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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 8, 2002
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Commission File number: 0-19861
IMPERIAL CREDIT INDUSTRIES, INC.
CALIFORNIA 95-4054791
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
23550 Hawthorne Boulevard, Building 1, Suite 110
Torrance, California 90505
(310) 373-1704
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Item 5. Other Events.
IMPERIAL CREDIT INDUSTRIES REPORTS FOURTH QUARTER AND YEAR ENDED 2001 RESULTS OF
OPERATIONS
TORRANCE, CA, February 8, 2002 - Imperial Credit Industries, Inc. (Nasdaq: ICII)
reports results for the quarter and year ended December 31, 2001.
Fourth Quarter and Year End Results
Imperial Credit Industries, Inc., (the "Company" or "ICII") reported a net loss
for the fourth quarter ended December 31, 2001 of $67.6 million or $1.60 diluted
net loss per share including an operating loss from discontinued operations of
$1.8 million or $0.04 diluted net loss per share and an extraordinary gain on
the early extinguishment of debt of $4.4 million or $0.10 diluted net income per
share. For the same quarter last year, the Company reported a net loss of $104.6
million or $3.26 diluted net loss per share including an operating loss from
discontinued operations of $4.1 million or $0.13 diluted net loss per share and
an extraordinary gain on the early extinguishment of debt of $1.1 million or
$0.04 diluted net income per share.
The fourth quarter losses were primarily attributable to the impacts on our
airline and airline related loans from the events of September 11, 2001 and the
continued decline in the U.S. economy which resulted in increased loan losses
concentrated at the Coast Business Credit ("CBC") division of Southern Pacific
Bank ("SPB") and the Company's investments in the Pacifica Partners I CLO. As a
result of these factors, the fourth quarter 2001 provision for loan and lease
losses was $49.6 million and impairment and net mark-to-market charges on
securities totaled $20.7 million. Also during the fourth quarter of 2001, the
Company recorded severance costs of $3.7 million related to our previously
announced staff reductions. Positively effecting results was the fourth quarter
2001 ($9.3) million net write-off of goodwill related to CBC and Imperial Credit
Commercial Mortgage Investment Corp. ("ICCMIC").
The net loss for the year ended December 31, 2001 was $131.6 million or $3.54
diluted net loss per share including an operating loss from discontinued
operations of $3.7 million or $0.10 diluted net loss per share and an
extraordinary gain on the early extinguishment of debt of $2.9 million or $0.08
diluted net income per share. This compares to a net loss of $163.3 million or
$5.01 diluted net loss per share including an operating loss from discontinued
operations of $5.2 million or $0.16 diluted net loss per share and an
extraordinary gain on the early extinguishment of debt of $3.5 million or $0.11
diluted net income per share for last year.
The operating results for the year ended December 31, 2001 were negatively
impacted by high levels of loan charge-offs and non-performing loans resulting
in a provision for loan and lease losses of $95.9 million, impairment and net
mark-to-market charges on securities of $34.3 million, severance costs of $3.7
million, increased collection costs of $6.5 million as a result of higher levels
of non-performing assets, and the ($9.3) million net write-off of goodwill
related to CBC and ICCMIC. Positively effecting the year ended 2001 were reduced
personnel, occupancy, legal settlement, real property, and general and
administrative costs.
Richard S. Cupp, the Company's newly appointed Chief Executive Officer said,
"ICII and its subsidiaries have made great strides in recognizing the issues
facing our Company, evaluating our business and financial assets, and
establishing a basis for much improved performance."
Regulatory Capital and other Capital Activities
The Company's largest subsidiary is SPB, an FDIC insured depository institution.
SPB had Tier 1 Leverage and Total Risk-based Capital ratios of 3.05% and 6.38%,
at December 31, 2001 as compared to 3.46% and 6.59% at December 31, 2000,
respectively. On January 22, 2002, ICII converted its $20.0 million investment
in SPB's subordinated debt and its $50.0 million investment in SPB's preferred
stock into common equity capital of SPB increasing its Tier 1 Leverage capital
ratio to 4.71%. After the conversion, SPB's Total Risk-based Capital remained in
the "Undercapitalized" capital category (i.e., below 8%). In accordance with the
FDIC's prompt corrective action regulations, the Bank is preparing a capital
restoration
plan that will describe the steps and the time the Bank will need to take to
restore its capital to the "adequately capitalized" level required by banking
regulations. That plan will be submitted for approval to the FDIC by March 1,
2002. The Bank also remains subject to the previously described regulatory
orders, issued in December 2000, that require the Bank to increase its
regulatory capital to 9% Tier 1 Risk-based Capital and 12% Total Risk-based
Capital levels, each of which is substantially above the "well capitalized"
minimum levels for FDIC insured institutions.
In October 2001 the Company announced that its Board of Directors had engaged
Friedman Billings Ramsey & Co. to act as its financial advisor and evaluate and
assist in capital raising alternatives that may be available to the Company. At
the Company's January Board meeting, representatives of Friedman Billings Ramsey
& Co. presented ICII's directors with four capital raising and restructuring
plans proposed by both various investors and their firm. The capital raising and
restructuring plans included raising between $55 million and $70 million in
order to restore SPB to the capital levels required under its regulatory orders.
Additionally, the plans propose the restructure of the Company's capital base
including the reduction of outstanding long-term debt and increasing
shareholders' equity. The Company's Board of Directors appointed a special
committee to evaluate each plan and make a recommendation to the entire board in
February 2002.
