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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 June 30, 1996
IMPERIAL BANCORP
(Exact name of registrant as specified in its charter)
California 95-2575576
(State or other jurisdiction of (I.R.S. Employer
incorporation 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 June 30, 1996:
15,135,478 shares.
Debt Securities : Floating Rate Notes Due 1999 and Fixed Rate Debentures Due
1999. As of June 30, 1996, $4,167,000 in principal amount of
such Notes and $1,082,000 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.
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IMPERIAL BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE AND SIX MONTHS ENDED JUNE 30, 1996
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 the three and six months
ended June 30, 1996.
PERFORMANCE SUMMARY
Net income for the second quarter rose to $28.7 million, or $1.82 per
share, from $4.6 million or $0.30 per share, earned in the second
quarter of 1995. Income as measured by return on average total assets
was 4.29% for the three months ended June 30, 1996, as compared to
0.82% for the three months ended June 30, 1995. Return on average
stockholders' equity was 45.12% for the quarter ended June 30, 1996,
an increase from the 9.02% return on average stockholders' equity for
the same period of 1995. For the six months ended June 30, 1996, net
income totaled $35.4 million as compared to $9.3 million for the same
period of 1995. Return on average assets and stockholders' equity for
the first half of 1996 was 2.72% and 29.16%, respectively, as compared
to 0.83% and 9.14%, respectively, from the same period of 1995.
Earnings reported for the second quarter were significantly impacted
by gains realized from the sale of a portion of the Company's
investment in Imperial Credit Industries, Inc. (NASDAQ-NMS-ICII). In
April 1996, the Company sold 1.5 million shares of ICII as a part of
an offering which included the sale of approximately 2.2 million new
ICII shares by ICII to the public. An additional 0.5 million shares
were sold by ICII to the public in May 1996. The Company recorded a
$25.6 million pre-tax gain on the sale of its ICII shares. After the
sales of ICII shares, the book value of ICII common stock approximated
$8.72 per share. As such, the Company recorded a $10.8 million pre-tax
gain which approximated the excess of ICII's book value per share over
the book value of the Company's remaining investment in ICII. At June
30, 1996, the Company's investment in ICII approximated 4.7 million
shares representing 25% ownership. In addition, the Company realized a
significant increase in equity in the net earnings of ICII for second
quarter 1996. In June 1996, ICII completed an offering in which it
sold approximately 2.0 million shares of its subsidiary Southern
Pacific Funding Corporation (NYSE-SFC) to the public. In addition to
the SFC shares sold by ICII, 5.0 million new SFC shares were issued
and sold to the public. The Company's share of the pre-tax gains
realized by ICII as a result of this transaction approximated $8.9
million and is included in "Equity in net earnings of Imperial Credit
Industries Inc."
Also during the second quarter, the Company made a decision to
discontinue Imperial Bank's (the "Bank") precious metals line of
business. In doing so, the Company provided approximately $6.7
million, net of tax, for the loss from operations in the discontinued
division.
Excluding the gains associated with the Company's investment in ICII
and the losses associated with the discontinued precious metals
business, the Company earned approximately $8.2 million, or $0.52 per
share, for the second quarter of 1996 and $14.7 million, or $0.92 per
share, for the six months ended June 30, 1996. From its core
operations, the Company's return on average total assets approximated
1.23% for the second quarter of 1996 and 1.13% for the first half of
1996. Return on average stockholders' equity from core operations
approximated 12.91% for the second quarter and 12.09% for the first
half of 1996. The increase in core earnings for the second quarter and
first half of 1996 was attributable mainly to the growth in average
loans from the same periods of 1995 which resulted in an improved net
interest margin and increased net interest income. Net interest income
and net interest margin were $34.9 million and 6.0%, respectively, for
the quarter ended June 30, 1996, as compared to $27.5 million and
5.6%, respectively, for the quarter ended June 30, 1995. For the six
months ended June 30, 1996, net interest income and net interest
margin were $67.1 million and 5.9%, respectively, as compared to $52.4
million and 5.5%, respectively, for the same period of 1995.
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2 Imperial Bancorp
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Noninterest income for the quarter ended June 30, 1996 totaled $59.6
million, an improvement from $8.8 million for the same period of 1995.
For the first half of 1996, noninterest income totaled $71.9 million
as compared to $16.7 million for the first half of 1995. The increase
in noninterest income for the three and six months ended June 30, 1996
was primarily attributable to the gains realized from the sale of ICII
common stock and the increased equity in the net earnings of ICII. In
addition, the Company recorded improvements in other fee based income
including gains from the origination and sale of SBA loans, service
charges on deposits and trust revenues from the Bank's trust
subsidiary, Imperial Trust Company.
Noninterest expenses amounted to $33.0 million for the quarter ended
June 30, 1996 as compared to $26.5 million reported for the same
period of 1995. For the six months ended June 30, 1996, noninterest
expenses totaled $63.2 million as compared to $52.6 million for the
same period. The increase in noninterest expense for the quarter and
six months ended June 30, 1996 was primarily due to a $3.1 million and
$7.1 million increase, respectively, in salary and employee benefits
expense over the same periods in 1995. In addition, the Company
recorded charitable donation expenses of $3.6 million in the second
quarter of 1996 and $4.7 million in the first six months of 1996.
Offsetting the increase in personnel costs and charitable donations
were reductions in regulatory assessments, real estate owned ("REO")
expense and data processing costs. Regulatory assessments for the
quarter and six months ended June 30, 1996 decreased $1.2 million and
$2.3 million, respectively, from the same periods of 1995 due to the
reduction in the FDIC deposit insurance premium in late 1995. REO
expenses declined $0.9 million and $1.4 million, respectively, for the
second quarter and first half of 1996 as levels of REO have decreased
significantly from the same periods of 1995.
At June 30, 1996, the Company's total assets were $3.1 billion, total
loans were $1.8 billion and stockholders' equity and allowance for
loan losses totaled $304 million. This compares to total assets of
$2.8 billion, total loans of $1.7 billion and stockholders' equity and
allowance for loan losses of $266 million at December 31, 1995.
Total deposits at June 30, 1996, amounted to $2.7 billion which
included $1.3 billion, or 50%, noninterest bearing demand deposits.
This favorably compares to total deposits of $2.4 billion at December
31, 1995 which included $1.1 billion, or 48%, noninterest bearing
demand deposits. The overall funding base of the Company is enhanced
by a sizable level of demand deposits resulting from the Company's
long standing relationships with the real estate services industry.
The Company's average demand deposits and average stockholders' equity
funded 47% of average total assets for the six months ended June 30,
1996, as compared to 44% for the six months ended June 30, 1995.
At June 30, 1996, the allowance for loan losses amounted to $38.5
million or 2.1% of total loans as compared to $37.4 million or 2.2% of
total loans at December 31, 1995 and $38.4 million or 2.5% of total
loans at June 30, 1995. The provision for loan losses for the quarter
ended June 30, 1996 totaled $3.4 million as compared to $3.2 million
reported for the quarter ended June 30, 1995. Net charge-offs for the
quarter ended June 30, 1996 totaled $4.0 million, a $0.3 million
decrease from the levels experienced in the same quarter of 1995. The
provision for loan losses for the six months ended June 30, 1996
totaled $6.0 million as compared to $4.6 million reported for the six
months ended June 30, 1995. Net charge-offs for the first half of 1996
totaled $4.9 million, a $1.2 million decrease from the levels
experienced in the first half of 1995.
Nonaccrual loans of $20.9 million at June 30, 1996, decreased $9.9
million from March 31, 1996 and decreased $8.1 million from year end
1995. The allowance for loan losses coverage of nonaccrual loans at
June 30, 1996 approximated 185%, a decrease from 266% at June 30, 1995
and increase from 121% at December 31, 1995. REO of $7.9 million at
June 30, 1996, decreased $15.0 million from June 30, 1995 and $2.4
million from year end 1995.
Imperial Bank is classified "Well Capitalized" with leverage, Tier I
and total capital ratios at June 30, 1996, of 9.2%, 10.1% and 11.4%,
respectively, as compared to 8.6%, 9.8% and 11.0%, respectively, the
year earlier.
