any particular segment of the balance sheet.
Cumulative interest sensitivity gap represents the
difference between interest-earning assets and interest-
bearing liabilities maturing or repricing, whichever is
earlier, at a given point in time. At March 31, 1995, the
Company maintained a positive cumulative one year gap of
approximately $512 million as its interest rate sensitive
assets exceeded its interest-bearing liabilities. This
positive cumulative gap positions the Company for increased
net interest income during a period of rising interest rates
but also
Imperial Bancorp Logo
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exposes it to an adverse impact on net interest income in a
falling rate environment. The Company's asset sensitivity,
as measured by its cumulative positive one year gap,
increased from year end 1994 as it is no longer impacted by
its derivative instruments.
The Company's net interest margin is very sensitive to
sudden changes in interest rates. In addition, the Company's
interest-earning assets, primarily its loans, are tied to
the Prime rate, an index that tends to react more slowly to
changes in market rates than other money market indices such
as LIBOR (London Interbank Offered Rate). The rates paid for
the Company's interest-bearing liabilities, however, do
correlate with LIBOR. This mismatch creates a spread
relationship risk between the Company's Prime based assets
and LIBOR correlated liabilities. An analysis of the
historic relationship between the Prime rate and LIBOR
showed that the spread between the indices narrows in an
environment of rising interest rates and widens in a falling
rate environment. In order to provide protection against a
narrowing of the Prime rate and LIBOR spread and reduce
asset sensitivity in the event of falling interest rates,
the Company entered into a series of derivative financial
contracts in 1993 and 1994 to establish a balance sheet
position which would provide some protection against a
decrease in interest rates while providing an increasing
rate asset whose characteristics would meet the objectives
of the Company's asset liability policy. The purpose of the
instruments was to synthetically alter the sensitivity of a
portion of the Company's Prime based loan portfolio while
retaining some positive asset sensitivity in the event of an
increase in interest rates.
At March 31, 1995, the Company's derivative financial
contracts consisted of several instruments including
interest rate swaps with embedded options and associated
written options, purchased options and interest rate floors.
The interest rate swaps with embedded options had a notional
value of $200 million at March 31, 1995 and mature in the
first quarter of 1996. The embedded options with increasing
strike prices of 25 basis points per quarter capped the rate
received on the interest rate swaps. The embedded options
were intended to provide a limited degree of protection
against a narrowing of the net interest margin in the event
of a decrease in short-term interest rates while providing
an increasing rate asset to retain asset sensitivity.
The interest rate swaps with linked written options had a
notional value of $300 million at March 31, 1995 and mature
in the fourth quarter of 1995 and first quarter of 1996. The
associated options had a notional value of $700 million at
March 31, 1995 including $556 million of financial futures
contracts. These linked options, in the same manner as the
embedded options, were intended to cap the rate received on
the interest rate swaps at escalating strike prices built
into the options. The packaged options and futures contracts
are stacked and expire during the second and third quarter
at the rate of $300 million per quarter with the final $100
million expiring in the last quarter of 1995.
As interest rates continued to rise more quickly than
anticipated in 1994 and other market related events caused a
deterioration in the values of derivative instruments, the
strike price of the escalating options written was exceeded
by LIBOR. To prevent further negative impact on interest
income from the interest rate swaps with both embedded and
linked options, the Company purchase options during the
second half of 1994 with terms similar to the linked options
written and embedded options thus effectively capping the
Company's exposure to further losses. The notional value of
the options purchased was $1.3 billion at March 31, 1995.
The combined economic impact of the Company's derivative
financial instruments discussed above was a $3.0 million
reduction in the Company's net interest income and a 63
basis point reduction in net interest margin for the quarter
ended March 31, 1995. The impact of these instruments was
not material for the same period of 1994. The total cost to
terminate the Company's derivative financial positions as of
March 31, 1995 would have been $7.1 million with a maximum
potential loss exposure of $11.2 million. This had improved
to a cost to terminate of $5.6 million and a maximum loss
exposure of $10.1 million at April 30, 1995. Exclusive of
the impact of premiums received on linked options and paid
for purchased options, the cash requirement and negative
impact on net interest income associated with the derivative
transactions would be $4.6 million if interest rates remain
unchanged through the final maturity of these instruments in
early 1996.
During the first quarter of 1995, the Company's asset
sensitivity was increasing as previously discussed. In
response, the Company purchased an interest rate floor whose
purpose was to protect against a drop in short term interest
rates. The interest rate floor, with a notional value of
$500 million at March 31,
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1995, expires in the second quarter of 1996. The floor
provides protection to the Company in the event that three
month LIBOR drops below the strike price of 6.32% associated
with the floor. The Company paid $0.3 million for the
instrument and its fair value at March 31, 1995 approximated
$1.2 million. In April 1995, the Company revised that
interest rate floor to decrease the associated strike price
to 6.0%.