ICII is in discussions with holders of its short-term Senior Secured Notes
regarding whether ICII is in default under the terms of the Notes, the rate of
interest currently payable on the Notes and whether the subordination provisions
of ICII's Exchange Notes due 2005 have been activated as a result of a default
so as to require that the amounts otherwise payable on the Exchange Notes must
instead be paid over to the holders of the Senior Secured Notes. The $16.2
million outstanding principal amount of ICII's Senior Secured Notes is secured
by ICII's stock and debt interests in SPB, which interests also stand as
security, subject to the prior claims of the holders of the Senior Secured
Notes, for ICII's obligations on its Exchange Notes. The Senior Secured Notes
provide for interest at an initial rate of 12% per annum, increasing to 20% per
annum if certain conditions relating to conversion of the Senior Secured Notes
to Exchange Notes have not been satisfied or waived by November 1, 2001, and for
interest at 25% per annum in the event of default. ICII has paid interest on the
Senior Secured Notes at the rate of 20% per annum for the period after November
1, 2001, while reserving its legal rights to maintain that interest on the
Senior Secured Notes remains payable at 12% per annum and that those notes
should be exchanged into Exchange Notes.
Net Interest Income Decreases due to Margin Compression and Asset Reductions
During the fourth quarter of 2001, interest income decreased to $31.3 million as
compared to $53.0 million for the same period last year. Interest income
decreased in the fourth quarter of 2001 as compared to the same period last year
due to a decrease in the average yield and average outstanding balance of
interest-earning assets. The average yield on loans at SPB decreased to 8.44%
during the fourth quarter of 2001 as compared to 10.78% for the same period last
year while average outstanding loans at SPB decreased to $1.377 billion as
compared to $1.671 billion for the same periods, respectively. The average yield
on SPB's loans decreased primarily as a result of a reduction in the prime rate
to an average of 5.17% during the fourth quarter of 2001 as compared to 9.50%
for the same period last year. Average outstanding loans at SPB decreased
primarily as a result of loan sales in order to reduce the outstanding assets of
SPB as part of management's plan to achieve regulatory capital compliance.
Interest expense was $20.7 million for the fourth quarter of 2001 as compared to
$35.4 million for the same period last year. Interest expense decreased in the
fourth quarter of 2001 as compared to the same period last year primarily due to
a decrease in the average cost and average outstanding balance of SPB's
deposits. The average rate on deposits at SPB decreased to 4.96% during the
fourth quarter of 2001 as compared to 6.67% for the same period last year while
the average outstanding balance of deposits at SPB decreased to $1.278 billion
as compared to $1.663 billion for the same periods, respectively. The average
cost of SPB's deposits decreased primarily as a result of a reduction in the
average 6 month Libor rate to 2.16% in the fourth quarter of 2001 as compared to
6.62% for the same period last year. SPB's cost of deposits was 4.05% at
February 6, 2002, a 91 basis point decrease from the fourth quarter 2001
average. Interest on long-term debt also decreased to $4.2 million for the
fourth quarter of 2001 as compared to $5.8 million for the same period last
year. The decrease in interest on long-term debt resulted from the debt exchange
competed in June 2001 and from the repurchase of debt during the previous twelve
months.
As a result of the above, net interest income decreased to $10.6 million for the
fourth quarter of 2001, as compared to $17.6 million for the same period last
year.
For the year ended December 31, 2001, interest income decreased to $161.5
million as compared to $224.8 million last year. Interest income decreased in
2001 as compared to last year due to a decrease in the average yield and average
outstanding balance of interest-earning assets. The average yield on loans at
SPB decreased to 9.58% during 2001 as compared to 11.05% last year while the
average outstanding balance of loans at SPB decreased to $1.526 billion during
2001 as compared to $1.682 billion last year. The average yield on SPB's loans
decreased primarily as a result of a reduction in the prime rate to an average
of 6.92% in 2001 as compared to 9.24% last year.
Interest expense was $112.6 million for the year ended December 31, 2001 as
compared to $140.2 million last year. Interest expense decreased in 2001 as
compared to the last year due to a decrease in the average cost and average
outstanding balance of the Federal Deposit Insurance Corporation ("FDIC")
insured deposits of SPB. The average rate on deposits at SPB decreased to 5.91%
during 2001 as compared to 6.33% for the same period last year while average
outstanding deposits at SPB decreased to $1.488 billion as compared to $1.709
billion for the same periods, respectively. The average costs of SPB's deposits
decreased primarily as a result of a reduction in the average 6 month Libor rate
to 3.73% in 2001 as compared to 6.66% last year. Interest on other borrowings
also decreased as borrowings secured by assets obtained in the ICCMIC
acquisition of 2000 were paid-off during 2001. Interest expense on ICCMIC's
other borrowings was $1.7 million for 2001 as compared to $3.5 million last
year. Interest on long-term debt also decreased to $20.7 million for 2001 as
compared to $24.1 million last year. The decrease in interest on long-term debt
resulted from the debt exchange completed in June 2001 and from the repurchase
of debt during the previous twelve months.
As a result of the above, net interest income decreased to $48.9 million for
2001, as compared to $84.6 million last year.