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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. For the quarter and six months ended June 30, 1996, net
interest income increased to $34.9 million and $67.1 million,
respectively, from $27.5 million and $52.4 million, respectively, for
the same periods of 1995.
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
June 30, June 30,
(In Thousands) 1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Interest income........ $50,326 $43,234 $98,416 $81,661
Interest expense....... 15,437 15,692 31,306 29,228
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Net interest income $34,889 $27,542 $67,110 $52,433
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Net interest margin 6.0% 5.6% 5.9% 5.5%
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</TABLE>
The Company's net interest margin increased to 6.0% and 5.9% for the
second quarter and first six months of 1996, respectively, from 5.6%
and 5.5%, respectively, for the same periods of 1995. The increased
net interest income and spread resulted from the $275 million and $291
million growth in average loans for the second quarter and first half
of 1996, respectively, from the second quarter and first half of 1995.
In addition, net interest income and net interest margin improved due
to the expiration of derivative financial instruments which had a
negative impact on the Company's net interest margin in the second
quarter and first half of 1995. As illustrated by Table 1 - Average
Balances, Yields and Rates Paid (see page 18) and Table 2 - Analysis
of Changes in Net Interest Margin (see page 19), the growth in the
Company's loan portfolio had a much greater impact on net interest
income for the quarter and six months ended June 30, 1996 than the
change in rates. Although the Company's average base lending rate
dropped approximately 60 basis points from period to period, the
Company experienced an increase in average loan rates as it was no
longer negatively impacted by its derivative financial instruments.
These instruments reduced net interest income and net interest margin
$2.9 million and 45 basis points, respectively, in the second quarter
of 1995 and $5.9 million and 52 basis points, respectively, in the
first half of 1995 while having no material impact in 1996. Offsetting
the increased interest income and rates recorded on loans were lower
rates earned on the Company's trading and available for sale
portfolios in the second quarter and first half of 1996.
Concurrently, the Company's average interest-bearing liabilities for
the second quarter of 1996, primarily time certificates of deposit
("CD"), have grown $105 million from the second quarter of 1995 in
order to support loan demand. In addition, average demand deposit
levels were up $235 million from the prior year as deposits inflows
from the Company's real estate related customers have increased. As a
result of lower interest rates, overall funding costs as a percentage
of total interest-bearing liabilities have been reduced. Offsetting
this decrease in rates paid is the volume increase in CDs greater than
$100,000.
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 $5.2 million
and $4.0 million, respectively, for the six months ended June 30, 1996
and 1995. The net interest margin for each period would have been 5.4%
and 5.0%, respectively.
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Noninterest Income: Noninterest income amounted to $59.6 million for
the second quarter of 1996 as compared to $8.8 million for the same
period of 1995. For the six months ended June 30, 1996, noninterest
income totaled $71.9 million as compared to $16.7 million in the prior
year. The table below shows the major components of noninterest
income.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
(In Thousands) 1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Service charges on deposit accounts. $ 1,236 $ 1,056 $ 2,494 $ 2,058
Trust fees.......................... 2,163 1,892 4,271 3,807
Gain on origination and sale of
loans.............................. 1,368 429 1,673 960
Equity in net earnings of Imperial
Credit Industries, Inc............. 10,651 1,123 13,511 1,057
Gain on sale of Imperial Credit
Industries, Inc. common stock...... 36,411 -- 36,411 --
Other service charges and fees...... 2,205 1,577 3,997 2,954
Merchant and credit card fees....... 597 1,575 1,036 3,014
Gain on securities available for
sale............................... 13 (76) 242 267
Gain on trading account securities.. 657 828 1,806 1,146
Appreciation of donated Imperial
Credit Industries, Inc. common
stock.............................. 2,726 -- 3,505 --
Other income........................ 1,613 428 2,985 1,410
Total............................... $59,640 $ 8,832 $71,931 $16,673
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</TABLE>
Noninterest income reported for the second quarter was significantly
impacted by gains realized from the sale of a portion of the Company's
investment in ICII. In April 1996, the Company sold 1.5 million shares
of ICII as a part of an offering which included the sale of
approximately 2.2 million new ICII shares by ICII to the public. An
additional 0.5 million shares were sold by ICII to the public in May
1996. The Company recorded a $25.6 million pre-tax gain on the sale of
its ICII shares. After the sales of ICII shares, the book value of
ICII common stock approximated $8.72 per share. As such, the Company
recorded a $10.8 million pre-tax gain which approximated the excess of
ICII's book value per share over the book value of the Company's
remaining investment in ICII. At June 30, 1996, the Company's
investment in ICII approximated 4.7 million shares representing
approximately 25% ownership. The total gains of $36.4 million related
to these transactions are reflected in the consolidated Statement of
Income as "Gain on sale of Imperial Credit Industries, Inc. common
stock."
In addition, the Company realized a significant increase in equity in
the net earnings of ICII for the second quarter of 1996. In June 1996,
ICII sold approximately 2.0 million shares of their subsidiary
Southern Pacific Funding Corporation (NYSE-SFC) in connection with
SFC's initial public offering of 5.0 million shares. ICII's sale of
its SFC stock resulted in a pre-tax gain to ICII of $62.0 million. The
Company's net equity in this gain realized by ICII approximated $8.9
million pre-tax and is included in the consolidated Statement of
Income as "Equity in the net earnings of Imperial Credit Industries,
Inc." Excluding the gains from the SFC transaction, the equity in net
earnings of ICII increased $0.6 million and $3.6 million for the
second quarter and first six months of 1996 despite the reduction in
ownership percentage to approximately 25%. These increases were
attributable to ICII's greater volume and higher profitability on loan
sales executed through securitization transactions.
Excluding ICII, noninterest income for the second quarter and first
six months of 1996 improved $3.7 million and $5.3 million,
respectively, from the same periods of 1995. This improvement
partially results from $2.7 million of appreciation of ICII stock
which was contributed to a charitable organization during the second
quarter. The appreciation represents the difference between the market
value and the book value of the ICII shares on the date they were
donated. The Company recorded a corresponding charitable contribution
expense in other expenses during the quarter (see Noninterest
Expense). The Company made a similar donation in the first quarter of
1996 resulting in appreciation of donated stock totaling $3.5 million
for the six months ended June 30, 1996.
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Also, the Company recorded improvements in other fee income
businesses. The Company recorded higher gains from the origination and
sales of SBA loans as loan volumes have increased over the prior year.
This line of business generated an additional $0.9 million and $0.7
million, respectively, to noninterest income for the quarter and six
months ended June 30, 1996. Trust income from Imperial Trust Company
increased $0.3 million and $0.5 million, respectively, from the second
quarter and first six months of 1995 as a result of the Trust
Company's increase in assets under management and administration.
Service charges on deposit accounts for the second quarter and first
six months of 1996 have increased $0.2 million and $0.4 million,
respectively, from the same periods in the prior year primarily due to
the increase in average demand deposits from period to period. The
$0.6 million and $1.0 million increase, respectively, in other service
charges and fees for the second quarter and first half of 1996 related
to various activities, most significant of which were the following:
commissions related to the sale of non-proprietary mutual funds
increased $0.1 million and $0.3 million, respectively, and fees
related to loan processing and servicing were also up $0.4 million and
$0.6 million, respectively. These increases were all related to
increased volumes in the respective operations. Other income recorded
in the quarter and six months ended June 30, 1996 improved $1.2
million and $1.6 million, respectively, over the same periods of 1995.
Partially responsible was a $0.4 million and $0.7 million increase,
respectively, from the same periods in 1995 in income recognized from
the exercise and sale of stock warrants.
Offsetting the overall increase in noninterest income was a $1.0
million and $2.0 million decrease, respectively, in merchant and
credit card fees for the quarter and six months ended June 30, 1996
from the same periods of 1995. As a result of the fourth quarter 1995
sale of a portion of the Bank's merchant card account portfolio, fee
income for the second quarter and first six months of 1996 related to
this line of business decreased from the same periods of 1995.
