<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________________ to __________________
Commission File Number 0-26960
ITLA CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4596322
------------------------------- -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
888 Prospect St., Suite 110, La Jolla, California 92037
- ------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(858) 551-0511
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock of the registrant: 7,128,484 outstanding
as of May 5, 2000.
1
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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
2000 DECEMBER 31,
(UNAUDITED) 1999
----------- -----------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
Assets
<S> <C> <C>
Cash and cash equivalents $ 13,389 $ 72,242
Investment securities available for sale, at approximate fair value 42,954 59,247
Stock in Federal Home Loan Bank 9,004 8,894
Real estate loans held for investment, net (net of allowance for credit losses of
$20,094 and $19,895 in 2000 and 1999, respectively) 936,819 951,480
Real estate loans held in trust for collateralized mortgage obligations, net
(net of allowance for credit losses of $4,614 ) 254,361 --
Interest receivable 9,235 7,383
Other real estate owned, net 535 1,041
Premises and equipment, net 3,407 3,253
Deferred income taxes 9,151 9,401
Other assets 2,767 2,882
----------- -----------
Total assets $ 1,281,622 $ 1,115,823
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposit accounts $ 909,247 $ 913,613
Collateralized mortgage obligations 205,455 --
Federal Home Loan Bank advances 27,250 67,250
Accounts payable and other liabilities 13,271 11,265
----------- -----------
Total liabilities 1,155,223 992,128
----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized, none issued -- --
Contributed capital - common stock, $.01 par value; 20,000,000
shares authorized, 8,204,916 and 8,202,916 issued and
outstanding in 2000 and 1999, respectively 57,204 57,184
Retained earnings 83,722 79,478
Accumulated other comprehensive (loss) income (198) 706
----------- -----------
140,728 137,368
Less treasury stock, at cost - 1,076,432 and 1,021,432 shares in
2000 and 1999, respectively (14,329) (13,673)
----------- -----------
Total shareholders' equity 126,399 123,695
----------- -----------
Total liabilities and shareholders' equity $ 1,281,622 $ 1,115,823
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
2
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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2000 1999
---------------- -------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Interest income:
Real estate loans held for investment, including fees $ 24,601 $ 22,798
Real estate loans held in trust for collateralized mortgage obligations 246 --
Cash and investment securities 1,672 1,337
-------- --------
Total interest income 26,519 24,135
-------- --------
Interest expense:
Deposit accounts 13,001 10,952
Collateralized mortgage obligations 151 --
Federal Home Loan Bank advances 450 513
-------- --------
Total interest expense 13,602 11,465
-------- --------
Net interest income before provision for estimated credit losses 12,917 12,670
Provision for estimated credit losses 600 1,200
-------- --------
Net interest income after provision for estimated credit losses 12,317 11,470
-------- --------
Noninterest income:
Gain on sale of investment securities available for sale 1,412 --
Other 162 278
-------- --------
Total noninterest income 1,574 278
-------- --------
Noninterest expense:
Compensation and benefits 2,440 2,706
Occupancy and equipment 699 725
FDIC assessment 48 44
Other 2,078 1,627
-------- --------
Total recurring general and administrative 5,265 5,102
Nonrecurring expenses 1,400 --
-------- --------
Total general and administrative 6,665 5,102
-------- --------
Real estate operations, net (54) 2
Provision for estimated losses on other real estate owned 144 15
Loss (gain) on sale of other real estate owned, net 69 (9)
-------- --------
Total real estate operations, net 159 8
-------- --------
Total noninterest expense 6,824 5,110
-------- --------
Income before provision for income taxes 7,067 6,638
Provision for income taxes 2,823 2,724
-------- --------
NET INCOME $ 4,244 $ 3,914
======== ========
BASIC EARNINGS PER SHARE $ 0.59 $ 0.55
======== ========
DILUTED EARNINGS PER SHARE $ 0.58 $ 0.53
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------
2000 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,244 $ 3,914