ASSET QUALITY
ALLOWANCE FOR LOAN LOSSES: The Company's determination of
the level of the allowance for loan losses, and
correspondingly, the provision for loan losses rests upon
various judgments and assumptions, including general
economic conditions (especially in California), loan
portfolio composition, prior loan loss experience and the
Company's on-going examination process to ensure timely
identification of potential problem loans. At March 31,
1995, the allowance for loan losses amounted to $39.6
million or 2.7% of total loans as compared to $40.1 million
or 2.9% of total loans at December 31, 1994 and $42.9
million or 3.1% of total loans at March 31, 1994. While
management uses available information to analyze losses on
loans, future additions to the allowance may be considered
necessary based on changes in economic conditions and loss
trends in the loan portfolio.
NONACCRUAL LOANS, RESTRUCTURED LOANS AND REAL ESTATE OWNED:
Asset quality improvement was evidenced by a $11.6 million
reduction in nonaccrual loans from March 31, 1994 as well as
a $24.4 million reduction in real estate owned from March
31, 1994. Nonaccrual loans of $18.6 million remained
relatively flat from year end 1994 while REO of $21.8
million at March 31, 1995 decreased $7.1 million from year
end 1994. The allowance for loan losses coverage of
nonaccrual loans at first quarter end approximated 213%, a
slight decrease from 221% at year end 1994 and increased
from 142% at March 31, 1994. Consistent with prior reporting
periods, there were no loans past due 90 days or more which
were still accruing interest and all interest associated
with nonaccrual loans had been reversed. It has been the
Company's policy to recognize interest with nonaccrual loans
only as collected.
On January 1, 1995, the Company adopted Statement of
Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("FAS 114") as amended
by Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure" ("FAS 118"). FAS 114 requires
the measurement of impaired loans to be based on (1) the
present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective
interest rate, (2) the observable market price of the
impaired loan or (3) the fair value of the collateral of a
collateral dependent loan. The adoption of FAS 114 had no
material effect on the Company's financial position or
results of operations and did not result in additional
provisions for loan losses.
The Company considers a loan to be impaired when it is
"probable" that it will be unable to collect all amounts due
(i.e., both principal and interest) according to the
contractual terms of the loan agreement. In determining
impairment, the Company considers loans with the following
characteristics: nonaccrual loans, restructured loans, and
performing loans for which it is probable the contractual
terms of the original loan agreement will not be met. The
Company bases the measurement of collateral dependent
impaired loans on the fair value of the loan's collateral.
Non-collateral dependent loans are valued based on a present
value calculation of expected future cash flows discounted
at the loan's effective rate. Impairment losses are included
in the allowance for loan losses through a charge to
provision for loan losses. Upon disposition of an impaired
loan, loss of principal is recorded through a charge-off to
the allowance for loan losses. At March 31, 1995, the
recorded investment in loans for which impairment has been
recognized in accordance with FAS 114 totaled $60.1 million,
of which $8.8 million were on nonaccrual status. The total
allowance for potential losses related to such loans was
$7.8 million. During the first quarter of 1995, total
interest recognized on the impaired loan portfolio, on a
cash basis, was $1.1 million. At March 31, 1995, $41.4 of
the impaired loans were current as to principal and
interest.
Excluding nonaccrual loans, restructured loans and impaired
loans, the Company had potential problem loans approximating
$48.5 million at March 31, 1995. The entire balance
represented real estate term loans secured by commercial
real estate. At March 31, 1995, these loans were current as
to principal and interest.
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Detailed information regarding nonaccrual loans,
restructured loans and real estate owned is presented below.
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MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
(IN THOUSANDS) 1995 1994 1994 1994 1994
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Nonaccrual loans:
Commercial loans $11,954 $10,884 $ 8,098 $16,071 $17,974
Real estate loans 6,623 7,272 2,392 7,398 12,188
Consumer loans -- -- -- -- --
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TOTAL NONACCRUAL LOANS $18,577 $18,156 $10,490 $23,469 $30,162
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RESTRUCTURED LOANS $ 3,238 $ 5,948 $ 4,116 $ 4,128 $ 4,640
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Real estate owned:
Foreclosed assets $25,138 $35,446 $41,470 $26,656 $27,306
In-substance foreclosures -- -- 2,995 17,150 21,995
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REO, gross $25,138 $35,446 $44,465 $43,806 $49,301
Less valuation allowance (3,312) (6,475) (5,434) (3,965) (3,051)
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REO, NET $21,826 $28,971 $39,031 $39,841 $46,250
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TOTAL $43,641 $53,075 $53,637 $67,438 $81,052
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On an ongoing basis, management closely monitors the loan
portfolio in addition to evaluating the continued adequacy
of the allowance for loan losses. Loans deemed uncollectible
by management are charged to the allowance for loan losses.