Noninterest Expense: Noninterest expense totaled $33.0 million for
the quarter ended June 30, 1996 as compared to $26.5 million for the
same period in the prior year. For the six months ended June 30, 1996,
noninterest expense was $63.1 million up from $52.6 million in the
first half of 1995. The table below shows the major components of
noninterest expense.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
(In Thousands) 1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Salary and employee benefits.. $14,426 $11,350 $29,924 $22,781
Net occupancy expense......... 2,233 2,193 4,465 4,293
Furniture and equipment....... 1,283 1,262 2,419 2,496
Data processing............... 1,561 1,927 3,057 4,000
Customer services............. 2,794 1,960 5,231 4,001
Net real estate owned expense. 298 1,214 948 2,328
Regulatory assessments........ 39 1,242 226 2,512
Professional and consulting... 1,830 1,093 3,452 1,913
Business development.......... 739 796 1,729 1,606
Charitable donations.......... 3,627 39 4,668 65
Other expense................. 4,157 3,446 7,031 6,572
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Total......................... $32,987 $26,522 $63,150 $52,567
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</TABLE>
For both the quarter and six months ended June 30, 1996, the increase
in noninterest expense was partially attributable to the charitable
donations of ICII common stock made in both the first and second
quarters of 1996 (see Noninterest Income).
Excluding the impact of these donations, noninterest expense rose $2.8
million and $5.9 million, respectively, from the second quarter and
first half of 1995. Primarily attributable was increased salary and
benefit costs experienced in the first half of 1996. In addition to
opening a new regional banking office in Fresno, California, the
Company's focus on statewide growth has centered around an investment
in people resulting in a $3.3 million increase in personnel expenses
for the first half of 1996 over the first half of 1995. Also, the
Company adopted an additional deferred compensation plan on January 1,
1996 which added approximately $1.8 million to benefit costs in the
first half of 1996. As a result of the greater profitability realized
for the first half of 1996 and expected through the remainder of the
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year, expenses related to incentive compensation for the six months
ended June 30, 1996 increased $1.5 million over the same period of the
prior year. Effective January 1, 1996, the Company increased the match
on its 401-K Plan which in turn increased expenses related to this
plan by $0.3 million for the first half of 1996 over the same period
of 1995. All of these factors were also responsible for the increase
in compensation costs in the second quarter of 1996 over the same
quarter of 1995.
Service costs in the second quarter and first half of 1996 related to
demand deposits including accounting, courier and other deposit
related services increased $0.8 million and $1.2 million,
respectively, from the same periods of 1995 due to increased average
demand deposit volumes during the first half of 1996 as these costs
are a function of deposit volume and interest rates. The Company
incurred higher professional and consulting fees during the second
quarter and first half of 1996. Increased consulting expenses in the
second quarter and first six months of 1996 accounted for
approximately $0.4 million and $0.8 million, respectively, of the
increase while legal fee expense was up $0.4 million and $0.7 million,
respectively. The Company has retained the services of outside
consultants to assist in the implementation of its cost containment
and revenue enhancement programs. Other expenses for the quarter and
six months ended June 30, 1996 increased $0.7 million and $0.5
million, respectively, over the same periods in the prior year. The
Company incurred higher amortization expense related to the deposit
premium paid in early 1995 to acquire the insured deposits of Guardian
Bank. This increase approximated $0.1 million and $0.3 million,
respectively, for the second quarter and first half of 1996 over the
same periods of 1995.
Offsetting these increases in noninterest expense were decreases in
the following components of noninterest expense. Regulatory
assessments for the quarter and six months ended June 30, 1996
decreased $1.2 million and $2.3 million, respectively, from the same
periods of 1995 due to a reduction in the FDIC deposit insurance
premium in the third quarter of 1995. Also, the Company experienced
reduced data processing costs in the second quarter and first half of
1996 which declined $0.4 million and $1.0 million, respectively, from
the same periods of 1995. The reduced costs were primarily the result
of the fourth quarter 1995 sale of a portion of the merchant card
account portfolio as the cost to service the accounts declined $0.4
million and $0.8 million, respectively, from the quarter and six
months ended June 30, 1995. REO expenses totaled $0.3 million and $0.9
million, respectively, for the quarter and six months ended June 30,
1996 a decrease of $0.9 million and $1.4 million from the same periods
of 1995. In the second quarter and first half of the prior year, the
Company recorded $0.5 million and $1.0 million, respectively, in
provisions for REO; no provisions for REO were required in the first
half of 1996.
Income Taxes: The Company recorded income tax expense of $23.4
million and $28.4 million, respectively, for the quarter and six
months ended June 30, 1996 representing effective tax rates of
approximately 40.2% and 40.7%, respectively. For the same periods of
1995, the Company's income tax expense and effective tax rate
approximated $2.4 million and 35.5%, respectively, and $3.3 million
and 27.2%, respectively. 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. Also in the first half
of 1995, the Company reduced the valuation allowance on its deferred
tax assets by approximately $0.8 million. Excluding these items, the
Company's effective tax rate would have been 41.6% and 41.4%,
respectively, for the second quarter and first six months of 1995. At
June 30, 1996, the Company had a net deferred tax receivable of $0.8
million, as compared to a $5.5 million net deferred tax receivable at
December 31, 1995. The Company's net deferred tax receivable is
supported by carryback and carryforward provisions of the tax laws as
well as the Company's level of taxable income recognized by the
Company in the first half of 1996 and its projection of taxable income
for the remainder of 1996.
Discontinued Operation: In the second quarter of 1996, the
management of the Company decided to discontinue the precious metals
business which had been engaged in trading and leasing of precious
metals in addition to making loans secured by precious metals since
1993. The decision to exit this line of business was made in the wake
of several operational losses for which the Company provided
approximately $6.7 million, net of tax, in the second quarter. This
provision, in addition to all of the results of operations from this
division, are reflected in the consolidated Statement of Income
"(Loss) income from operations of discontinued operation, net of tax."
The Company expects substantially all of the activities of the
precious metals division to be ended by December 31, 1996.
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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 long standing
relationships with the real estate services industry which have
provided a relatively stable and low cost funding base. Demand
deposits averaged $975 million for the six months ended June 30, 1996
as compared to $780 million for the same period of 1995. The Company's
average demand deposits and average stockholders' equity funded 47%
and 44%, respectively, of average total assets for the quarters ended
June 30, 1996 and 1995.
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
of 1996, the Company experienced a net cash outflow from its investing
activities of $77 million. This net outflow in investing activities
resulted primarily from the growth in the Company's loan portfolio, an
outflow of $151 million. The outflows were offset by the $271 million
net cash provided by the Company's financing activities consisting
mainly of deposit inflows including $70 million in certificates of
deposit and $222 million in demand deposits, money market and savings
accounts. These deposit inflows were partially offset by $57 million
of outflows attributable to short-term 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 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
("ALCO") 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 June 30,
1996, the Company maintained a positive one year gap of approximately
$610 million as its interest rate sensitive assets exceeded its
interest rate sensitive liabilities. This positive cumulative gap
positions indicate that the Company is asset sensitive and positioned
for increased net interest income during a period of rising interest
rates but also exposed to an adverse impact on net interest income in
a falling rate environment.
The Company's net interest margin is 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 which 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
- --------------------------------------------------------------------------------
8 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
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.
Of the derivative financial contracts entered into in late 1993 and
1994, which included interest rate swaps with embedded options and
associated written options, and purchased options, many expired during
1995 although some were still outstanding at year end 1995. Those
swaps outstanding from 1995 matured in the first quarter of 1996. All
of the embedded and linked options expired during 1995.
The combined economic impact of the Company's derivative financial
instruments discussed above was a reduction in net interest income and
net interest margin of $2.9 million and 45 basis points, respectively,
in the second quarter of 1995, and $5.9 million and 52 basis points,
respectively, in the first half of 1995. The impact of these
instruments for the quarter and six months ended June 30, 1996 was not
material.