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of premises and equipment 231 268
Amortization of premium on purchased loans 267 --
Accretion of deferred loan origination fees (401) (918)
Provision for estimated credit losses 600 1,200
Provision for estimated losses on other real estate owned 144 15
Gain on the sale of investment securities available for sale (1,412) --
Loss (gain) on the sale of other real estate owned 69 (9)
Increase in interest receivable 120 47
Decrease in other assets 895 158
Increase in accounts payable and other liabilities 2,269 2,469
--------- ---------
Net cash provided by operating activities 7,026 7,144
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities available for sale (10,000) (10,403)
Proceeds from the maturity of investment securities available for sale 10,000 --
Proceeds from the sale of investment securities available for sale 16,176 --
Increase in stock in Federal Home Loan Bank (110) (173)
Cash paid to acquire ICCMAC Multifamily and Commercial Trust 1999-1 (51,069) --
Purchases of real estate loans held for investment (15,522) (13,119)
Decrease (increase) in real estate loans held for investment, net 29,599 (16,643)
Proceeds from sale of real estate loans held for sale -- 7,931
Proceeds from the sale of other real estate owned 434 --
Cash paid for capital expenditures (393) (291)
Other, net 8 30
--------- ---------
Net cash used in investing activities (20,877) (32,668)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued through exercise of employee stock options 20 --
Cash paid to acquire treasury stock (656) --
Net decrease in deposit accounts (4,366) (21,849)
Amounts borrowed from the Federal Home Loan Bank 6,000 14,500
Repayment of amounts borrowed from the Federal Home Loan Bank (46,000) (18,750)
--------- ---------
Net cash used in financing activities (45,002) (26,099)
--------- ---------
Net decrease in cash and cash equivalents (58,853) (51,623)
Cash and cash equivalents at beginning of the period 72,242 125,602
--------- ---------
Cash and cash equivalents at end of period $ 13,389 $ 73,979
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 14,408 $ 11,382
Cash paid during the period for income taxes $ 4,400 $ 700
NONCASH INVESTING TRANSACTIONS:
Loans transferred to other real estate owned $ 141 $ 650
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE> 5
ITLA CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of ITLA Capital Corporation
("ITLA Capital") included herein reflect all normal recurring adjustments which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period indicated. The unaudited consolidated financial
statements include the accounts of ITLA Capital and its wholly-owned
subsidiaries, Imperial Capital Bank (the "Bank"), ITLA Commercial Securitization
Corporation ("ITLA CSC"), ICCMAC Multifamily and Commercial Trust 1999-1 (the
"Trust"), ITLA Commercial Investment Corporation, and ITLA Funding Corporation.
All intercompany transactions and balances have been eliminated. Certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission. The results of operations for the three
months ended March 31, 2000 are not necessarily indicative of the results of
operations for the remainder of the year.
These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in ITLA Capital's annual report on Form 10-K for the year ended
December 31, 1999.
NOTE 2 - ACQUISITION OF ICCMAC MULTIFAMILY AND COMMERCIAL TRUST 1999-1
On March 28, 2000, ITLA Capital completed the acquisition of the Trust. The
acquisition of the Trust has been recorded using the purchase method of
accounting. At the time of the acquisition, the Trust contained $254.4 million
of loans, consisting of approximately 35 percent commercial and 65 percent
multi-family real estate loans. The Trust's loans are held as collateral for
$205.4 million of bonds in the form of collateralized mortgage obligations
("CMO's"). ITLA Capital's investment in the Trust is held through ITLA CSC, its
qualified Real Estate Investment Trust subsidiary. ITLA Capital paid $51.1
million to acquire 100 percent of the equity and certain CMO's of the Trust. The
accounts of the Trust as of March 31, 2000 and for the period from March 28 to
March 31, 2000 have been included in the accompanying consolidated financial
statements of ITLA Capital.
NOTE 3 - EARNINGS PER SHARE
Basic Earnings Per Share ("Basic EPS") is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted Earnings Per Share ("Diluted EPS") reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock which shared in the earnings of ITLA Capital.