Recoveries on loans previously charged off are credited to
the allowance.
CAPITAL
Retained earnings from operations has been the primary
source of new capital for the Company, with the exception of
its long term debt offering in 1979 and the exercise of
employee stock options. At March 31, 1995, shareholders'
equity totaled $203 million as compared to $198 million at
December 31, 1994 and $187 million at March 31, 1994.
During the first quarter of 1995, the Company declared and
paid a 5% stock dividend. The dividend was paid on February
24, 1995 to shareholders of record on February 15, 1995.
Management is committed to maintaining capital at a
sufficient level to assure shareholders, customers and
regulators that the Company and the Bank are financially
sound. Risk-adjusted capital guidelines, issued by bank
regulatory agencies, assign risk weightings to assets both
on and off-balance sheet and place increased emphasis on
common equity. Under Prompt Corrective Action, the
guidelines require adequately capitalized institutions to
maintain a Tier I (core) capital ratio of 4% and a combined
Tier I and Tier II capital ratio of 8%. Institutions whose
Tier I and total capital ratios meet or exceed 6% and 10%,
respectively, are deemed to be well capitalized. Tier I
capital basically consists of common stockholders' equity
and noncumulative perpetual preferred stock and minority
interest consolidated subsidiaries minus intangible assets.
Based on the guidelines, the Bank's Tier I and total capital
ratios at March 31, 1995 were 10.1% and 11.4%, respectively,
as compared to 10.1% and 11.3%, respectively, the year
earlier.
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CAPITAL RATIOS FOR IMPERIAL BANK(1)
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MARCH 31, (IN THOUSANDS) 1995 1994
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TIER I:
Common stockholders' equity and preferred stock(2) $ 194,380 $ 187,580
Disallowed assets (2,567) (1,342)
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TIER I CAPITAL $ 191,813 $ 186,238
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TIER II:
Allowance for loan losses allowable in Tier II 23,931 23,394
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TOTAL RISK-BASED CAPITAL $ 215,744 $ 209,632
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RISK-WEIGHTED BALANCE SHEET ASSETS $1,710,560 $1,726,793
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Risk-weighted off-balance sheet items:
Commitments to make or purchase loans 131,801 88,318
Standby letters of credit 60,643 39,534
Other 14,045 18,231
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TOTAL RISK-WEIGHTED OFF-BALANCE SHEET ITEMS $ 206,489 $ 146,083
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Disallowed assets (2,567) (1,342)
Allowance for loan losses not included in Tier II (15,643) (19,456)
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TOTAL RISK-WEIGHTED ASSETS $1,898,839 $1,852,078
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Risk-based capital ratios:
Tier I capital (4.0% minimum requirement) 10.1% 10.1%
Total capital (8.0% minimum requirement) 11.4% 11.3%
Leverage ratio (6.5% minimum requirement) 8.7% 7.9%
- - - - -----------------------------------------------------------------------------------
(1) As reported on the March 31, 1995 and 1994 FDIC call reports.
(2) Excludes unrealized loss on securities available for sale.
In addition to the risk-weighted ratios, all banks are
required to maintain leverage ratios, to be determined on an
individual basis, but not below a minimum of 3%. The ratio
is defined as Tier I capital to average total assets for the
most recent quarter. The Bank's leverage ratio requirement
is 6.5% as stipulated in its Memorandum of Understanding
("MOU") with the Federal Deposit Insurance Company ("FDIC")
and the California State Banking Department ("State") which
was revised during the third quarter of 1993. The Bank's
leverage ratio for March 31, 1995 was 8.7% up from 7.9%
the prior year. In addition to the leverage ratio
requirement, the revised MOU established levels for the
reduction of classified assets identified in the 1992
examination. No specific targets for the reduction of
classified assets were set as a result of the 1993
examination. In addition, the MOU requires the prior written
consent for dividends by the Bank from the FDIC and the
State. Management believes that the Bank was in compliance
with the terms of the MOU at March 31, 1995.