During 1995, the Company revised its approach as it related to
protecting net interest income from a narrowing of the Prime Rate and
LIBOR spread. The concern with the spread between the two indices
narrowing was reduced as the Prime Rate moved toward the
characteristics of a retail rate and away from those of a wholesale
rate. This was evidenced by the interest rate swap markets in 1995 as
the spread between Prime and LIBOR increased from approximately 217
basis points to 250 basis points. Although the Company remains asset
sensitive, management had fewer concerns about potential compression
of the Company's interest rate margin in early 1995 then it did in
late 1993 and early 1994. The Company developed strategies to protect
both net interest income and net interest margin from significant
movements in interest rates both up and down. These strategies involve
purchasing interest rate floors and caps with strike prices which
generally adjust quarterly and are approximately 200 basis points
below or above (depending on the instrument) current market rates.
Based on its strategy and the general asset sensitive nature of the
balance sheet, the Company purchased over the counter interest rate
floors in the first quarter of 1995 to protect against a drop in
interest rates. The interest rate floors, with a notional value of
$500 million at June 30, 1996, mature in the first quarter of 1997. In
the first and second quarters of 1996, the Company purchased $2.0
billion of exchange traded interest rate floors. The floors mature at
the rate of $500 million per quarter beginning in the second quarter
of 1997. The floors maturing in the first, second and third quarter of
1997 provide protection to the Company in the event that the three
month LIBOR drops below the strike price of 4.0% associated with the
floor while the remaining floors have a strike price of 4.25%. The
unrealized gain on the floors approximated $125,000 at June 30, 1996.
During 1995, the Company also purchased both exchange traded and over
the counter interest rate caps to protect its fixed rate loans from an
increase in interest rates which would narrow the Company's net
interest margin. The exchange traded caps had a notional value of $0.4
billion at June 30, 1996 and mature in the third quarter of 1996. The
over the counter caps had a notional value of $100 million at June 30,
1996. These caps reset in September of 1996 and mature in December of
1996. All of the caps provide protection to the Company in the event
that the three month LIBOR rises above the strike prices of the caps
which range from 8.0% to 8.5%. There were no material unrealized gains
or losses on these caps at June 30, 1996. In the first and second
quarters of 1996, the Company purchased additional exchange traded
interest rate caps with a notional value of $1.0 billion at June 30,
1996. The caps provide protection in the event that the three month
LIBOR increases above the 6.5% strike price of the caps. These caps
mature at the rate of $500 million per quarter in the fourth quarter
of 1996 and the first quarter of 1997. The unrealized gains on these
caps at June 30, 1996 approximated $388,000.
- --------------------------------------------------------------------------------
9 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
ASSET QUALITY
Nonaccrual loans, restructured loans and real estate owned:
Nonaccrual loans, which includes loans 90 days or more past due,
totaled $20.9 million at June 30, 1996 as compared to $28.9 million at
year end 1995 and $14.5 million at June 30, 1995. The decrease from
year end 1995 was related in part to charge-offs of loans on
nonaccrual at year end, approximately $2.5 million, paydowns
approximating $2.5 million and delinquencies which were cured,
approximately $4.6 million. 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 on
nonaccrual loans only as collected.
Restructured loans, loans outstanding whose original terms have been
modified, totaled $45.0 million at June 30, 1996 as compared to $33.6
million at prior year end and $4.1 million at June 30, 1995. The
increase in restructured loans from the second quarter of 1995
resulted from the modification of two real estate secured loans
totaling $29.5 million in the fourth quarter of 1995. The modified
loans carried market rates of interest but are classified as
restructured because the Company anticipates debt forgiveness on one
of the loans in return for a partial principal paydown and additional
collateral and because the Company deferred a principal reduction on
the other. All restructured loans were current as to principal and
interest at June 30, 1996.
Real estate owned of $7.9 million, net of a $0.4 valuation allowance,
at June 30, 1996 decreased $2.4 million from year end 1995 and $15.0
million from June 30, 1995.
Detailed information regarding nonaccrual loans, restructured loans
and real estate owned is presented below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30,
(In Thousands) 1996 1996 1995 1995 1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial loans........ $10,419 $14,766 $11,714 $ 9,308 $ 7,358
Real estate loans....... 10,434 16,022 17,212 13,938 7,121
-------------------------------------------------------------------------------
Total nonaccrual loans $20,853 $30,788 $28,926 $23,246 $14,479
-------------------------------------------------------------------------------
Restructured loans $44,962 $35,966 $33,608 $ 4,083 $ 4,097
-------------------------------------------------------------------------------
Real estate owned:
REO, gross.............. $ 8,306 $10,377 $15,015 $17,504 $26,272
Less valuation allowance (366) (640) (4,686) (4,379) (3,381)
-------------------------------------------------------------------------------
REO, net $ 7,940 $ 9,737 $10,329 $13,125 $22,891
-------------------------------------------------------------------------------
Total $73,755 $76,491 $72,863 $40,454 $41,467
-------------------------------------------------------------------------------
</TABLE>
At June 30, 1996, the recorded investment in loans for which
impairment has been recognized in accordance with FAS 114 totaled
$137.3 million, of which $20.9 million were on nonaccrual status and
$41.0 were classified as restructured loans. A significant portion,
$108.8 million, of the impaired loans were secured by real estate.
Impaired loans totaling $106.9 million required a specific allowance
for potential losses. The specific allowance for potential losses
related to such loans was $13.9 million. The remaining $30.4 million
of loans classified as impaired did not require a specific allowance
for potential losses. Impaired loans averaged $128.7 million during
the six months ended June 30, 1996. During the first half of 1996,
total interest recognized on the impaired loan portfolio, on a cash
basis, was $4.8 million. At June 30, 1996, $108.4 million of the
impaired loans were current as to principal and interest. There were
no loans classified as potential problems at June 30, 1996.
Allowance and provision for loan losses: The allowance for loan
losses is maintained at a level considered appropriate by management
and is based on an ongoing assessment of the risks inherent in the
loan portfolio. The allowance for loan losses is increased by the
provision for loan losses which is charged against current period
operating results, and is decreased by the amount of net charge-offs
during the period. 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
- --------------------------------------------------------------------------------
10 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
general economic conditions (especially in California), loan portfolio
composition and concentrations, prior loan loss experience, collateral
value, identification of problem and potential problem loans and other
relevant data to identify the risks in the loan portfolio. While
management believes that the allowance for loan losses is adequate at
June 30, 1996, future additions to the allowance will be subject to
continuing evaluation of inherent risk in the loan portfolio.
At June 30, 1996, the allowance for loan losses amounted to $38.5
million, or 2.08% of total loans, as compared to $37.4 million, or
2.20% of total loans, at December 31, 1995 and $38.5 million, or 2.49%
of total loans, at June 30, 1995. The following table summarizes
changes in the allowance for loan losses.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Six months ended June 30, (In Thousands) 1996 1995
-------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 37,402 $ 40,072
-------------------------------------------------------------------------------
Loans charged off:
Commercial......................................... (4,651) (3,712)
Real estate........................................ (1,451) (3,501)
Consumer........................................... (13) (37)
-------------------------------------------------------------------------------
Total loans charged off $ (6,115) $ (7,250)
-------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial......................................... 1,154 1,042
Real estate........................................ 11 43
Consumer........................................... 13 21
-------------------------------------------------------------------------------
Total loan recoveries $ 1,178 $ 1,106
-------------------------------------------------------------------------------
Net loans charged off............................... (4,937) (6,144)
Provision for loan losses........................... 6,026 4,556
Provision for loan losses of discontinued operation. 26 --
-------------------------------------------------------------------------------
Balance, end of period $ 38,517 $ 38,484
-------------------------------------------------------------------------------
Loans outstanding, end of period $1,849,653 $1,544,684
-------------------------------------------------------------------------------
Average loans outstanding $1,754,963 $1,464,289
-------------------------------------------------------------------------------
Ratio of net charge-offs to average loans........... 0.56%/(1)/ 0.84%/(1)/
Ratio of allowance for loan losses to average loans. 2.19 2.63
Ratio of allowance for loan losses to loans
outstanding at June 30............................. 2.08 2.49
Ratio of allowance for loan losses to nonaccrual
loans.............................................. 185 266
Ratio of provision for loan losses to net charge-offs 123 74
-------------------------------------------------------------------------------
</TABLE>
/(1)/ Annualized
The provision for loan losses totaled $3.4 million and $6.0 million,
respectively, for the quarter and six months ended June 30, 1996 as
compared to $3.2 million and $4.6 million, respectively, for the same
periods of 1995. Net charge-offs totaled $4.0 million and $4.9
million, respectively, for the three and six months ended June 30,
1996 as compared to $4.2 million and $6.1 million, respectively, in
the same periods of 1995. As a percentage of average loans
outstanding, annualized net charge-offs were 0.90% and 1.13%,
respectively, for the three months ended June 30, 1996 and 1995 and
0.56% and 0.84%, respectively, for the six months ended June 30, 1996.