5
<PAGE> 6
ITLA CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - EARNINGS PER SHARE (Continued)
The following is a reconciliation of the calculation of Basic and Diluted
EPS.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
WEIGHTED-
AVERAGE PER
NET SHARES SHARE
INCOME OUTSTANDING AMOUNT
---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
2000
Basic EPS $4,244 7,222 $ 0.59
Effect of Dilutive Stock Options -- 76 (0.01)
------ ------ --------
Diluted EPS $4,244 7,298 $ 0.58
====== ====== ========
1999
Basic EPS $3,914 7,166 $ 0.55
Effect of Dilutive Stock Options -- 169 (0.02)
------ ------ --------
Diluted EPS $3,914 7,335 $ 0.53
====== ====== ========
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME
Comprehensive income, which encompasses net income and unrealized gains on
investment securities available for sale, is presented below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net income $ 4,244 $ 3,914
Other comprehensive income-
Unrealized holding losses arising during period,
net of tax benefit of $47 in 2000 and $40 in 1999,
respectively (70) (58)
Less reclassification adjustment for gains included in
net income, net of tax benefit of $578 in 2000 (834) --
------- -------
Comprehensive income $ 3,340 $ 3,856
======= =======
</TABLE>
6
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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5 - IMPAIRED LOANS RECEIVABLE
As of March 31, 2000 and December 31, 1999, the recorded investment in
loans receivable that were considered impaired as defined by Statement of
Financial Accounting Standards No. 114 was $18.8 million and $20.3 million,
respectively. The average recorded investment in impaired loans was $19.4
million for the three month period ended March 31, 2000 and $8.7 million for the
year ended December 31, 1999. Interest income recognized on impaired loans
totaled $0.3 million and $0 during the three month periods ended March 31, 2000
and 1999.
Subsequent to March 31, 2000, ITLA Capital sold one impaired loan, with an
outstanding principal balance of $13.2 million and a net book value of $12.7
million at no gain or loss.
7
<PAGE> 8
ITLA CAPITAL CORPORATION AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is intended to identify the major
factors that influenced the financial condition and results of operations of
ITLA Capital as of and for the three month period ended March 31, 2000.
"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995: This Form 10-Q contains forward-looking statements that are subject to
risks and uncertainties, including, but not limited to, changes in economic
conditions in ITLA Capital's market areas, changes in policies by regulatory
agencies, the impact of competitive loan products, loan demand risks,
fluctuations in interest rates and operating results and other risks detailed
from time to time in ITLA Capital's filings with the Securities and Exchange
Commission. ITLA Capital cautions readers not to place undue reliance on
forward-looking statements. ITLA Capital does not undertake and specifically
disclaims any obligation to revise any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after the
date of such statements. These risks could cause ITLA Capital's actual results
for 2000 and beyond to differ materially from those expressed in any
forward-looking statements by, or on behalf of, ITLA Capital.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET INCOME
Net income totaled $4.2 million for the three months ended March 31, 2000
compared to $3.9 million for the corresponding period in 1999, an increase of
8.4 percent. The increase in net income was primarily due to an increase in net
interest income and a decrease in the provision for estimated credit losses.
Diluted EPS was $0.58 for the three months ended March 31, 2000 compared to
$0.53 for the corresponding period in 1999, an increase of 9.4 percent.
NET INTEREST INCOME
The following table sets forth a summary of the changes in interest income
and interest expense resulting from changes in average interest-earning asset
and interest-bearing liability balances (volume) and changes in average interest
rates (rate). The change in interest due to both volume and rate have been
allocated to change due to volume and rate in proportion to the relationship of
absolute dollar amounts of each.
8
<PAGE> 9
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 VS. 1999
--------------------------------------------------
INCREASE (DECREASE) DUE TO:
-----------------------------
VOLUME RATE TOTAL
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest and fees earned from:
Real estate loans held for investment $ 2,144 $ (341) $ 1,803
Real estate loans held in trust for
collateralized mortgage obligations 246 -- 246
Cash and investment securities (20) 355 335
------- ------- -------
Total increase in interest income 2,370 14 2,384
------- ------- -------
Interest paid for:
Deposit accounts 1,074 975 2,049
Collateralized mortgage obligations 151 -- 151
FHLB advances (65) 2 (63)
------- ------- -------
Total increase in interest expense 1,160 977 2,137
------- ------- -------
Increase (decrease) in net interest income $ 1,210 $ (963) $ 247
======= ======= =======
</TABLE>
Total interest income increased by $2.4 million in the first quarter of
2000 compared to the corresponding period in 1999 due primarily to increases in
the average balances of real estate loans held for investment and real estate
loans held in trust for collateralized mortgage obligations and an increase in
the yield earned on cash and investment securities, partially offset by a
decline in the yield earned on real estate loans held for investment and in the
average balance of cash and investment securities.