Imperial Bancorp Logo
9
CONSOLIDATED BALANCE SHEET
- - - - -------------------------------------------------------------------------------------------------
(UNAUDITED)
IMPERIAL BANCORP AND SUBSIDIARIES MARCH 31, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA) 1995 1994
- - - - -------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 184,540 $ 168,626
Trading account securities 57,263 74,028
Securities available for sale (at fair value at March 31, 1995, and
December 31, 1994) 298,834 388,249
Investment securities (fair value of $6,139 and $6,146 for 1995 and
1994, respectively) 6,139 6,146
Federal funds sold and securities purchased under resale agreements 240,525 276,500
Loans held for sale (fair value of $4,051 and $768 for 1995 and 1994,
respectively) 3,733 768
Loans:
Loans, net of unearned income and deferred loan fees 1,468,491 1,375,146
Less allowance for loan losses (39,574) (40,072)
- - - - -------------------------------------------------------------------------------------------------
TOTAL NET LOANS $1,428,917 $1,335,074
- - - - -------------------------------------------------------------------------------------------------
Premises and equipment, net 17,530 18,254
Accrued interest receivable 14,102 12,769
Real estate owned, net 21,826 28,971
Income taxes receivable 6,583 3,573
Real property held for sale or investment -- 234
Investment in Imperial Credit Industries, Inc. 30,869 30,934
Other assets 35,715 34,583
- - - - -------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,346,576 $2,378,709
- - - - -------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 903,791 $ 928,728
Savings 24,672 27,207
Money market 437,094 491,090
Time--under $100,000 243,545 168,044
Time--$100,000 and over 404,126 344,641
- - - - -------------------------------------------------------------------------------------------------
TOTAL DEPOSITS $2,013,228 $1,959,710
- - - - -------------------------------------------------------------------------------------------------
Accrued interest payable 6,148 5,209
Short-term borrowings 98,279 190,919
Long-term borrowings 8,146 8,153
Other liabilities 18,083 16,942
- - - - -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $2,143,884 $2,180,933
- - - - -------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock - no par, 50,000,000 shares authorized; 13,489,431
shares at March 31, 1995 and 12,832,609 shares at December 31,
1994 issued and outstanding 127,205 117,144
Unrealized loss on securities available for sale, net of tax (701) (847)
Retained earnings 76,188 81,479
- - - - -------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 202,692 $ 197,776
- - - - -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,346,576 $2,378,709
- - - - -------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Imperial Bancorp Logo
10
CONSOLIDATED STATEMENT OF INCOME
- - - - ----------------------------------------------------------------------------------------------
IMPERIAL BANCORP AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1994
- - - - ----------------------------------------------------------------------------------------------
Interest income:
Loans $31,154 $27,531
Trading account securities 951 441
Securities available for sale 4,747 2,536
Investment securities 74 140
Federal funds sold and securities purchased under resale agreements 1,593 1,867
Loans held for sale 80 240
- - - - ----------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME $38,599 $32,755
- - - - ----------------------------------------------------------------------------------------------
Interest expense:
Deposits 12,015 6,997
Short-term borrowings 1,370 1,021
Long-term borrowings 150 167
- - - - ----------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE $13,535 $ 8,185
- - - - ----------------------------------------------------------------------------------------------
Net interest income 25,064 24,570
Provision for loan losses 1,380 2,132
- - - - ----------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $23,684 $22,438
- - - - ----------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 1,002 1,335
Trust fees 1,915 1,643
Gain on origination and sale of loans 531 897
Equity in net (losses) earnings of Imperial Credit Industries, Inc. (66) 191
Other service charges and fees 1,512 1,487
Merchant and credit card fees 1,439 1,361
Gain on securities available for sale 343 49
Gain on trading account securities 707 210
Other income 1,053 650
- - - - ----------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME $ 8,436 $ 7,823
- - - - ----------------------------------------------------------------------------------------------
Noninterest expense:
Salary and employee benefits 11,667 11,983
Net occupancy expense 2,109 2,363
Furniture and equipment 1,238 1,247
Data processing 2,082 2,162
Customer services 2,041 2,215
Net real estate owned expense 1,114 1,321
Regulatory assessments 1,270 1,641
Professional and consulting 819 1,103
Business development 815 786
Other expense 3,264 3,643
- - - - ----------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE $26,419 $28,464
- - - - ----------------------------------------------------------------------------------------------
Income before income taxes 5,701 1,797
Income tax provision 1,045 672
- - - - ----------------------------------------------------------------------------------------------
NET INCOME $ 4,656 $ 1,125
- - - - ----------------------------------------------------------------------------------------------