- --------------------------------------------------------------------------------
11 [LOGO OF IMPERIAL BANCORP APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
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 on a smaller scale, the exercise of employee
stock options. At June 30, 1996, shareholders' equity totaled $265
million as compared to $228 million at December 31, 1995. In the first
half of 1996, the Company recorded an additional $1.5 million of
shareholders' equity from the exercise of employee stock options. The
Company receives a tax deduction from the exercise of non-qualified
stock options for the difference between the option price and the
market value of the shares issued. The tax benefit associated with
shares exercised, which is recorded as a component of stockholders'
equity, approximated $1.3 million during the first six months of 1996.
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 legislation, 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 of consolidated
subsidiaries minus intangible assets. Based on the guidelines, the
Bank's Tier I and total capital ratios at June 30, 1996 were 10.1% and
11.4%, respectively, as compared to 9.8% and 11.0%, respectively, at
June 30, 1995.
Capital Ratios for Imperial Bank/(1)/
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
June 30, (In Thousands) 1996 1995
------------------------------------------------------------------------------
<S> <C> <C>
Tier I:
Common stockholders' equity and preferred stock/(2)/ $ 248,890 $ 199,537
Disallowed assets................................... (1,514) (2,523)
------------------------------------------------------------------------------
Tier I capital $ 247,376 $ 197,014
------------------------------------------------------------------------------
Tier II:
Allowance for loan losses allowable in Tier II...... 30,646 25,392
------------------------------------------------------------------------------
Total risk-based capital $ 278,022 $ 222,406
------------------------------------------------------------------------------
Risk-weighted balance sheet assets $2,092,578 $1,803,950
------------------------------------------------------------------------------
Risk-weighted off-balance sheet items:
Commitments to make or purchase loans............... 260,790 152,281
Standby letters of credit........................... 82,437 59,012
Other............................................... 15,870 18,626
------------------------------------------------------------------------------
Total risk-weighted off-balance sheet items $ 359,097 $ 229,919
------------------------------------------------------------------------------
Disallowed assets.................................... (1,514) (2,523)
Allowance for loan losses not included in Tier II.... (7,871) (13,092)
------------------------------------------------------------------------------
Total risk-weighted assets $2,442,290 $2,018,254
------------------------------------------------------------------------------
Risk-based capital ratios:
Tier I capital...................................... 10.1% 9.8%
Total capital....................................... 11.4 11.0
Leverage ratio...................................... 9.2 8.6
------------------------------------------------------------------------------
</TABLE>
/(1)/ As reported on the June 30, 1996 and 1995 FDIC Call Reports.
/(2)/ Excludes unrealized gain 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 was 9.2% at June 30, 1996 as compared to 8.6% at June 30, 1995
well in excess of its regulatory requirement.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("FAS 121"). FAS 121 requires that
long-lived assets and certain
- --------------------------------------------------------------------------------
12 [LOGO OF IMERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
identifiable intangibles held for use be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In addition, FAS 121
requires that long-lived assets and certain identifiable intangibles
held for disposal be reported at the lower of book value or fair value
less selling costs. The Company adopted FAS 121 on January 1, 1996.
The impact of adopting FAS 121 was not material to the results of
operations for the six months ended June 30, 1996.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("FAS
123"). FAS 123 applies to all transactions in which the Company
acquires goods or services by issuing equity instruments or by
incurring liabilities where the payment amounts are based on the
Company's common stock price, except for Employee Stock Ownership
Plans. A new method of accounting for stock based compensation
arrangements with employees is established by FAS 123. The new method
is based on the fair value method rather than the intrinsic value
method prescribed by APB Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB 25"). FAS 123 does not require companies to adopt
the new fair value method for purposes of preparing their basic
financial statements. Companies are allowed to either continue to use
the APB 25 method or adopt the fair value method set forth in FAS 123.
Companies that do not adopt the new fair value method in FAS 123 for
purposes of preparing their basic financial statements are required to
include pro-forma disclosures in the notes to the basic financial
statements. The pro-forma disclosures should include the impact of the
fair value method on net income and income per share as if FAS 123 had
been adopted. The Company adopted FAS 123 on January 1, 1996 but
management has decided not to adopt the fair value method set forth in
FAS 123 for purposes of accounting for its stock-based compensation.
In June 1996, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 125, Accounting for Liabilities
("FAS 125"). FAS 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities. These standards are based on consistent application of a
financial components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity recognizes
the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. FAS 125
provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. FAS 125 requires that liabilities and derivatives incurred
or obtained by transferors as part of a transfer of financial assets
be initially measured at fair value, if practicable. It also requires
that servicing assets and other retained interests in the transferred
assets be measured by allocating the previous carrying amount between
the assets sold, if any, and retained interest, if any, based on their
relative fair values at the date of the transfers. FAS 125 includes
specific provisions to deal with servicing assets or liabilities. FAS
125 will be effective for transactions occurring after December 31,
1996. It is not anticipated that the financial impact of this
statement will have material effect on the Company.