Loan Sales
During the fourth quarter of 2001, SPB sold $90.3 million of Income Property
Lending Division ("IPLD") loans, $2.0 million of loan participations, and $10.9
million of single-family residential and other loans generating gains of $1.5
million, zero, and $233,000, respectively. For the same period last year, SPB
sold $67.0 million of IPLD loans and $3.8 million of loan participations
generating gains of $1.1 million and zero, respectively.
For the year ended December 31, 2001, SPB sold $240.0 million of IPLD loans,
$36.5 million of loan participations, and $47.9 million of single-family and
other loans generating gains (losses) of $2.4 million, ($135,000), and $358,000,
respectively. For the year ended December 31, 2000, SPB sold $141.8 million of
IPLD loans, $75.2 million of loan participations, and $7.5 million of consumer
loans generating gains (losses) of $2.0 million, ($2.7) million, and zero,
respectively.
Allowance for Loan and Lease Losses and Non-Accrual Loans
As a result of the continued higher level of provision for loan and lease
losses, the Company has increased its allowance for loan and lease losses to
$72.3 million or 6.29% of loans held for investment and 74.24% of non-accrual
loans at December 31, 2001 as compared to $63.6 million or 5.36% of loans held
for investment and 81.02% of non-accrual loans at December 31, 2000. The
Company's non-accrual loans and leases increased to $97.3 million at December
31, 2001 as compared to $78.5 million at December 31, 2000. Non-accrual loans at
December 31, 2001 include $24.3 million of loans to airline or airline related
companies.
The provision for loan and lease losses for the fourth quarter of 2001 was $49.6
million as compared to $66.3 million for the same period last year. Net
charge-offs for the fourth quarter of 2001 were $38.8 million as compared to
$60.3 million for the same period last year. The provision for loan losses and
charge-
offs for the fourth quarter of 2001 were $38.8 million as compared to $60.3
million for the same period last year. The provision for loan losses and charge-
offs for the fourth quarter of 2001 were primarily the result of the events of
September 11, 2001 and their effect on CBC's airline and airline related loans
in addition to the continued decline in the U.S. economy. The provision for loan
and lease losses for the fourth quarter of 2001 included $20.0 million related
to CBC's airline and airline related loans. At December 31, 2001, CBC had $94.0
million of airline and airline related loans outstanding. During the fourth
quarter of 2001, net charge-offs (recoveries) were $35.6 million at CBC,
($283,000) of SPB's Loan Participation and Investment Group ("LPIG") loans, $1.2
million at Imperial Warehouse Finance ("IWF") and $2.3 million in all other
portfolios. Included in the net charge-offs at CBC were $15.7 million of charge-
offs of loans to airline or airline related companies. During the fourth quarter
of 2000, net charge-offs were $33.4 million at CBC, $16.4 million at LPIG, $2.0
million at IWF and $8.6 million in all other portfolios.
For the year ended December 31, 2001, the provision for loan and lease losses
was $95.9 million as compared to $181.0 million last year. The provision for
loan losses and charge-offs for 2001 were primarily the result of management's
continued efforts to aggressively work out or dispose of increased levels of
non-accrual and potential problem loans-particularly in the CBC loan portfolio,
the events of September 11, 2001 and their effect on CBC's airline and airline
related loans, and the continued decline in the U.S. economy. The provision for
loan and lease losses for 2001 included $23.5 million related to CBC's airline
and airline related loans.
Mark-to-Market and Impairment Charges
For the fourth quarter ended December 31, 2001, net mark-to-market and
impairment losses on loans and securities were $20.7 million as compared to net
mark-to-market and impairment losses of $4.8 million for the same period last
year. The mark-to-market losses for the fourth quarter of 2001 were primarily
related to a $20.0 million decline in the value of the Company's investments in
the senior subordinated bond and the total return swap of the junior
subordinated bond of the Pacifica Partners I CLO. The decline was due to an
increase in the market interest spread on similar securities as well as
increased defaults and a deterioration of credit quality in the CLO's $490.6
million loan and bond portfolio. The Pacifica Partners I CLO is managed by
Imperial Credit Asset Management, a wholly-owned subsidiary of ICII.
Additionally, fourth quarter 2001 net mark-to-market losses included a $1.4
million charge related to the termination of the LPIG total return swap (the
"LPIG swap"). The net mark-to-market losses for the fourth quarter of 2000 were
primarily related to a $1.5 million decline in the value of the retained
interests in lease securitizations at IBC, a $2.3 million decline in the value
of loans funded in the LPIG swap, and a $1.0 million decline in the value of
interest-only securities.
For the year ended December 31, 2001, net mark-to-market and impairment losses
were $34.3 million. The mark-to-market losses for 2001 primarily related to a
$20.0 million decline in the value of the Company's investment in the senior
subordinated bond and the total return swap of the junior subordinated bond of
the Pacifica Partners I CLO, a $5.7 million write-down of IBC's retained
interests in lease securitizations, a $2.7 million write-down of the LPIG swap,
and a write down of $5.9 million related to other trading securities. For the
year ended December 31, 2000, net mark-to-market and impairment losses were
$12.8 million. The mark-to-market losses for the year ended December 31, 2000
primarily related to a $5.0 million write-down of IBC's retained interests in
lease securitizations, a $3.9 million write-down of the LPIG swap, and $3.9
million related to other trading securities.
Noninterest Expenses
Total noninterest expenses during the fourth quarter of 2001 decreased 34% to
$13.4 million as compared to $20.2 million for the same period last year.
