Beverly Hills Bancorp Announces Third Quarter 2006 Results and Sale of Beverly Hills Branch.CALABASAS, Calif. -- Beverly Hills Beverly Hills, city (1990 pop. 31,971), Los Angeles co., S Calif., completely surrounded by the city of Los Angeles; inc. 1914. The largely residential city is home to many motion-picture and television personalities. Bancorp Inc. (the "Company" or "BHBC") (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BHBC), the parent company of First Bank of Beverly Hills (the "Bank"), reported net income for the three months ended September 30, 2006 of $2.6 million, or $0.13 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $4.4 million, or $0.21 per diluted share, for the three months ended September 30, 2005. For the nine months ended September 30, 2006, the Company's net income was $8.4 million, or $0.40 per diluted share, compared with $11.2 million, or $0.52 per diluted share, for the nine months ended September 30, 2005. Pre-tax income declined to $14.1 million for the first nine months of 2006, compared with $19.2 million for the corresponding 2005 period. On November 3, 2006, the Company sold the Bank's Beverly Hills branch to First Bank, a subsidiary of First Banks, Inc., headquartered in St. Louis, Missouri. In the sale, First Bank assumed all of the deposits at the branch and certain liabilities associated with the branch, including the branch lease, and acquired certain branch assets at their book values. First Bank paid a deposit premium of 5.5% of the deposits. The Company will realize a net gain on the sale of approximately $8.4 million, after related selling expenses. Subsequent to the sale, the Company will continue to operate its Calabasas branch and will continue its deposit gathering strategies. The decrease in net income for the third quarter of 2006 reflects a $2.5 million decrease in net interest income, a $0.5 million decrease in other income and slight increases in the provision for loan losses and other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . The Company's net interest income was $8.0 million for the third quarter of 2006, compared with $10.5 million for the third quarter of 2005. This decrease was due to a decline in the Company's net interest margin from 3.08% to 2.28%, as the amount of the Company's net interest earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin in the quarters were comparable. The net interest margin declined primarily as a result of the increase in market interest rates from 2005 to 2006. Because the Company's interest-bearing liabilities reprice more frequently than its interest-earning assets, its net interest margin tends to fall as interest rates rise. As a result, the weighted average cost of the Company's interest-bearing liabilities increased by 119 basis points to 4.51% for the three months ended September 30, 2006, compared with 3.32% for the three months ended September 30, 2005. In contrast, the yield on the Company's interest-earning assets increased by only 31 basis points, to 6.33% for the third quarter of 2006 compared with 6.02% for the third quarter of 2005. To a lesser extent, the net interest margin declined because the Company's portfolio of mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. comprised a larger share of its interest-earning assets in 2006 than in 2005. The Company in 2006 has made significant investments in these assets due to the reduced demand for loans during the year. The decrease in income from the nine months ended September 30, 2005 to the nine months ended September 30, 2006 was due primarily to a $4.1 million decline in net interest income, reflecting a narrowing of the net interest margin to 2.50% for the first nine months of 2006, as compared with 3.00% for the first nine months of 2005. In addition, other operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. decreased by $0.5 million, and other operating expenses increased by $0.4 million. The $0.5 million decline in other operating income from the 2005 periods to the 2006 periods was due primarily to a one-time gain of $0.4 million recorded in September 2005. This gain resulted from the Company's payoff of a participation liability to a co-investor, which previously shared in the returns generated by certain loan portfolios. Because the Company may utilize approximately $6.0 million of its net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carryforward per year, approximately $2.1 million of the Company's annual reported income tax expense will not be currently payable in cash. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. declined by $22.7 million for the nine months ended September 30, 2006 to $151.2 million, or $8.05 book value per diluted share, despite the Company's net income of $8.4 million. This decrease was due primarily to the repurchase of 2.75 million shares of the Company's outstanding common stock for a total price of $24.75 million and cash dividends of $7.7 million. These decreases were partially offset by net after-tax unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. of $1.2 million on the Company's portfolio of available-for-sale securities and a $0.2 million increase in paid-in capital Paid-in capital Capital received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc stock-based compensation. Other operating highlights for the quarter and nine months ended September 30, 2006 included