- --------------------------------------------------------------------------------
13 [LOGO IMPERIAL BANCORP]
<PAGE>
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(Unaudited)
Imperial Bancorp and Subsidiaries June 30, December 31,
(In Thousands, Except Share Data) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks......................... $ 408,912 $ 242,018
Trading account securities...................... 73,465 40,050
Securities available for sale................... 368,059 295,312
Securities held to maturity (fair value of $4,362
and $4,975 for 1996 and 1995, respectively).... 4,362 4,975
Federal funds sold and securities purchased under
resale agreements.............................. 280,300 425,300
Loans held for sale (fair value of $5,971 and
$2,842 for 1996 and 1995, respectively)........ 5,313 2,648
Loans:
Loans, net of unearned income and deferred loan
fees.......................................... 1,849,653 1,699,347
Less allowance for loan losses................. (38,517) (37,402)
- -------------------------------------------------------------------------------
Total net loans $1,811,136 $1,661,945
- -------------------------------------------------------------------------------
Premises and equipment, net..................... 16,851 16,003
Accrued interest receivable..................... 15,233 15,284
Real estate owned, net.......................... 7,940 10,329
Income taxes receivable......................... -- 4,008
Investment in Imperial Credit Industries, Inc... 49,898 36,126
Other assets.................................... 39,230 34,376
- -------------------------------------------------------------------------------
Total assets $3,080,699 $2,788,374
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand......................................... $1,337,763 $1,145,720
Savings........................................ 13,649 15,708
Money market................................... 468,002 435,674
Time--under $100,000........................... 201,782 227,262
Time--$100,000 and over........................ 634,545 539,252
- -------------------------------------------------------------------------------
Total deposits $2,655,741 $2,363,616
- -------------------------------------------------------------------------------
Accrued interest payable........................ 3,459 5,576
Income taxes payable............................ 7,649 --
Short-term borrowings........................... 102,883 159,636
Long-term borrowings............................ 5,249 5,906
Other liabilities............................... 40,609 25,404
- -------------------------------------------------------------------------------
Total liabilities $2,815,590 $2,560,138
- -------------------------------------------------------------------------------
Stockholders' equity:
Common stock--no par, 50,000,000 shares
authorized; 15,135,478 shares at June 30, 1996
and 13,821,125 shares at December 31, 1995
issued and outstanding........................ 161,006 130,780
Unrealized gain on securities available for sale,
net of tax.................................... 1,365 2,747
Retained earnings.............................. 102,738 94,709
- -------------------------------------------------------------------------------
Total stockholders' equity $ 265,109 $ 228,236
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $3,080,699 $2,788,374
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
14 [LOGO IMPERIAL BANCORP]
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
------------------------------------------------------------------------------------------------------
Three months ended Six months ended
Imperial Bancorp and Subsidiaries June 30, June 30,
(In Thousands, Except Per Share Data) Unaudited 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans.................................................... $42,385 $35,193 $82,705 $66,175
Trading account securities............................... 416 1,368 1,047 2,319
Securities available for sale............................ 5,289 4,178 10,079 8,925
Securities held to maturity.............................. 77 79 154 153
Federal funds sold and securities purchased under resale
agreements.............................................. 2,004 2,340 4,204 3,933
Loans held for sale...................................... 155 76 227 156
------------------------------------------------------------------------------------------------------
Total interest income $50,326 $43,234 $98,416 $81,661
------------------------------------------------------------------------------------------------------
Interest expense:
Deposits................................................. 14,747 14,427 29,800 26,442
Short-term borrowings.................................... 599 1,110 1,317 2,481
Long-term borrowings..................................... 91 155 189 305
------------------------------------------------------------------------------------------------------
Total interest expense $15,437 $15,692 $31,306 $29,228
------------------------------------------------------------------------------------------------------
Net interest income...................................... 34,889 27,542 67,110 52,433
Provision for loan losses................................ 3,357 3,175 6,026 4,556
------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses $31,532 $24,367 $61,084 $47,877
------------------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts...................... 1,236 1,056 2,494 2,058
Trust fees............................................... 2,163 1,892 4,271 3,807
Gain on origination and sale of loans.................... 1,368 429 1,673 960
Equity in net earnings of Imperial Credit Industries, Inc. 10,651 1,123 13,511 1,057
Gain on sale of Imperial Credit Industries, Inc. common
stock................................................... 36,411 -- 36,411 --
Other service charges and fees........................... 2,205 1,577 3,997 2,954
Merchant and credit card fees............................ 597 1,575 1,036 3,014
Gain on securities available for sale.................... 13 (76) 242 267
Gain on trading account securities....................... 657 828 1,806 1,146
Appreciation of donated Imperial Credit Industries, Inc.
common stock............................................ 2,726 -- 3,505 --
Other income............................................. 1,613 428 2,985 1,410
------------------------------------------------------------------------------------------------------
Total noninterest income $59,640 $ 8,832 $71,931 $16,673
------------------------------------------------------------------------------------------------------
Noninterest expense:
Salary and employee benefits............................. 14,426 11,350 29,924 22,781
Net occupancy expense.................................... 2,233 2,193 4,465 4,293
Furniture and equipment.................................. 1,283 1,262 2,419 2,496
Data processing.......................................... 1,561 1,927 3,057 4,000
Customer services........................................ 2,794 1,960 5,231 4,001
Net real estate owned expense............................ 298 1,214 948 2,328
Regulatory assessments. ................................. 39 1,242 226 2,512
Professional and consulting.............................. 1,830 1,093 3,452 1,913
Business development..................................... 739 796 1,729 1,606
Charitable donations..................................... 3,627 39 4,668 65
Other expense............................................ 4,157 3,446 7,031 6,572
------------------------------------------------------------------------------------------------------
Total noninterest expense $32,987 $26,522 $63,150 $52,567
------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes.... 58,185 6,677 69,865 11,983
Income tax provision..................................... 23,418 2,379 28,418 3,257
------------------------------------------------------------------------------------------------------
Net income from continuing operations $34,767 $ 4,298 $41,447 $ 8,726
------------------------------------------------------------------------------------------------------
(Loss) income from operations of discontinued operation,
net of tax.............................................. (6,114) 350 (5,998) 578
------------------------------------------------------------------------------------------------------
Net income $28,653 $ 4,648 $35,449 $ 9,304
------------------------------------------------------------------------------------------------------
Net income from continuing operations per share.......... $ 2.21 $ 0.28 $ 2.64 $ 0.57
(Loss) income per share of discontinued operations....... $ (0.39) $ 0.02 $ (0.38) $ 0.04
------------------------------------------------------------------------------------------------------
Net income per share $ 1.82 $ 0.30 $ 2.26 $ 0.61
------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- -------------------------------------------------------------------------------
15 [LOGO IMPERIAL BANCORP]
<PAGE>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Imperial Bancorp and Subsidiaries (Unaudited)
Six months ended June 30, (In Thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $35,449 $9,304
Adjustments for noncash charges (credits):
Depreciation and amortization............. (1,367) 638
Accretion of purchased loan discount...... (183) (1,260)
Provision for loan losses................. 6,026 4,556
Provision for real estate owned........... (5) 989
Provision for operational losses.......... 10,615 --
Equity in net earnings of Imperial Credit
Industries, Inc.......................... (13,511) (1,057)
Gain on sale of Imperial Credit
Industries, Inc. common stock............ (36,411) --
Gain on sale of real estate owned......... (23) (40)
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............................... -- 500
Gain on securities available for sale..... (242) (267)
Net change in trading account
securities............................... (33,415) 5,963
Net change in loans held for sale......... (2,665) (801)
Net change in accrued interest receivable. 51 (1,904)
Net change in accrued interest payable.... (2,117) 1,475
Net change in income taxes payable........ 11,657 (1,724)
Net change in other liabilities........... 4,590 3,233
Net change in other assets................ (5,465) 3,520
------------------------------------------------------------------------
Net cash (used in) provided by operating
activities $(27,016) $ 23,046
------------------------------------------------------------------------
Cash flows from investing activities:
Net change in deposits placed with banks..... -- (823)
Proceeds from securities held to maturity.... 14 14
Purchase of securities held to maturity...... -- (250)
Proceeds from sale of securities available
for sale.................................... 1,432,242 774,005
Proceeds from maturities of securities
available for sale.......................... 79,307 424,194
Purchase of securities available for sale....(1,582,858) (1,040,973)
Proceeds from sale of Imperial Credit
Industries, Inc. common stock............... 35,079 --
Net change in federal funds sold and
securities purchased under resale
agreements.................................. 145,000 (178,500)
Net change in loans.......................... (151,216) (183,412)
Capital expenditures......................... (2,805) (2,176)
Proceeds from sale of real estate owned...... 2,961 17,278
Proceeds from sale of real property held
for sale or investment...................... -- 309
Proceeds from sale of premises and
equipment................................... -- 9
------------------------------------------------------------------------
Net cash used in investing activities $(42,276) $(190,325)
------------------------------------------------------------------------
Cash flows from financing activities:
Net change in demand deposits, savings, and
money market accounts....................... 222,312 55,420
Net change in time deposits.................. 69,813 245,664
Net change in short-term borrowings.......... (56,753) (68,827)
Retirement of long-term borrowings........... (657) (70)
Proceeds from exercise of employee stock
options..................................... 1,489 578
Other........................................ (18) (11)
------------------------------------------------------------------------
Net cash provided by financing activities $236,186 $232,754
------------------------------------------------------------------------
Net change in cash and due from banks $166,894 $65,475
------------------------------------------------------------------------
Cash and due from banks, beginning of year $242,018 $168,626
------------------------------------------------------------------------
Cash and due from banks, end of period $408,912 $234,101
------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
16 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
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.