The average balance of real estate loans held for investment increased to
$957.0 million in the first quarter of 2000 from $880.0 million in the
corresponding period of the prior year, an increase of $77.0 million, or 8.7
percent. This increase in the average balance resulted primarily from purchases
of single family residential mortgages, partially offset by a slight decline in
loans secured by income producing real estate. Purchased single family
residential loans had an average balance of $86.7 million in the quarter ended
March 31, 2000, compared to none in the prior year. The average yield earned on
real estate loans held for investment declined to 10.34 percent in the current
period from 10.51 percent in the prior year. The decline in the yield on real
estate loans held for investment was primarily due to the decline in fees
received when loans pay off prior to maturity. Excluding loan prepayments and
other nonrecurring loan interest and fee income, the yields would have been
10.36 percent in the current period compared to 10.26 percent in the prior year.
The yield on cash and investment securities increased to 5.80 percent for
the quarter ended March 31, 2000 compared to 4.62 percent in the corresponding
period of the prior year. The increase in yield on cash and investment
securities resulted partially from the dividend yield earned on ITLA Capital's
investment in common stock of Imperial Credit Commercial Mortgage Investment
Corporation ("ICMI"), and also due to the general increase in market interest
rates on cash and cash equivalent investments in the first quarter of 2000
compared to the corresponding period in the prior year.
Total interest expense increased by $2.1 million in the first quarter of
2000 compared to the corresponding period in 1999 due to an increase in the
average balance of deposit accounts
9
<PAGE> 10
and collateralized mortgage obligations and an increase in the cost of funds,
partially offset by a decline in the average balance of FHLB advances. The
average balance of deposit accounts increased $71.7 million to $906.8 million
for the three months ended March 31, 2000 compared to $835.1 million in the
corresponding period of the prior year. The increase in deposits was used to
fund the increase in the loan portfolio discussed above. The cost of funds
increased to 5.76 percent for the 2000 first quarter from 5.32 percent during
the corresponding period in 1999. This increase in funding costs was consistent
with the general increase in market interest rates. FHLB advances averaged $33.3
million in the current period, compared to $38.4 million in the prior year, a
decline of $5.1 million, or 13.3 percent.
PROVISION FOR ESTIMATED CREDIT LOSSES
Management periodically assesses the adequacy of the allowance for credit
losses by reference to many factors which may be weighted differently at various
times depending on prevailing conditions. These factors include, among other
elements, general portfolio trends relative to asset and portfolio size, asset
categories, credit and geographic concentrations, nonaccrual loan levels,
historical loss experience and risks associated with changes in economic, social
and business conditions. Accordingly, the calculation of the adequacy of the
allowance for credit losses is not based solely on the level of nonperforming
assets. Management believes that the allowance for credit losses as of March 31,
2000 was adequate to absorb the known and inherent risks of loss in the loan
portfolio at that date. While management believes the estimates and assumptions
used in its determination of the adequacy of the allowance are reasonable, there
can be no assurance that such estimates and assumptions will not be proven
incorrect in the future, or that the actual amount of future provisions will not
exceed the amount of past provisions or that any increased provisions that may
be required will not adversely impact ITLA Capital's financial condition and
results of operations. In addition, the determination of the amount of the
allowance for credit losses is subject to review by the Bank's regulators, as
part of the routine examination process, which may result in the establishment
of additional reserves based upon their judgment of information available to
them at the time of their examination.
The provision for estimated credit losses decreased to $0.6 million in the
first quarter of 2000 from $1.2 million in the corresponding period in 1999. The
decrease was primarily the result of a decrease in the real estate loan
portfolio held for investment which was lower due to a significant decrease in
loan production during the March 2000 quarter as compared to the same period in
1999. In addition, nonperforming assets declined both in total dollars and as a
percentage of total assets (excluding the acquisition of the Trust) at March 31,
2000 compared to both December 31, 1999 and March 31, 1999.
Nonperforming assets as a percentage of total assets decreased to 0.71
percent as of March 31, 2000, compared to 0.81 percent at December 31, 1999. The
aggregate amount of nonperforming assets increased slightly to $9.1 million as
of March 31, 2000 ($8.4 million from the Bank and $0.7 million from the Trust)
from $9.0 million (all from the Bank) at December 31, 1999. See also "Financial
Condition - Nonperforming Assets and Allowance for Credit Losses."
