Beverly Hills Bancorp Inc. Announces Third Quarter 2005 Results.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 quarter ended September September: see month. 30, 2005, of $4.4 million, or $0.21 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 net income of $3.0 million, or $0.14 per diluted share, for the quarter ended September 30, 2004. For the nine months ended September 30, 2005, the Company's net income was $11.2 million, or $0.52 per diluted share, compared with income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $7.6 million, or $0.36 per diluted share, for the nine months ended September 30, 2004. Total net income for the first nine months of 2004, including discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , was $18.7 million, or $0.88 per diluted share. The Company's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: results for the first nine months of 2004 included a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain of $18.5 million (subsequently adjusted to $18.0 million) on the sale of its 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, Wilshire Not to be confused with Wiltshire. Wilshire may refer to:
WCC n abbr (= World Council of Churches) → Weltkirchenrat m "). The Company's income from continuing operations, excluding the operating results of WCC and the gain on its sale, increased by 47% from the nine months ended September 30, 2004, to the nine months ended September 30, 2005. Pre-tax income from continuing operations increased from $5.1 million for the third quarter of 2004 to $7.5 million for the third quarter of 2005, and from $13.1 million for the nine months ended September 30, 2004, to $19.2 million for the nine months ended September 30, 2005. The Company's income tax provision of $8.0 million for the first nine months of 2005 includes approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2 million that is not expected to be currently payable in cash due to the utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of the Company's 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 carryforward 1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. . The increase in income for the third quarter of 2005 over the third quarter of 2004 reflects a $2.3 million increase in loan fees and charges, primarily as a result of early loan payoffs. In addition, the Company recorded $48,000 in loan loss recaptures during the quarter, compared with a provision for loan losses of $0.3 million for the third quarter of 2004. Partially offsetting these increases in income was a decline in net interest income of $0.5 million, reflecting accelerated premium amortization associated with loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. combined with a narrowing of the net interest margin. The Company's results for the nine months ended September 30, 2005, versus the comparable 2004 period reflect a $2.9 million increase in net interest income, a $2.9 million increase in other income, and $52,000 in loan loss recaptures compared with a loan loss provision of $0.6 million for the first nine months of 2004. These increases in income were partially offset by a $0.4 million increase in 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 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. increased by $2.4 million during the nine months ended September 30, 2005, to $172.6 million, or $8.01 book value per diluted share. This increase reflects the Company's net income of $11.2 million, the issuance of $0.4 million of common stock upon the exercise of stock options, and a $0.3 million tax benefit from the exercise of non-qualified stock options Non-qualified stock options are stock options which do not qualify for the special treatment accorded to incentive stock options. Incentive stock options are only available for employees and other restrictions apply for them. , partially offset by cash dividends of $8.0 million on the Company's common stock and net after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. of $1.5 million on the Company's portfolio of available-for-sale securities. Consolidated Financial Highlights The following tables present selected consolidated financial information for the Company for the periods and as of the dates indicated:
Operating Data: Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
2005 2004 2005 2004
--------- -------- -------- ----------
(Dollars in thousands, except per share data)
Net income $ 4,422 $ 2,964 $ 11,183 $ 18,728
Income from continuing
operations 4,422 2,964 11,183 7,613
Income from continuing
operations before taxes 7,475 5,067 19,202 13,128
Net interest income 8,129 8,628 26,277 23,340
Earnings per share - diluted 0.21 0.14 0.52 0.88
Earnings per share from
continuing operations -
diluted 0.21 0.14 0.52 0.36
Net interest margin 2.38% 2.76% 2.66% 2.75%
Net interest spread 2.09% 2.40% 2.32% 2.40%
Return on average assets
(annualized) 1.23% 0.93% 1.08% 2.13%
Return on average equity
(annualized) 10.17% 8.40% 8.70% 18.62%
Return on average assets
from continuing operations
(annualized) 1.23% 0.93% 1.08% 0.87%
Return on average equity
from continuing operations
(annualized) 10.17% 8.40% 8.70% 7.57%
Efficiency ratio 34.66% 40.96% 38.56% 45.92%
Balance Sheet Data: Sept. 30, June 30, Dec. 31, Sept. 30,
2005 2005 2004 2004
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
Total assets $1,410,392 $1,438,563 $1,338,114 $1,300,122
Stockholders' equity 172,576 171,902 170,139 141,510
Book value per share -
diluted 8.01 7.99 7.93 6.59
Total assets per
employee 24,744 24,382 22,302 22,809
At December December: see month. 31, 2004 and 2003, the Company recorded significant reductions in the valuation allowance against its deferred tax assets and, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), recorded corresponding increases directly to stockholders' equity. These adjustments resulted in a cumulative increase in average stockholders' equity of $41.9 million for the quarter and nine months ended September 30, 2005, and $19.8 million for the corresponding 2004 periods. Excluding the effects of these direct adjustments to stockholders' equity, the annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on equity on a non-GAAP basis would have been 13.42% for the third quarter of 2005 (as compared to 10.17%) and 11.51% for the nine months ended September 30, 2005 (as compared to 8.70%). For the third quarter of 2004, the annualized return on equity from continuing operations would have been 9.75% (as compared to 8.40%), and for the nine months ended September 30, 2004, would have been 8.88% (as compared to 7.57%). The Company believes that this provides a better comparison of the annualized return on equity between these periods, since the reduction in valuation allowance for the deferred tax asset increased average equity in significantly disproportionate dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por amounts in 2005 as compared
with 2004.