At December 31, 1994, the Company owned 3,867,368 shares, or 40.2% of
the common stock of Imperial Credit Industries, Inc. (NASDAQ-NMS-ICII)
("ICII"). During 1995, ICII common stock was split at the ratio of
three new shares for every two shares outstanding. In February 1996,
ICII declared and paid a 10% stock dividend. Combined, these events
increased shares held by the Company to 6,381,157. The Company's
ownership percentage dropped slightly from 40.2% to 39.7% as a result
of the exercise of employee stock options at ICII. In April 1996, the
Company sold 1,500,000 shares of ICII in a public offering for $26 per
share. As a part of that same offering, ICII sold 2,252,091 new shares
to the public. In May 1996, ICII sold an additional 562,813 new shares
to the public.
As a result of the second quarter sale and offerings, the Company's
ownership percentage was reduced to approximately 25%. The Company
does not exercise significant control over the operations of ICII and
as such the results of operations are accounted for in the Company's
financial statements as an equity investment. The equity investment in
ICII is carried at cost adjusted for changes in ICII's shareholder
equity including undistributed income. Transactions between ICII and
the Company occur during the normal course of business. All
transactions are carried out at substantially the same terms as those
prevailing at the same time for comparable transactions with others.
NOTE (3) STATEMENT OF CASH FLOWS
The following information supplements the statement of cash flows.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, (In Thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Interest paid............................................ $33,423 $27,753
Taxes refunded........................................... 244 --
Taxes paid............................................... 10,240 6,770
Significant noncash transactions:
Loans transferred to real estate owned................ 544 10,983
Donation of Imperial Credit Industries, Inc.
common stock......................................... 4,576 --
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
17 [LOGO OF IMPERIAL BANCORP]
<PAGE>
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 interest rates earned
and paid thereon. The yields are not presented on a tax equivalent basis as the
effects are not material.
<TABLE>
<CAPTION>
====================================================================================================================================
Three months ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Interest
Average Income/ Average Average Income/ Average Average
(In Thousands) Balance Expense Rate % Balance Expense Rate % Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans/(1)/........................... $ 1,783,815 $ 42,385/(2)/ 9.5% $ 1,508,567 $ 35,193/(2)/ 9.4% $ 1,754,963
Trading account securities........... 36,175 416 4.6 72,306 1,368 7.6 41,188
Securities available for sale........ 356,493 5,289 5.9 250,290 4,178 6.7 326,210
Securities held to maturity.......... 4,365 77 7.1 6,218 79 5.1 4,369
Federal funds sold and securities
purchased under resale agreements.. 153,223 2,004 5.2 154,814 2,340 6.0 157,847
Loans held for sale.................. 5,970 155 10.4 2,699 76 11.3 4,495
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-earning assets $ 2,340,041 $ 50,326 8.6% $ 1,994,894 $ 42,234 8.8% $ 2,289,072
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses.............. (39,438) (40,536) (39,324)
Cash................................... 254,896 196,601 241,347
Other assets........................... 118,677 123,705 116,432
------------- ------------- -------------
Total assets......................... $ 2,674,176 $ 2,274,664 $ 2,607,527
============= ============= =============
Interest-bearing liabilities:
Savings.............................. $ 17,708 $ 109 2.5% $ 21,309 $ 134 2.5% $ 18,787
Money market......................... 458,514 3,494 3.0 432,846 3,063 2.8 446,507
Time-under $100,000.................. 219,968 3,061 5.6 254,996 4,120 6.5 230,162
Time-$100,000 and over............... 605,795 8,083 5.3 458,821 7,110 6.2 601,201
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing deposits $ 1,301,985 $ 14,747 4.5% $ 1,167,972 $ 14,427 4.9% $ 1,296,657
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings................ 48,920 599 4.9 75,055 1,110 5.9 52,619
Long-term borrowings................. 5,490 91 6.6 8,109 155 7.6 5,698
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing liabilities $ 1,336,395 $ 15,437 4.6% $ 1,251,136 $ 15,692 5.0% $ 1,354,974
- ------------------------------------------------------------------------------------------------------------------------------------
Demand deposits........................ 1,023,150 788,540 974,569
Other liabilities...................... 40,629 28,755 34,848
Stockholders' equity................... 254,002 206,233 243,136
------------- ------------- -------------
Local liabilities and
stockholders' equity............... $ 2,674,176 $ 2,274,664 $ 2,607,527
============= ============= =============
Net interest income/net interest margin $ 34,889 6.0% $ 27,542 5.6%
===================== =========================
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Six months ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Interest
Income/ Average Average Income/ Average
(In Thousands) Expense Rate % Balance Expense Rate%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Loans/(1)/........................... $ 82,705/(2)/9.4% $ 1,464,289 $ 66,175/(2)/ 9.1%
Trading account securities........... 1,047 5.1 63,095 2,319 7.4
Securities available for sale........ 10,079 6.2 275,974 8,925 6.5
Securities held to maturity.......... 154 7.0 6,181 153 5.0
Federal funds sold and securities
purchased under resale agreements.. 4,204 5.3 132,297 3,933 5.9
Loans held for sale.................. 227 10.1 2,787 156 11.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-earning assets $ 98,416 8.6% $ 1,944,623 $ 81,661 8.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses.............. (40,471)
Cash................................... 200,049
Other assets........................... 127,624
-------------
Total assets......................... $ 2,231,825
=============
Interest-bearing liabilities:
Savings.............................. $ 232 2.5% $ 28,857 $ 359 2.5%
Money market......................... 6,646 3.0 448,193 6,172 2.8
Time-under $100,000.................. 6,580 5.7 237,201 7,409 6.2
Time-$100,000 and over............... 16,342 5.4 414,175 12,502 6.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing deposits $ 29,800 4.6% $ 1,128,426 $ 26,442 4.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings................ 1,317 5.0 85,020 2,481 5.8
Long-term borrowings................. 189 6.6 8,129 305 7.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing liabilities $ 31,306 4.6% $ 1,221,575 $ 29,228 4.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Demand deposits................................... 780,142
Other liabilities................................. 26,522
Stockholders' equity.............................. 203,586
-------------
Local liabilities and stockholders' equity...... $ 2,231,825
=============
Net interest income/net interest margin
$ 67,110 5.9% $ 52,433 5.5%
==================== =========================
====================================================================================================================================
</TABLE>
1) Includes nonaccrual loans.