NET INCOME PER SHARE $0.33 $0.09
- - - - ----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Imperial Bancorp Logo
11
CONSOLIDATED STATEMENT OF CASH FLOWS
- - - - ---------------------------------------------------------------------------------------------------
IMPERIAL BANCORP AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
- - - - ---------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 4,656 $ 1,125
Adjustments for noncash charges (credits):
Depreciation and amortization 507 1,871
Provision for loan losses 1,380 2,132
Provision for real estate owned 500 608
Equity in net losses (earnings) of Imperial Credit Industries, Inc. 66 (191)
(Gain) loss on sale of real estate owned (45) 106
Gain on sale of real property held for sale or investment (75) --
Gain on sale of premises and equipment (4) --
Writedown for impairment of equity investment -- 503
Gain on securities available for sale (343) (49)
Net change in trading account securities 16,765 (40,535)
Net change in loans held for sale (2,965) 12,848
Net change in accrued interest receivable (1,333) (1,810)
Net change in accrued interest payable 939 1,234
Net change in income taxes receivable (3,010) 5,753
Net change in other liabilities 1,141 32,672
Net change in other assets (1,132) (5,290)
- - - - ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 17,047 $ 10,977
- - - - ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from investment securities 7 1,350
Purchase of investment securities -- (227)
Proceeds from sale of securities available for sale 405,227 688,245
Proceeds from maturities of securities available for sale 300,944 520,421
Purchase of securities available for sale (616,398) (1,068,248)
Net change in federal funds sold and securities purchased
under resale agreements 35,975 30,016
Net change in loans (98,968) 72,026
Capital expenditures (944) (2,495)
Proceeds from sale of real estate owned 11,736 10,693
Proceeds from sale of real property held for sale or investment 309 1,295
Proceeds from sale of premises and equipment 9 --
- - - - ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES $ 37,897 $ 253,076
- - - - ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in demand deposits, savings, and money market accounts (81,468) (66,755)
Net change in time deposits 134,986 13,609
Net change in short-term borrowings (92,640) (125,778)
Retirement of long-term borrowings (7) --
Proceeds from exercise of employee stock options 110 --
Other (11) (9)
- - - - ---------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES $ (39,030) $ (178,933)
- - - - ---------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND DUE FROM BANKS $ 15,914 $ 85,120
- - - - ---------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, BEGINNING OF YEAR $ 168,626 $ 158,126
- - - - ---------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 184,540 $ 243,246
- - - - ---------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Imperial Bancorp Logo
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IMPERIAL BANCORP AND SUBSIDIARIES
NOTE (1) BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION
The accompanying unaudited Consolidated Financial Statements
have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all footnotes as
would be necessary for a fair presentation of financial
position, results of operations, and changes in cash flows
in conformity with generally accepted accounting principles.
However, these interim financial statements reflect all
normal recurring adjustments, which are, in the opinion of
the management, necessary for a fair presentation of the
results for the interim periods presented. All such
adjustments were of a normal recurring nature. The
Consolidated Balance Sheet, Consolidated Statement of Income
and Consolidated Statement of Cash Flows are presented in
the same format as that used in the Company's most recently
filed Report on Form 10-K. The consolidated financial
statements include the accounts of the Company and its
wholly owned subsidiaries.
NOTE (2) IMPERIAL CREDIT INDUSTRIES, INC.
During 1993, the Bank sold 2,800,000 shares of the common
stock of Imperial Credit Industries, Inc. ("ICII") reducing
its ownership of ICII to 40.2%. After the 1993 sale of ICII
stock, the Company no longer exercised significant control
over the operations of ICII, and therefore, the results of
ICII operations are now accounted for in the Company's
financial statements as an equity investment. The equity
investment in ICII is carried at cost adjusted for equity in
undistributed earnings.
NOTE (3) STATEMENT OF CASH FLOWS
The following information supplements the statement of
cash flows.
-------------------------------------------------------------
MARCH 31, (IN THOUSANDS) 1995 1994
-------------------------------------------------------------
Interest paid $12,596 $6,951
Taxes refunded 1,089 5,080
Taxes paid 5,340 --
Significant noncash transactions:
Loans transferred to real estate owned 4,577 991
-------------------------------------------------------------
Imperial Bancorp Logo
13
TABLE 1 - AVERAGE BALANCES, YIELDS AND RATES PAID
The following table sets forth the average daily balances
for major categories of assets, liabilities and
stockholders' equity including interest-earning assets and
interest-bearing liabilities and the average annualized
interest rates earned and paid thereon. The yields are not
presented on a tax equivalent basis as the effects are not
material.