10
<PAGE> 11
NONINTEREST INCOME
Noninterest income totaled $1.6 million for the three months ended March
31, 2000 compared to $0.3 million for the corresponding period in 1999. The
increase in noninterest income was due primarily to the gain realized on the
sale of ITLA Capital's investment in ICMI stock. ITLA Capital purchased
1,426,000 ICMI shares for an average cost of $10.35 per share during the second
quarter of 1999. During the current period, ITLA Capital sold its investment in
ICMI, realizing a net gain of $1.4 million.
NONINTEREST EXPENSE
Noninterest expense totaled $6.8 million for the three months ended March
31, 2000, consisting of $5.3 million of recurring and $1.4 million of
nonrecurring general and administrative expenses and $0.1 million of real estate
operations, net. In the prior year, noninterest expense totaled $5.1 million,
consisting entirely of recurring general and administrative expenses. The
increase in noninterest expense in the current period was due primarily to the
nonrecurring general and administrative expense recorded in the quarter ended
March 31, 2000. These nonrecurring expenses consist primarily of the write-off
of fixed assets, leasehold improvements and costs related to sublease contracts
on leased premises at market rates that are lower than the contractual lease
rate. These expenses were the result of the consolidation of the Bank's
headquarters with ITLA Capital's headquarters in La Jolla, California, effective
during the March 2000 quarter.
For the three months ended March 31, 2000, ITLA Capital's ratio of
consolidated recurring general and administrative expense to average assets, on
an annualized basis, decreased to 1.94 percent compared from 2.04 percent in the
1999 quarter. ITLA Capital's efficiency ratio (excluding real estate operations
and nonrecurring general and administrative expenses) was 36.3 percent for the
quarter ended March 31, 2000 compared to 39.4 percent during the corresponding
period in the prior year.
FINANCIAL CONDITION
NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES
The following table sets forth ITLA Capital's nonperforming assets by
category as of the dates indicated.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-performing real estate loans held for investment $7,896 $7,977
Non-performing real estate loans held in trust for
collateralized mortgage obligations 729 --
Other real estate owned, net 535 1,041
------ ------
Total nonperforming assets $9,160 $9,018
====== ======
Non-performing real estate loans to total
gross real estate loans 0.71% 0.82%
Nonperforming assets to total assets 0.71% 0.81%
</TABLE>
11
<PAGE> 12
At March 31, 2000 and December 31, 1999, Other Real Estate Owned consisted
of five and six properties, respectively.
The following table provides certain information regarding ITLA Capital's
allowance for credit losses on its portfolios of real estate loans held for
investment and real estate loans held in trust for collateralized mortgage
obligations.
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REAL ESTATE LOANS HELD FOR INVESTMENT:
Balance at beginning of period $ 19,895 $ 16,811
Provision for estimated credit losses 600 4,950
Net charge-offs on real estate loans (401) (1,866)
-------- --------
Balance at end of period $ 20,094 $ 19,895
======== ========
Allowance for credit losses as a percentage of real estate
loans held for investmet, net 2.10% 2.05%
REAL ESTATE LOANS HELD IN TRUST FOR
COLLATERALIZED MORTGAGE OBLIGATIONS:
Balance at beginning of period $ -- $ --
Additions due to purchases 4,614 --
-------- --------
Balance at end of period $ 4,614 $ --
======== ========
Allowance for credit losses as a percentage of real estate
loans held in trust for collateralized mortgage
obligations, net 1.78% --
</TABLE>
LIQUIDITY AND DEPOSIT ACCOUNTS
Liquidity refers to ITLA Capital's ability to maintain cash flow adequate
to fund operations and meet obligations and other commitments on a timely basis,
including the payment of maturing deposits and the origination or purchase of
new loans receivable. ITLA Capital maintains a cash and investment securities
portfolio designed to satisfy operating and regulatory liquidity requirements
while preserving capital and maximizing yield. As of March 31, 2000, ITLA
Capital held approximately $13.4 million of cash and cash equivalents
(consisting primarily of short-term investments with original maturities of 90
days or less) and $43.0 million of investment securities classified as available
for sale. Short-term fixed income investments classified as cash equivalents
consisted of government money market funds and short-term government agency
securities, while investment securities available for sale consisted primarily
of fixed income instruments which were rated "AAA" or equivalent by nationally
recognized rating agencies.
12
<PAGE> 13
As of March 31, 2000 and December 31, 1999, the Bank's liquidity ratios
were 5.4 percent and 11.8 percent, respectively, exceeding the regulatory
requirement of 1.5 percent. In addition, The Bank's liquidity position is
supported by a credit facility with the FHLB with an available borrowing
capacity of $56.9 million based on collateral pledged, and by federal funds
lines of credit with two major banks with an available borrowing capacity of
$30.0 million.