2) Includes net loan fees of $4.4 million and $2.4 million for the six months
ended June 30, 1996 and 1995, respectively, and $1.4 million and $1.2 million
for the three months ended June 30, 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
18
<PAGE>
- -------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
-----------------------------------------------------------------------------------------------------
1996 Over 1995 1996 Over 1995
Rate/ Rate/
(In Thousands) Volume Rate Volume Total Volume Rate Volume Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase/(decrease) in:
Loans, net of unearned
income and deferred loan
fees . . . . . . . . . . 6,468 394 330 7,192 13,226 2,381 923 16,530
Trading account securities (704) (549) 301 (952) (811) (731) 270 (1,272)
Securities available for
sale . . . . . . . . . . 1,779 (479) (189) 1,111 1,633 (442) (37) 1,154
Securities held to
maturity . . . . . . . . (23) 30 (9) (2) (44) 34 11 1
Federal funds sold and
securities purchased
under resale agreements. (24) (297) (15) (336) 754 (379) (104) 271
Loans held for sale . . . 92 (6) (7) 79 96 (15) (10) 71
-----------------------------------------------------------------------------------------------------
Total interest income $ 7,588 $ (907) $ 411 $ 7,092 $14,854 $ 848 $ 1,053 $16,755
-----------------------------------------------------------------------------------------------------
Savings . . . . . . . . . (41) (2) 18 (25) (123) (4) -- (127)
Money market. . . . . . . 180 268 (17) 431 (24) 396 102 474
Time - under $100,000 . . (569) (595) 105 (1,059) (218) (572) (39) (829)
Time - $100,000 and over 2,278 (990) (315) 973 5,611 (1,167) (604) 3,840
-----------------------------------------------------------------------------------------------------
Total deposits $ 1,848 $(1,319) $(209) $ 320 $ 5,246 $(1,347) $ (541) $ 3,358
-----------------------------------------------------------------------------------------------------
Short-term borrowings . . (385) (188) 63 (511) (940) (338) 114 (1,164)
Long-term borrowings. . . (50) (20) 5 (64) (91) (35) 10 (116)
-----------------------------------------------------------------------------------------------------
Total interest expense $ 1,413 $(1,527) $(141) $ (255) $4,215 $(1,720) $ (417) $ 2,078
-----------------------------------------------------------------------------------------------------
Changes in net interest
income $ 6,175 $ 620 $ 552 $ 7,347 $10,639 $ 2,568 $1,470 $14,677
-----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
19 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- ----------------------------------------------------------------------------
TABLE 3 - SECURITIES
(a) Securities Held to Maturity
The following is a summary for the major categories of securities held
to maturity.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1996
Industrial development bonds... $ 4,362 $ -- $ -- $ 4,362
----------------------------------------------------------------------------
Total.......................... $ 4,362 $ -- $ -- $ 4,362
----------------------------------------------------------------------------
December 31, 1995
Industrial development bonds... $ 4,376 $ -- $ -- $ 4,376
Other securities............... 599 -- -- 599
----------------------------------------------------------------------------
Total.......................... $ 4,975 $ -- $ -- $ 4,975
----------------------------------------------------------------------------
</TABLE>
(b) Securities Available for Sale
The following is a summary for the major categories of securities
available for sale.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1996
U.S. Treasury and federal agencies..... $ 322,814 $ 2,295 $ (6) $ 325,103
Mutual funds........................... 39,634 -- -- 39,634
Other securities....................... 3,246 76 -- 3,322
----------------------------------------------------------------------------------------
Total $ 365,694 $ 2,371 $ (6) $ 368,059
----------------------------------------------------------------------------------------
December 31, 1995
U.S. Treasury and federal agencies..... $ 241,649 $ 4,274 $ (4) $ 245,919
Mutual funds........................... 43,052 -- -- 43,052
Other securities....................... 5,837 504 -- 6,341
----------------------------------------------------------------------------------------
Total $ 290,538 $ 4,778 $ (4) $ 295,312
----------------------------------------------------------------------------------------
</TABLE>
Gross realized gains and losses for the three months ended June 30,
1996, were $39,000 and $26,000, respectively. For the same period of
1995, these amounts were $10,000 and $86,000, respectively. For the
six months ended June 30, 1996, gross realized gains and losses were
$272,000 and $30,000, respectively, as compared to $417,000 and
$150,000, respectively, for the same period of 1995.
- -----------------------------------------------------------------------------
20 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- -----------------------------------------------------------------------------
TABLE 4 - REAL ESTATE OWNED
(a) Real Estate Owned by Type of Project
At June 30, 1996 and December 31, 1995, real estate owned by type of
project is presented in the following table:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
June 30, December 31,
(In Thousands) 1996 1995
----------------------------------------------------------------------------
<S> <C> <C>
Acquisition and land development.......... $ 2,708 $ 6,908
Multi-family residential.................. -- 162
Single-family residential................. 433 1,325
----------------------------------------------------------------------------
Total residential $ 3,141 $ 8,395
----------------------------------------------------------------------------
Acquisition and land development.......... 5,165 5,420
Retail facilities......................... -- 1,200
----------------------------------------------------------------------------
Total non-residential $ 5,165 $ 6,620
----------------------------------------------------------------------------
REO, gross $ 8,306 $ 15,015
----------------------------------------------------------------------------
Less valuation allowance.................. (366) (4,686)
----------------------------------------------------------------------------
REO, net $ 7,940 $ 10,329
----------------------------------------------------------------------------
</TABLE>
(b) Net Real Estate Owned Expense
For the three and six months ended June 30, 1996 and 1995, net real
estate owned expense was comprised of the following:
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
(In Thousands) 1996 1995 1996 1995
-----------------------------------------------------------------------------
<C> <C> <C> <C>
Net (gain) loss on sale of real
estate owned..................... $ (20) $ 5 $ (23) $ (40)
Valuation adjustments charged
to operations.................... (5) 489 (5) 989
Direct holding costs.............. 323 720 976 1,379
-----------------------------------------------------------------------------
Net real estate owned expense $ 298 $ 1,214 $ 948 $ 2,328
-----------------------------------------------------------------------------
</TABLE>
The following table sets forth information regarding the Company's
valuation allowance for REO.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
June 30, December 31,
(In Thousands) 1996 1995
-------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year............ $ 4,686 $ 6,475
(Reversal) provision for REO.......... (5) 4,547
REO charged off....................... (4,315) (6,336)
-------------------------------------------------------------------
Balance, end of period $ 366 $ 4,686
--------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
21 [LOGO IMPERIAL BANCORP]
<PAGE>
- --------------------------------------------------------------------------------
TABLE 5 - FINANCIAL RATIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income as a percentage of:/(1)/
Average stockholders' equity 45.12% 9.02% 29.16% 9.14%
Average total assets 4.29 0.82 2.72 0.83
Average earning assets 4.90 0.93 3.10 0.96
Average stockholders' equity as a percentage of:
Average assets 9.50% 9.07% 9.32% 9.12%
Average loans 14.24 13.67 13.85 13.90
Average deposits 10.92 10.54 10.71 10.67
Stockholders' equity at period end
as a percentage of:
Total assets at period end -- -- 8.61% 7.98%
Total loans at period end -- -- 14.33 13.59
Total deposits at period end -- -- 9.98 9.28
- ----------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Annualized
- --------------------------------------------------------------------------------
22 [LOGO OF IMPERIAL BANCORP]
<PAGE>
- -------------------------------------------------------------------------------
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 June 30, 1996 and 1995, 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.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------------------------------------------------
1996 1995/(1)/ 1996 1995/(1)/
--------------- ------------------------------ ---------------
<S> <C> <C> <C>
15,741,542 15,350,637 15,664,850 15,277,404
</TABLE>
/(1)/ Adjusted for an 8% stock dividend paid in the first quarter of
1996.
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.
- --------------------------------------------------------------------------------
23 Imperial Bancorp
<PAGE>
ITEM 5. Other Information
No events have transpired which would make response to this item
appropriate.
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.
-------------------------------------------------------------------------------
24 Imperial Bancorp
<PAGE>
- --------------------------------------------------------------------------------
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: August 14, 1996 By: Robert M. Franko
-----------------------------
Robert M. Franko
Executive Vice President and
Chief Financial Officer
- --------------------------------------------------------------------------------
25 Imperial Bancorp
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 408,912
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 280,300
<TRADING-ASSETS> 73,465
<INVESTMENTS-HELD-FOR-SALE> 368,059
<INVESTMENTS-CARRYING> 4,362
<INVESTMENTS-MARKET> 4,362
<LOANS> 1,849,653
<ALLOWANCE> 38,517
<TOTAL-ASSETS> 3,080,699
<DEPOSITS> 2,655,741
<SHORT-TERM> 102,883
<LIABILITIES-OTHER> 40,609
<LONG-TERM> 5,249
0
0
<COMMON> 161,006
<OTHER-SE> 102,738
<TOTAL-LIABILITIES-AND-EQUITY> 3,080,699
<INTEREST-LOAN> 82,705
<INTEREST-INVEST> 11,280
<INTEREST-OTHER> 4,431
<INTEREST-TOTAL> 98,416
<INTEREST-DEPOSIT> 29,800
<INTEREST-EXPENSE> 31,306
<INTEREST-INCOME-NET> 67,110
<LOAN-LOSSES> 6,026
<SECURITIES-GAINS> 242
<EXPENSE-OTHER> 63,150
<INCOME-PRETAX> 69,865
<INCOME-PRE-EXTRAORDINARY> 41,447
<EXTRAORDINARY> (5,998)
<CHANGES> 0
<NET-INCOME> 35,449
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
<YIELD-ACTUAL> 5.9
<LOANS-NON> 20,853
<LOANS-PAST> 0
<LOANS-TROUBLED> 44,962
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 37,402
<CHARGE-OFFS> 6,115
<RECOVERIES> 1,178
<ALLOWANCE-CLOSE> 38,517
<ALLOWANCE-DOMESTIC> 38,517
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