- - - - --------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
- - - - --------------------------------------------------------------------------------------------------------------------------------
1995 1994
- - - - --------------------------------------------------------------------------------------------------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
(IN THOUSANDS) BALANCE EXPENSE RATE % BALANCE EXPENSE RATE %
- - - - --------------------------------------------------------------------------------------------------------------------------------
Earning assets:
Loans(1) $1,419,525 $31,154(2) 8.8% $1,410,412 $27,531(2) 7.8%
Trading account securities 53,782 951 7.1 39,006 441 4.5
Securities available for sale 301,943 4,747 6.3 317,820 2,536 3.2
Investment securities 6,143 74 4.8 11,146 140 5.0
Federal funds sold and securities purchased
under resale agreements 109,530 1,593 5.8 228,017 1,867 3.3
Loans held for sale 2,877 80 11.1 17,228 240 5.6
- - - - --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS $1,893,800 $38,599 8.2% $2,023,629 $32,755 6.5%
- - - - --------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (40,409) (43,044)
Cash 203,536 255,954
Other assets 131,580 161,570
---------- ----------
TOTAL ASSETS $2,188,507 $2,398,109
---------- ----------
Interest-bearing liabilities:
Savings $ 36,488 225 2.5% $ 23,678 $ 148 2.5%
Money market 463,710 3,109 2.7 452,993 2,405 2.1
Time - under $100,000 219,207 3,289 6.0 169,294 1,637 3.9
Time - $100,000 and over 369,032 5,392 5.8 320,861 2,807 3.5
- - - - --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING DEPOSITS $1,088,437 $12,015 4.4% $ 966,826 $ 6,997 2.9%
- - - - --------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 95,095 1,370 5.8 152,855 1,021 2.7
Long-term borrowings 8,149 150 7.4 9,866 167 6.8
- - - - --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES $1,191,681 $13,535 4.5% $1,129,547 $ 8,185 2.9%
- - - - --------------------------------------------------------------------------------------------------------------------------------
Demand deposits 771,651 1,065,113
Other liabilities 24,268 17,180
Stockholders' equity 200,907 186,269
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,188,507 $2,398,109
---------- ----------
NET INTEREST INCOME/NET INTEREST MARGIN $25,064 5.3% $24,570 4.9%
-------------------- ---------------------
- - - - --------------------------------------------------------------------------------------------------------------------------------
(1) Includes nonaccrual loans.
(2) Includes net loan fees of $832,000 and $944,000 for the three
months ended March 31, 1995 and 1994, respectively.
Imperial Bancorp Logo
14
TABLE 2 - ANALYSIS OF CHANGES IN NET INTEREST MARGIN
Changes in the Company's net interest income are a function
of both changes in rates and changes in volumes of interest-
earning assets and interest-bearing liabilities. The
following table sets forth information regarding changes in
interest income and interest expense for the years
indicated. The total change is segmented into the change
attributable to variations in volume (changes in volume
multiplied by old rate) and the change attributable to
variations in interest rates (changes in rates multiplied by
old volume). The change in interest due to both rate and
volume (changes in rate multiplied by changes in volume) is
classified as rate/volume. Nonaccrual loans are included in
average loans used to compute this table. The table is not
presented on a tax equivalent basis as the effects are not
material.
--------------------------------------------------------------------------------------------------------------
1995 OVER 1994
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) VOLUME RATE(1) RATE/VOLUME TOTAL
- - - - --------------------------------------------------------------------------------------------------------------
Increase/(Decrease) in:
Loans, net of unearned income and deferred loan fees $ 178 $3,526 $(81) $3,623
Trading account securities 166 254 90 510
Securities available for sale (127) 2,463 (125) 2,211
Investment securities (63) (6) 3 (66)
Federal funds sold and securities purchased under resale
agreements (978) 1,425 (721) (274)
Loans held for sale (201) (237) 278 (160)
- - - - --------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME $(1,025) $7,425 $ (556) $5,844
- - - - --------------------------------------------------------------------------------------------------------------
Savings 77 -- -- 77
Money market 56 679 (31) 704
Time - under $100,000 487 889 276 1,652
Time - $100,000 and over 421 1,845 319 2,585
- - - - --------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS $ 1,041 $3,413 $ 564 $5,018
- - - - --------------------------------------------------------------------------------------------------------------
Short-term borrowings (390) 1,185 (446) 349
Long-term borrowings (29) 59 (47) (17)
- - - - --------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE $ 622 $4,657 $ 71 $5,350
- - - - --------------------------------------------------------------------------------------------------------------
CHANGES IN NET INTEREST INCOME $(1,647) $2,768 $ (627) $ 494
- - - - --------------------------------------------------------------------------------------------------------------
(1) The rate change for interest income on loans includes a $3.0 million impact
of derivative instruments for the three months ended March 31, 1995.
TABLE 3 - SECURITIES
(a) INVESTMENT SECURITIES
The following is a summary for the major categories of investment
securities.