the following: * In August 2006, the Company successfully completed a "Dutch auction Dutch Auction An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price. Notes: The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities. " tender offer for the repurchase of 2,750,000 shares of its common stock, or 12.8% of the shares then outstanding. The Company repurchased the shares at $9.00 per share, for a total purchase price of $24.75 million. * Loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. totaled $59.8 million and $183.5 million, respectively, for the three and nine months ended September 30, 2006, compared with $32.9 million and $180.9 million, respectively, for the corresponding 2005 periods. Origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real activity continues to be impeded im·pede tr.v. im·ped·ed, im·ped·ing, im·pedes To retard or obstruct the progress of. See Synonyms at hinder1. [Latin imped by higher interest rates, which have reduced the number of refinancings, and also by increased competitiveness in loan pricing. With loan repayments of $198.6 million, the Company's loan portfolio declined by $14.7 million during the nine months ended September 30, 2006. * The Company's portfolio of mortgage-backed and other investment securities increased by $64.7 million for the first nine months of 2006. To offset the reduced demand for loans, the Company purchased $117.9 million in government-sponsored enterprise and AAA-rated mortgage-backed securities with a weighted-average yield of 6.07% in the second quarter of 2006. * At September 30, 2006, the Company's deposits totaled $821.4 million, compared with $604.6 million at December 31, 2005 and $574.6 million at September 30, 2005. The weighted average interest rate on deposits increased to 4.55% for the third quarter of 2006, compared with 3.27% for the third quarter of 2005. This increase in total deposits and weighted average rate was due primarily to the issuance of wholesale CDs, resulting in an increase in CDs as a percentage of total deposits. Deposits will decline in the fourth quarter of 2006 with the sale of the Bank's Beverly Hills branch, which held $155.8 million in deposits at September 30, 2006. * The Company recorded a loan loss provision of $120,000 for the third quarter of 2006 and a net provision of $51,000 (after loan loss recaptures) through the first nine months of 2006. At September 30, 2006, the ratio of the Company's allowance for loan losses to total loans was 0.75%, compared with a similar ratio at December 31, 2005. At September 30, 2006, total nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. were $3.9 million, or 0.27% of total assets. * The Company's legal expenses increased by $0.3 million from the nine months ended September 30, 2005 to the nine months ended September 30, 2006. This increase occurred despite the reversal in May 2006 of $0.7 million in unpaid legal expenses that the Company had previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. on behalf of a former officer. The increase in legal expenses reflects the Company's legal costs relating to its disputes with the former officer, in addition to expenses in connection with disputes with the Company's former loan servicing Loan servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking their services. subsidiary. * As of September 30, 2006, the Company and the Bank met all regulatory capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , and the Bank was "well capitalized" under applicable regulations. Financial Highlights The following table presents selected consolidated financial information for the Company for the periods indicated: [TABLE OMITTED] The following table presents selected consolidated financial information for the Company as of the dates indicated: [TABLE OMITTED] The following table presents selected unconsolidated financial information for the Bank for the periods indicated: [TABLE OMITTED] For further information, please see our website (www.bhbc.com) for our Quarterly Report on Form 10-Q Form 10-Q See 10-Q. and related communications (available on or about November 6, 2006). This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. including financial projections, statements as to the plans and objectives of management for future operations, and statements as to the Company's future economic performance, financial condition and results of operations. These forward-looking statements are not historical facts but rather are based on current expectations, estimates, and projections about our industry, our beliefs and our assumptions. Words such as "may," "will," "anticipates," "expects," "intends," "plans," "believes," "seeks" and "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements. The Company's actual results may differ materially from those projected in these forward-looking statements as a result of a number of factors, including, but not limited to, the condition of the real estate market and the economy, changes in banking regulations, the availability and conditions of financing for loan pool acquisitions, mortgage-backed securities and other financial assets Financial assets Claims on real assets. as well as interest rates. Readers of this release are cautioned not to place undue reliance on these forward-looking statements. [TABLE OMITTED] [TABLE OMITTED] |
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