Excluding net amortization and write-offs of goodwill and severance costs, total
noninterest expenses decreased 11% to $18.7 million as compared to $21.1 million
for the same period last year. The decrease in expenses primarily resulted from
reductions in personnel, commission, occupancy, professional, communications,
and real property expenses. The reductions in noninterest expenses above were
partially offset by increases in net expenses of other real estate owned,
collection costs, and general and administrative expenses.
During the year ended December 31, 2001 noninterest expenses decreased 23% to
$65.7 million as compared to $84.9 million last year assuming a formerly
consolidated subsidiary, Imperial Capital Group
("ICG") was accounted for under the equity method during all of 2000. Excluding
net amortization and write-offs of goodwill and severance costs, total
noninterest expenses decreased 13% to $73.0 million as compared to $83.5 million
last year. The decrease in expenses occurred in all expense categories except
net expense of other real estate owned, professional, collection, and general
and administrative expenses. Assuming ICG was accounted for under the equity
method for all of 2000, the significant changes in expense levels were as
follows:
Personnel expenses were $10.6 million for the fourth quarter and $32.8 million
for the year ended December 31, 2001 compared to $9.7 million and $35.3 million
for the same periods of the prior year, respectively. The increase in personnel
costs for the fourth quarter of 2001 resulted from severance costs of $3.7
million. Excluding these costs, personnel expenses decreased 29% in the fourth
quarter and 18% for the year ended December 31, 2001 as compared to the same
periods last year. The decreases excluding severance costs for both periods were
the result of a 23% decrease in Full Time Equivalent Employees ("FTE"). At
December 31, 2001, the Company had 328 FTE as compared to 428 FTE at December
31, 2000.
During the fourth quarter and year ended December 31, 2001, legal and
professional costs were $1.7 million and $7.1 million as compared to $2.2
million and $7.2 million for the same periods of the prior year, respectively.
Additionally, during the fourth quarter and year ended December 31, 2001,
collection costs were $1.8 million and $6.5 million as compared to $1.2 million
and $2.3 million for the same periods of the prior year, respectively. Legal,
professional, and collection costs increased as a result of increased balances
of non-performing credits, and defense costs associated with securities and
general litigation involving the Company.
During the fourth quarter and year ended December 31, 2001, net amortization and
write-offs of goodwill were ($8.9) million and ($11.0) million as compared to
($828,000) and $1.4 million for the same periods of the prior year,
respectively. In the fourth quarter of 2001, the Company wrote-off the remaining
$10.0 million balance of goodwill related to SPB's CBC division, and $19.3
million in negative goodwill related to the ICCMIC acquisition of 2000. CBC's
goodwill was written-off due to continued operating losses and ICCMIC's negative
goodwill was written-off as no employees or material assets obtained in the
ICCMIC acquisition remained.
During the fourth quarter and year ended December 31, 2001, FDIC insurance
premiums were $941,000 and $3.0 million as compared to $254,000 and $1.1 million
for the same periods of the prior year, respectively. FDIC insurance premiums
increased due to reduced capital ratios as a result of increased provisions for
loan and lease losses, charge-offs and higher levels of non-performing assets at
SPB.
Brad S. Plantiko, the Company's newly appointed President said, "We have
implemented an aggressive plan to continue to reduce the Company's expenses
during 2002."
General Description of the Company
Imperial Credit Industries, Inc., is the parent company of Southern Pacific
Bank, a FDIC insured industrial bank headquartered in Torrance, California.
Southern Pacific Bank offers a wide variety of commercial loan and lease
products to its borrowers and certificates of deposit, money market, passbook,
and IRA accounts to its depositors. Southern Pacific Bank offers loans through
its core lending divisions, including: Coast Business Credit - specializing in
asset-based commercial lending; Imperial Warehouse Finance - offering
residential mortgage repurchase facilities; the Lewis Horwitz Organization - the
premier lender to independent film and television production companies; and the
Income Property Lending Division - lending to multifamily and commercial
property owners.
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: our ability to raise additional capital; the
need for SPB to comply with its regulatory orders; our ability complete any
restructuring plans; 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.
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 1:30 P.M.
Pacific Time, 4:30 P.M. Eastern Time on February 8, 2002. The phone number for
the conference call is (719) 457-2679, confirmation number 588028. There will be
a replay of the call available beginning at 3:30 p.m. PST on February 8, 2002
and ending at 11:59 p.m. on February 12, 2002. The replay dial-in number is
(719) 457-0820, confirmation number 588028. 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/event.asp?id=3307. For further information contact:
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Brad Plantiko/ President and Chief Financial Officer 310-791-8096 or Paul
Lasiter /Senior Vice President and Controller 310-791-8028.
IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
December 31, December 31,
2001 2000
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ASSETS
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Cash......................................................................................... $ 117,219 $ 30,938
Interest bearing deposits.................................................................... 16,071 183,193
Investment in Federal Home Loan Bank stock................................................... 6,070 4,148
Trading securities, at market................................................................ 58,315 164,050
Available for sale securities, at market..................................................... 62,483 63,684
Loans and leases held for sale, net.......................................................... 126,427 386,469
Loans and leases held for investment, net of unearned income and deferred loan fees.......... 1,149,099 1,186,119
Less: allowance for loan and lease losses................................................. (72,252) (63,625)
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Loans held for investment, net............................................................... 1,076,847 1,122,494
Real property................................................................................ 4,741 53,840
Retained interest in loan and lease securitizations.......................................... -- 6,330
Accrued interest receivable.................................................................. 8,612 15,744
Premises and equipment, net.................................................................. 7,285 9,791
Other real estate owned and other repossessed assets, net.................................... 12,157 8,778
Goodwill..................................................................................... 19,853 32,330
Other assets................................................................................. 22,337 28,158
Net assets of discontinued operations........................................................ 4,812 17,630
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Total assets........................................................................ $1,543,229 $2,127,577
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits .................................................................................... $1,227,850 $1,632,704
Borrowings from Federal Home Loan Bank....................................................... 75,000 65,000
Senior secured debt.......................................................................... 16,200 --
Secured convertible notes.................................................................... 10,000 --
Exchange notes............................................................................... 166,374 --
Remarketed par securities ("ROPES").......................................................... 1,040 42,885
Senior notes................................................................................. 26,839 176,757
Other borrowings............................................................................. 41,120 84,118
Accrued interest payable..................................................................... 7,965 18,992
Accrued income taxes payable................................................................. 34,323 20,522
Minority interest in consolidated subsidiaries............................................... 1,116 1,116
Goodwill .................................................................................... -- 23,797
Other liabilities............................................................................ 13,267 22,244
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Total liabilities................................................................... 1,621,094 2,088,135
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Shareholders' equity:
Preferred stock, 8,000,000 shares authorized; none issued or outstanding..................... -- --
Common stock, no par value. Authorized 80,000,000 shares; 42,180,798, and 32,096,361 shares
issued and outstanding at December 31, 2001 and December 31, 2000, respectively......... 113,142 97,668
Accumulated deficit.......................................................................... (196,487) (64,889)
Shares held in deferred executive compensation plan.......................................... 4,655 5,745
Accumulated other comprehensive income-unrealized gain on securities available for sale, net. 825 918
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Total shareholders' (deficit) equity...................................................... (77,865) 39,442
---------- ----------
Total liabilities and shareholders' (deficit) equity...................................... 1,543,229 $2,127,577
========== ==========
IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
Interest Income: 2001 2000 2001 2000
---- ---- ---- ----
Interest on loans and leases............................................ $ 29,738 $ 46,737 $ 148,567 $ 194,213
Interest on investments................................................. 1,608 5,719 12,357 28,213
Interest on other finance activities.................................... -- 581 597 2,399
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Total interest income.............................................. 31,346 53,037 161,521 224,825
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Interest Expense:
Interest on deposits.................................................... 15,914 27,728 87,626 107,779
Interest on other borrowings............................................ 550 1,880 4,326 8,364
Interest on long-term debt.............................................. 4,234 5,799 20,669 24,070
-------- --------- --------- ---------
Total interest expense............................................. 20,698 35,407 112,621 140,213
-------- --------- --------- ---------
Net interest income................................................ 10,648 17,630 48,900 84,612
Provision for loan and lease losses..................................... 49,625 66,300 95,860 180,975
-------- --------- --------- ---------
Net interest expense after provision for loan and lease losses..... (38,977) (48,670) (46,960) (96,363)
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Fee and Other Income:
Gain (loss) on sale of loans and leases................................. 1,726 1,140 2,588 (771)
Asset management fees................................................... 774 780 3,050 3,239
Investment banking and brokerage fees................................... -- -- -- 21,057
Loan servicing income .................................................. 808 1,508 5,001 5,993
Gain (loss) on sale of securities....................................... 216 (104) 3,471 12,988
Equity in net income of Imperial Capital Group.......................... -- 479 912 479