- - - - ----------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(IN THOUSANDS) COST GAINS LOSSES VALUE
- - - - ----------------------------------------------------------------------------------------------
March 31, 1995
Industrial development bonds $ 4,539 $ -- $ -- $ 4,539
Other securities 1,600 1,600
- - - - ----------------------------------------------------------------------------------------------
TOTAL $ 6,139 $ -- $ -- $ 6,139
- - - - ----------------------------------------------------------------------------------------------
December 31, 1994
Industrial development bonds $ 4,546 $ -- $ -- $ 4,546
Other securities 1,600 1,600
- - - - ----------------------------------------------------------------------------------------------
TOTAL $ 6,146 $ -- $ -- $ 6,146
- - - - ----------------------------------------------------------------------------------------------
Imperial Bancorp Logo
15
(b) SECURITIES AVAILABLE FOR SALE
The following is a summary for the major categories of securities available
for sale.
- - - - ----------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(IN THOUSANDS) COST GAINS LOSSES VALUE
- - - - ----------------------------------------------------------------------------------------------
March 31, 1995
U.S. Treasury and federal agencies $232,460 $11 $ (254) $232,217
Mutual funds 61,667 -- -- 61,667
Other securities 5,824 -- (874) 4,950
- - - - ----------------------------------------------------------------------------------------------
TOTAL $299,951 $11 $(1,128) $298,834
- - - - ----------------------------------------------------------------------------------------------
December 31, 1994
U.S. Treasury and federal agencies $321,455 $11 $ (517) $320,949
Mutual funds 56,915 56,915
Other securities 11,352 2 (969) 10,385
- - - - ----------------------------------------------------------------------------------------------
TOTAL $389,722 $13 $(1,486) $388,249
- - - - ----------------------------------------------------------------------------------------------
Gross realized gains and losses for the three months ended March 31, 1995 were
$408,000 and $65,000, respectively. For the same period of 1994, these amounts
were $49,000 and zero, respectively.
TABLE 4 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following table summarizes changes in the allowance for loan losses and
pertinent ratios.
- - - - ---------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
- - - - ---------------------------------------------------------------------------------------------------
Allowance for loan losses:
Balance, beginning of year $ 40,072 $ 42,800
Loans charged off:
Commercial (1,366) (2,694)
Real estate (800) (760)
Consumer (12) (42)
- - - - ---------------------------------------------------------------------------------------------------
TOTAL LOANS CHARGED OFF $ (2,178) $ (3,496)
- - - - ---------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial 289 1,354
Real estate 42
Consumer 11 18
- - - - ---------------------------------------------------------------------------------------------------
TOTAL LOAN RECOVERIES $ 300 $ 1,414
- - - - ---------------------------------------------------------------------------------------------------
Net loans charged off (1,878) (2,082)
Provision for loan losses 1,380 2,132
- - - - ---------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ 39,574 $ 42,850
- - - - ---------------------------------------------------------------------------------------------------
LOANS OUTSTANDING, END OF PERIOD $1,468,491 $1,399,650
- - - - ---------------------------------------------------------------------------------------------------
AVERAGE LOANS OUTSTANDING $1,419,525 $1,410,412
- - - - ---------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans 0.53%(1) 0.59%(1)
Ratio of allowance for loan losses to average loans 2.79% 3.04%
Ratio of allowance for loan losses to loans outstanding at March 31 2.69% 3.06%
Ratio of provision for loan losses to net chargeoffs 73.5% 102%
- - - - ---------------------------------------------------------------------------------------------------
(1) Annualized
Imperial Bancorp Logo
16
The Company evaluates the adequacy of its allowance for loan
losses on an overall basis rather than by specific
categories of loans. In determining the adequacy of the
allowance for loan losses, management considers such factors
as historical loan loss experience, known problem loans,
evaluations made by bank regulatory authorities, assessment
of economic conditions and other appropriate data to
identify the risks in the loan portfolio.