Total deposit accounts decreased to $909.2 million at March 31, 2000 from
$913.6 million at December 31, 1999. ITLA Capital retained a significant amount
of the funds which matured through rollover of maturing deposit accounts during
the three months ended March 31, 2000. Although ITLA Capital competes for
deposits primarily on the basis of rates, management believes that a significant
portion of deposits will remain with ITLA Capital upon maturity on an ongoing
basis based on its historical experience regarding retention of deposits.
CAPITAL RESOURCES
As of March 31, 2000, the Bank's Leverage (Core), Tier I and Total
Risk-Based capital ratios were 8.4 percent, 9.2 percent and 10.5 percent,
respectively. These ratios were 9.0 percent, 10.1 percent and 11.4 percent,
respectively, as of December 31, 1999. The decline in capital ratios from
December 31, 1999 to March 31, 2000 was due to the payment of a $14.3 million
cash dividend from the Bank to ITLA Capital. These funds were utilized by ITLA
Capital to complete the acquisition of 100 percent of the equity and certain
CMO's of the Trust. The minimum regulatory requirement for Leverage (Core), Tier
I and Total Risk-Based capital are 4.0 percent, 4.0 percent and 8.0 percent,
respectively. As of March 31, 2000, the Bank's capital position was designated
as "well capitalized" for regulatory purposes.
ITLA Capital's shareholders' equity increased $2.7 million from December
31, 1999 to March 31, 2000 primarily due to the accumulation of $4.2 million in
net income, partially offset by the net change in unrealized gain (loss) on
investment securities available for sale of $0.9 million and purchases of
treasury stock of $0.7 million. There were no dividends declared or paid by ITLA
Capital during the first three months of 2000.
MARKET RISK
ITLA Capital's estimated sensitivity to interest rate risk, as measured by
the estimated interest earnings sensitivity profile and the interest sensitivity
gap analysis, has not materially changed from the information disclosed in ITLA
Capital's annual report on Form 10-K for the year ended December 31, 1999.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
ITLA Capital is a party to certain legal proceedings
incidental to its business. Management believes that the
outcome of such proceedings, in the aggregate, will not have a
material effect on ITLA Capital's financial condition or
results of operations.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Financial Data Schedule
14
<PAGE> 15
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.
ITLA CAPITAL CORPORATION
Date: May 5, 2000 /s/ George W. Haligowski
------------------------------------
George W. Haligowski
Chairman of the Board, President and
Chief Executive Officer
Date: May 5, 2000 /s/ Michael A. Sicuro
------------------------------------
Michael A. Sicuro
Managing Director and Chief
Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,069
<INT-BEARING-DEPOSITS> 8,320
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 42,954
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,215,888
<ALLOWANCE> 24,708<F2>
<TOTAL-ASSETS> 1,281,622
<DEPOSITS> 909,247
<SHORT-TERM> 15,500
<LIABILITIES-OTHER> 11,750
<LONG-TERM> 205,455
0
0
<COMMON> 126,399
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,281,622
<INTEREST-LOAN> 24,847
<INTEREST-INVEST> 1,672
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 26,519
<INTEREST-DEPOSIT> 13,001
<INTEREST-EXPENSE> 13,602
<INTEREST-INCOME-NET> 12,917
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 1,412
<EXPENSE-OTHER> 6,824<F1>
<INCOME-PRETAX> 7,067
<INCOME-PRE-EXTRAORDINARY> 7,067
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,244
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 4.79
<LOANS-NON> 8,625
<LOANS-PAST> 0
<LOANS-TROUBLED> 12,925
<LOANS-PROBLEM> 43,092
<ALLOWANCE-OPEN> 19,895
<CHARGE-OFFS> 778
<RECOVERIES> 377
<ALLOWANCE-CLOSE> 24,708
<ALLOWANCE-DOMESTIC> 24,708
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Included in (expense-other) is a $1,400,000 nonrecurring charge relating to
the relocation of Imperial Capital Bank's headquarters to La Jolla, California.
<F2>The allowance for loan losses increased by $4,614,000 due to the acquisition
of the ICCMAC Multifamily and Commercial Trust 1999-1 during the period.
</FN>
</TABLE>