Mark-to-market losses on securities and loans held for sale, net........ (14,692) (4,787) (27,125) (12,810)
Rental income........................................................... 781 2,595 6,174 8,183
Loss on impairment of securities........................................ (6,000) -- (7,206) --
Other income............................................................ 2,571 3,429 9,066 12,278
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Total fee and other income......................................... (13,816) 5,040 (4,069) 50,636
-------- --------- --------- ---------
Noninterest Expenses:
Personnel............................................................... 10,573 9,669 32,767 43,679
Commissions............................................................. 370 452 1,925 6,418
Amortization of servicing rights........................................ 67 118 346 529
Occupancy............................................................... 1,061 1,220 4,232 5,446
Net expenses of other real estate owned................................. 1,121 135 1,473 1,386
Legal and professional services......................................... 1,692 2,189 7,132 7,181
Legal settlements....................................................... 11 50 615 6,942
Collection costs........................................................ 1,792 1,168 6,455 2,283
FDIC insurance premiums................................................. 941 254 3,048 1,051
Telephone and other communications...................................... 280 431 1,312 2,900
Amortization and write-off of goodwill, net............................. (8,918) (828) (11,033) 1,431
Real property........................................................... -- 1,145 1,908 4,192
General and administrative.............................................. 4,448 4,220 15,494 19,599
-------- --------- --------- ---------
Noninterest expenses............................................... 13,438 20,223 65,674 103,037
Acquisition costs....................................................... -- -- -- 9,397
-------- --------- --------- ---------
Total expenses..................................................... 13,438 20,223 65,674 112,434
-------- --------- --------- ---------
Loss from continuing operations before income taxes,
minority interest and extraordinary item........................... (66,231) (63,853) (116,703) (158,161)
Income taxes............................................................ 4,000 37,757 14,021 2,356
Minority interest in income of consolidated subsidiaries................ 33 33 130 1,125
-------- --------- --------- ---------
Loss from continuing operations......................................... (70,264) (101,643) (130,854) (161,642)
Operating losses from discontinued operations of AMN, net of income
taxes................................................................. (1,771) (4,113) (3,656) (5,218)
-------- --------- --------- ---------
Loss before extraordinary item.......................................... (72,035) (105,756) (134,510) (166,860)
Extraordinary item--Gain on early extinguishment of debt, net of income
taxes................................................................. 4,454 1,130 2,912 3,534
-------- --------- --------- ---------
Net loss........................................................... $(67,581) $(104,626) $(131,598) $(163,326)
======== ========= ========= =========
Comprehensive loss:
Other comprehensive income (loss), net............................... 545 663 (93) (1,698)
-------- --------- --------- ---------
Comprehensive loss................................................. $(67,036) $(103,963) $(131,691) $(165,024)
======== ========= ========= =========
Basic and diluted income per share:
Loss from continuing operations......................................... $ (1.66) $ (3.17) $ (3.52) $ (4.96)
Operating loss from discontinued operations, net of income taxes........ (0.04) (0.13) (0.10) (0.16)
Extraordinary item--Gain on early extinguishment of debt, net of income
taxes................................................................. 0.10 0.04 0.08 0.11
-------- --------- --------- ---------
Net loss per common share.......................................... $ (1.60) $ (3.26) $ (3.54) $ (5.01)
======== ========= ========= =========
Basic and diluted weighted average shares outstanding: 42,181 32,096 37,142 32,573
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
At or for the Three At or for the Three At or for the Three
Months Ended Months Ended Months Ended
December 31, September 30, December 31,
Selected Credit Data: 2001 2001 2000
- --------------------- ---- ---- ----
Core Business Nonperforming Assets
- ----------------------------------
Coast Business Credit $ 62,504 $ 42,934 $ 31,795
Acquired Entertainment Assets and LHO Loans 11,542 11,709 7,998
Loan Participation and Investment Group 12,565 11,358 26,206
Imperial Warehouse Finance 3,587 5,449 9,404
Income Property Lending Division 8,765 7,501 1,650
Other core businesses 7,370 5,187 9
--------- -------- --------
Total core business nonperforming assets 106,333 84,138 77,062
--------- -------- --------
Non-Core Business Nonperforming Assets
- --------------------------------------
Auto loans 433 469 798
Single family residential loans 2,801 3,525 4,380
Other non-core businesses 338 2,340 5,129
--------- -------- --------
Total non-core business nonperforming assets 3,572 6,334 10,307
--------- -------- --------
Total nonperforming assets $ 109,905 $ 90,472 $ 87,369
========= ======== ========
Core Business Non-accrual Loans
- -------------------------------
Coast Business Credit $ 62,504 $ 42,934 $ 31,795
Lewis Horwitz Organization Entertainment Loans 1,324 199 246
Loan Participation and Investment Group 12,565 11,358 26,206
Imperial Warehouse Finance 3,587 5,449 9,404
Income Property Lending Division 8,765 7,501 1,650
Leases 6,824 4,646 --
Other core businesses 5 -- 7
--------- -------- --------
Total core business non-accrual loans 95,574 72,087 69,308
--------- -------- --------
Non-Core Business Non-accrual Loans
- -----------------------------------
Auto loans -- 437 716
Single family residential loans 1,719 2,590 3,564
Other non-core businesses 23 2,340 4,941
--------- -------- --------
Total non-core business non-accrual loans 1,742 5,367 9,221
--------- -------- --------
Total non-accrual loans $ 97,316 $ 77,454 $ 78,529
========= ======== ========
At or for the Three At or for the Three At or for the Three
Months Ended Months Ended Months Ended
December 31, September 30, December 31,
2001 2001 2000
---- ---- ----
Allowance for loan and lease losses to non-accrual loans and
leases 74.24% 79.28% 81.02%
Allowance for loan and lease losses to gross LHFI 6.29% 5.12% 5.36%
Nonperforming assets to total assets 7.12% 5.37% 4.11%
Nonperforming assets to LHFI, OREO and other repossessed assets 9.43% 7.42% 7.25%
Annualized net charge-offs to average LHFI, net 13.21% 2.92% 19.49%
Imperial Credit Industries, Inc.