TABLE 5 - REAL ESTATE OWNED
(a) REAL ESTATE OWNED BY TYPE OF PROJECT
At March 31, 1995 and December 31, 1994, real estate owned
by type of project is presented in the following table:
- - - - --------------------------------------------------------------------
MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1995 1994
- - - - --------------------------------------------------------------------
Acquisition and land development $11,591 $15,010
Single-family residential 12,533 14,579
- - - - --------------------------------------------------------------------
TOTAL RESIDENTIAL $24,124 $29,589
- - - - --------------------------------------------------------------------
Acquisition and land development 255 255
Retail facilities -- 2,214
Office 759 3,388
- - - - --------------------------------------------------------------------
TOTAL NONRESIDENTIAL $ 1,014 $ 5,857
- - - - --------------------------------------------------------------------
REO, GROSS $25,138 $35,446
- - - - --------------------------------------------------------------------
Less valuation allowance (3,312) (6,475)
- - - - --------------------------------------------------------------------
REO, NET $21,826 $28,971
- - - - --------------------------------------------------------------------
(b) NET REAL ESTATE OWNED EXPENSE
For the periods ended March 31, 1995 and 1994, net
real estate owned expense was comprised of the
following:
- - - - -------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1995 1994
- - - - -------------------------------------------------------------------------
Net (gain) loss on sale of real estate owned $ (45) $ 106
Valuation adjustments charged to operations 500 608
Direct holding costs 659 607
- - - - -------------------------------------------------------------------------
NET REAL ESTATE OWNED EXPENSE $ 1,114 $ 1,321
- - - - -------------------------------------------------------------------------
The following table sets forth information regarding the
Company's valuation allowance for REO.
- - - - --------------------------------------------------------------------
MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1995 1994
- - - - --------------------------------------------------------------------
Balance, beginning of period $ 6,475 $ 3,084
Provision for REO 500 5,291
REO charged off (3,663) (1,900)
- - - - --------------------------------------------------------------------
BALANCE, END OF PERIOD $ 3,312 $ 6,475
- - - - --------------------------------------------------------------------
Imperial Bancorp Logo
17
TABLE 6 - FINANCIAL RATIOS
- - - - -----------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1995 1994
- - - - -----------------------------------------------------------------------------
Net income as a percentage of: (1)
Average stockholders' equity 9.27% 2.42%
Average total assets 0.85 0.19
Average earning assets 0.98 0.22
Average stockholders' equity as a percentage of:
Average assets 9.18% 7.77%
Average loans 14.15 13.21
Average deposits 10.80 9.17
Stockholders' equity at period end as a percentage of:
Total assets at period end 8.64% 7.05%
Total loans at period end 13.80 13.35
Total deposits at period end 10.07 8.00
- - - - -----------------------------------------------------------------------------
(1) Annualized
Imperial Bancorp Logo
18
EXHIBITS
PART I
COMPUTATION OF EARNINGS PER SHARE
Imperial Bancorp ("the Company") has outstanding certain
employee stock options, which options have been determined
to be common stock equivalents for purposes of computing
earnings per share.
During the periods ended March 31, 1995 and 1994, the market
price of the Company's common stock exceeded the exercise
price of certain of these common stock equivalents. Under
the treasury stock method, the following weighted average
shares of common stock and common stock equivalents
outstanding were used in the respective earnings per share
computations.
THREE MONTHS ENDED (1)
----------------------------------
MARCH 31, 1995 MARCH 31, 1994
----------------------------------
14,093,740 13,450,583
(1) Adjusted for a 5% stock dividend paid in the first
quarter of 1995.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Due to the nature of the businesses, the Company and its
subsidiaries are subject to numerous legal actions, threatened
or filed, arising in the normal course of business. Certain of
the actions currently pending seek punitive damages, in
addition to other relief. The Company is of the opinion that
the eventual outcome of all currently pending legal
proceedings will not be materially adverse to the Company, nor
has the resolution of any proceeding since the Company's last
filing with the Commission materially adversely affected the
registrant or any subsidiary thereof.
ITEM 2. CHANGES IN SECURITIES
No events have transpired which would make response to this
item appropriate.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No events have transpired which would make response to this
item appropriate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No events have transpired which would make response to this
item appropriate.
Imperial Bancorp Logo
19
ITEM 5. OTHER INFORMATION
During the third quarter of 1993, the Bank entered into a
revised Memorandum of Understanding ("MOU") with the Federal
Deposit Insurance Corporation ("FDIC") and the California
State Banking Department ("State"). The revised MOU
established a new level for the reduction of classified
assets. The MOU continued the prior written approval of
dividends of the Bank by the FDIC and the State and a minimum
leverage ratio of 6.5% which began with the first quarter of
1993. At March 31, 1995, the Bank's leverage ratio was 8.7%.
Management believes the Bank was in compliance with the terms
of the MOU as of March 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS INDEX
EXHIBIT NUMBER DESCRIPTION
--------------------------------------------------
27 Financial Data Schedule
All other material referenced in this report which is
required to be filed as an exhibit hereto has previously
been submitted.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K have been
filed during the period, and no events have occurred
which would require one to be filed.
Imperial Bancorp Logo
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
IMPERIAL BANCORP
Dated: May 12, 1995 By: /s/ DAVID A. SKLAR
----------------------------------
David A. Sklar
Executive Vice President and
Chief Financial Officer
21