Financial and Operating Highlights
(In millions, except per share amounts and percentages)
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Operating Results Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue
Interest income $ 31.3 $ 38.1 $ 43.4 $ 48.6 $ 53.0
Interest expense (20.7) (25.8) (32.0) (34.0) (35.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 10.6 12.3 11.4 14.6 17.6
Provision for loan and lease losses 49.6 14.9 26.7 4.6 66.3
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest (expense) income after provision (39.0) (2.6) (15.3) 10.0 (48.7)
- ------------------------------------------------------------------------------------------------------------------------------------
Gain on sale of loans and leases 1.7 0.4 0.4 0.1 1.1
Asset management fees 0.8 0.8 0.7 0.8 0.8
Loan servicing income 0.8 1.0 1.8 1.4 1.5
Gain (loss) on sale of securities 0.2 0.1 3.0 0.1 (0.1)
Equity in net income of ICG - - - 0.9 0.5
Loss on impairment of securities (6.0) - (1.2) - -
Mark-to-market loss on securities and loans held for sale, net (14.7) (8.3) (2.3) (1.8) (4.8)
Rental income 0.8 1.8 1.6 2.0 2.6
Other income 2.6 1.9 2.0 2.6 3.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total fee and other income (13.8) (2.3) 6.0 6.1 5.1
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Personnel 10.9 9.0 7.4 7.3 10.1
Occupancy 1.1 1.1 1.1 1.0 1.2
Legal, professional, and collection costs 3.5 3.6 3.9 3.2 3.3
Amortization and write-off of goodwill, net (8.9) (0.7) (0.7) (0.7) (0.8)
Net expense of real estate owned 1.1 0.2 0.1 0.1 0.1
Real property - 0.5 0.5 0.9 1.1
Other 5.7 5.2 5.0 4.3 5.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 13.4 18.9 17.3 16.1 20.2
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes and
minority interest (66.2) (23.8) (26.6) (0.1) (63.8)
Income taxes 4.0 - 10.0 - 37.8
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (70.2) (23.8) (36.6) (0.1) (101.6)
Operating loss from discontinued operations and disposal of AMN (1.8) (0.7) (1.0) (0.2) (4.1)
Extraordinary item - gain (loss) on early extinguishment of debt 4.4 - (2.2) 0.6 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (67.6) $ (24.5) $ (39.8) $ 0.3 $ (104.6)
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common and
Common equivalent shares (diluted) 42.2 41.7 32.4 32.1 32.1
Net (Loss) Income per Diluted Share:
Loss from continuing operations $ (1.66) $ (0.57) $ (1.13) $ - $ (3.17)
Operating loss from discontinued operations of AMN (0.04) (0.02) (0.03) (0.01) (0.13)
Extraordinary item - gain (loss) on early extinguishment of
debt 0.10 - (0.07) 0.02 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income per diluted share $ (1.60) $ (0.59) $ (1.23) $ 0.01 $ (3.26)
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Imperial Credit Industries, Inc.
Financial and Operating Highlights
(In millions, except per share amounts and percentages)
2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Fourth Third Second First Fourth
Consolidated Financial Condition (at quarter end): Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
Loans and leases held for sale $ 126.4 $ 171.5 $ 371.8 $ 380.1 $ 386.5
Loans held for investment, net $ 1,076.8 $ 1,138.8 $ 1,085.7 $ 1,195.5 $ 1,122.5
Securities, at market $ 120.8 $ 142.9 $ 157.4 $ 166.5 $ 227.7
Retained interest in loan and lease securitizations $ - $ - $ 3.7 $ 3.6 $ 6.3
Total assets $ 1,543.2 $ 1,686.3 $ 1,917.8 $ 2,056.5 $ 2,127.6
Deposits $ 1,227.9 $ 1,359.5 $ 1,512.7 $ 1,623.7 $ 1,632.7
Borrowings from FHLB and other borrowings $ 116.1 $ 34.4 $ 82.2 $ 85.0 $ 149.1
Senior secured debt $ 16.2 $ 16.2 $ 16.2 $ 16.2 $ -
Senior notes $ 26.8 $ 29.0 $ 29.0 $ 176.8 $ 176.8
Senior convertible notes $ 10.0 $ 10.0 $ 10.0 $ - $ -
Exchange notes trading $ 166.4 $ 171.6 $ 171.1 $ - $ -
ROPES $ 1.0 $ 1.0 $ 1.0 $ 41.0 $ 42.9
Total shareholders' (deficit) equity $ (77.9) $ (10.8) $ 11.4 $ 40.1 $ 39.4
- -----------------------------------------------------------------------------------------------------------------------------------
Asset Quality
Other real estate owned and other repossessed assets, net $ 12.2 $ 13.0 $ 13.2 $ 13.3 $ 8.8
Non-accrual loans $ 97.3 $ 77.5 $ 72.5 $ 85.4 $ 78.5
Allowance for loan and lease losses $ 72.3 $ 61.4 $ 55.1 $ 64.8 $ 63.6
Ratio of the loan loss allowance to net loans held for
investment 6.29% 5.12% 4.83% 5.14% 5.36%
Ratio of the loan loss allowance to non-accrual loans 74.24% 79.28% 76.07% 75.87% 81.02%
Charge-offs $ 40.3 $ 10.6 $ 38.8 $ 7.6 $ 61.5
Recoveries $ 1.5 $ 2.0 $ 2.4 $ 4.1 $ 1.2
--------------------------------------------------------------------
Net Charge-offs $ 38.8 $ 8.6 $ 36.4 $ 3.5 $ 60.3
- -----------------------------------------------------------------------------------------------------------------------------------
Loan and Lease Sales:
Income Property Division-SPB $ 90.3 $ 41.8 $ 63.4 $ 44.5 $ 67.0
Other Loan Sales-SPB $ 12.9 $ 32.8 $ 12.6 $ 12.8 $ 8.0
- -----------------------------------------------------------------------------------------------------------------------------------
Full Time Equivalent Employees 328 374 387 404 428
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow Information:
- -----------------------------------------------------------------------------------------------------------------------------------
(Loss) earnings before interest, taxes, depreciation and
amortization (EBITDA) $ (69.0) $ (18.6) $ (18.8) $ 6.7 $ (35.4)
Pre-tax interest coverage ratio (14.7x) (4.6x) (3.1x) 1.0x (10.0x)
Ratio of (loss) earnings to fixed charges (2.2x) 0.1x 0.2x 1.0x (0.7x)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Ratios
Risk-based Capital 6.38% 8.63% 8.24% 8.31% 6.59%
Risked-based Tier 1 Capital 3.53% 5.98% 5.75% 5.96% 3.54%
Tier 1 FDIC Leverage Ratio 3.05% 5.35% 5.37% 6.09% 3.46%
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Imperial Credit Industries, Inc.
Financial and Operating Highlights
(In millions, except per share amounts and percentages)
2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Portfolio
Multifamily real estate $ 222.6 $ 269.3 $ 280.3 $ 268.9 $ 281.3
Commercial real estate 109.1 136.4 134.0 156.8 151.6
Asset-based and cash stream loans 536.7 606.6 665.4 742.9 752.9
Loan participations 67.2 75.4 80.1 108.9 123.5
Mortgage warehouse lines 143.8 105.9 129.0 131.5 50.6
Film and television production loans 130.5 106.0 116.5 113.7 83.7
Other 42.7 46.2 40.2 36.9 28.6
---------------------------------------------------------------------
Total Core Loans 1,252.6 1,345.8 1,445.5 1,559.6 1,472.2
Non Core Loans 28.1 35.8 76.4 90.2 95.1
---------------------------------------------------------------------
Gross Loans $ 1,280.7 $ 1,381.6 $ 1,521.9 $ 1,649.8 $ 1,567.3
========== ========== ========== ========== =========
- ---------------------------------------------------------------------------------------------------------------------------------
Yield on interest-earning assets at SPB 7.94% 8.85% 9.30% 10.04% 10.40%
Cost of interest-bearing liabilities at SPB 4.79% 5.60% 6.22% 6.61% 6.66%
Net interest margin at SPB 3.70% 3.83% 3.76% 4.11% 4.47%
- ---------------------------------------------------------------------------------------------------------------------------------
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. As a result of the deconsolidation of ICG, certain
components of the Company's year 2001 results of operations are not comparable
to 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 the periods presented.
IMPERIAL CREDIT INDUSTRIES, INC.
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS - ICG UNDER THE EQUITY METHOD
(Dollars in thousands)
(unaudited)
Twelve Months Ended
December 31,
------------
2001 2000
---- ----
Interest Income:
Interest on loans and leases............................................ $ 148,567 $ 194,592
Interest on investments................................................. 12,357 27,750
Interest on other finance activities.................................... 597 2,399
--------- ----------
Total interest income.............................................. 161,521 224,741
--------- ----------
Interest Expense:
Interest on deposits.................................................... 87,626 107,779
Interest on other borrowings............................................ 4,326 7,940
Interest on long term debt.............................................. 20,669 24,070
--------- ----------
Total interest expense............................................. 112,621 139,789
--------- ----------
Net interest income................................................ 48,900 84,952
Provision for loan and lease losses..................................... 95,860 180,975
--------- ----------
Net interest expense after provision for loan and lease losses..... (46,960) (96,023)
--------- ----------
Fee and Other Income:
Gain (loss) on sale of loans and leases................................. 2,588 (771)
Asset management fees................................................... 3,050 3,239
Loan servicing income .................................................. 5,001 5,993
Gain on sale of securities.............................................. 3,471 12,988
Equity in net income of Imperial Capital Group.......................... 912 2,250
Mark-to-market losses on securities and loans held for sale, net........ (27,125) (12,810)
Rental income........................................................... 6,174 8,183
Loss on impairment of securities........................................ (7,206) --
Other income............................................................ 9,066 12,070
--------- ----------
Total fee and other income......................................... (4,069) 31,142
--------- ----------
Noninterest Expenses:
Personnel............................................................... 32,767 35,307
Commissions............................................................. 1,925 2,261
Amortization of servicing rights........................................ 346 529
Occupancy............................................................... 4,232 4,832
Net expenses of other real estate owned................................. 1,473 1,386
Legal and professional services......................................... 7,132 6,637
Lawsuit settlements..................................................... 615 6,942
Collection costs........................................................ 6,455 2,283
FDIC insurance premiums................................................. 3,048 969
Telephone and other communications...................................... 1,312 2,014
Amortization of goodwill, net........................................... (11,033) 1,359
Real property........................................................... 1,908 4,191
General and administrative.............................................. 15,494 16,168
--------- ----------
Noninterest expenses............................................... 65,674 84,878
Acquisition costs....................................................... -- 9,397
--------- ----------
Total expenses..................................................... 65,674 94,275
--------- ----------
Loss from continuing operations before income taxes,
minority interest and extraordinary item..................... (116,703) (159,156)
Income taxes............................................................ 14,021 2,356
Minority interest in income of consolidated subsidiaries................ 130 130
--------- ----------
Loss from continuing operations.................................... (130,854) (161,642)
Operating losses from discontinued operations of AMN, net of income
taxes................................................................... (3,656) (5,218)
--------- ----------
Loss before extraordinary item..................................... (134,510) (166,860)
Extraordinary item--Gain on early extinguishment of debt, net of income
taxes 2,912 3,534
--------- ----------
Net loss........................................................... $(131,598) $ (163,326)
========= ==========
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, hereunto duly authorized.
Date: February 13, 2002
-----------------
IMPERIAL CREDIT INDUSTRIES, INC.
By: /s/ Paul B. Lasiter
------------------------------------
Senior Vice President and Controller