The Company's operating highlights for the three and nine months ended September 30, 2005, included the following: --Net interest income was $8.1 million for the third quarter of 2005, down from $8.6 million for the third quarter of 2004. This decrease was due primarily to $0.9 million in amortization of loan premiums triggered by early loan payoffs during the quarter. Net interest income also was negatively impacted by the continuing rise in market interest rates and the flattening
The flattening, ellipticity, or oblateness of an oblate spheroid is the "squashing" of the spheroid's pole, down towards its equator. of the treasury yield curve, which have caused an increase in the Bank's cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. as maturing deposits and borrowings were replaced by higher-costing deposits and borrowings. For the nine months ended September 30, 2005, net interest income was $26.3 million, compared with $23.3 million for the nine months ended September 30, 2004. The year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. increase was due primarily to the Bank's higher average loan volume in 2005, which more than offset an increase in the Bank's cost of funds. The Bank's average interest-earning asset portfolio for the first nine months of 2005 was $1.3 billion, an increase of $214.9 million over the first nine months of 2004. --The net interest margin decreased by 38 basis points to 2.38% for the third quarter of 2005, compared with 2.76% for the third quarter of 2004. The premium amortization charges (which are directly related to the significant increase in loan prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. fees) described above accounted for approximately 26 basis points of the decline in margin; the remaining decline reflects a substantial increase in the Bank's costs of funds brought about by the increase in market interest rates and the flattening of the treasury yield curve. For the nine-month period ended September 30, 2005, the net interest margin was 2.66%, a decrease of 9 basis points from the first nine months of 2004. --The Bank originated and purchased commercial real estate and multi-family mortgage loans in the aggregate of $32.9 million and $180.9 million for the quarter and nine months ended September 30, 2005, respectively. Loan origination 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. activity has slowed throughout 2005 as compared with 2004, due primarily to the increase in interest rates, which reduced the number of refinancings, and also due to increasing competitiveness in loan pricing. The Bank's pipeline of loans in process was $120.5 million as of September 30, 2005. --The Bank purchased $28.9 million and $112.5 million, respectively, of mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. (MBS See Mb/sec. MBS - mobile broadband services ) during the quarter and nine months ended September 30, 2005. Due to the increase in market interest rates, the Bank's yield on MBS increased by 48 basis points, to 4.17% for the nine months ended September 30, 2005, compared with 3.69% for the nine months ended September 30, 2004. --The Bank's 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. declined to $2.5 million, or less than 0.2% of its total assets, as of September 30, 2005. --Effective September 30, 2005, the Company's investment subsidiary, WFC WFC Wi-Fi Connection (Nintendo gaming service) WFC Wide-Field Camera WFC World Financial Center (New York) WFC Workforce Center WFC World Federation of Chiropractic WFC World Food Council Inc. ("WFC"), acquired a 100% interest in the returns generated by certain loan portfolios which WFC had acquired in a joint venture with a third party. Previously, WFC shared approximately 50% of the net cash flows from these loan portfolios with the co-investor. WFC recorded a gain of $0.4 million on the payoff of the participation liability to the co-investor during the third quarter. --Compensation expense for the quarter and nine months ended September 30, 2005, increased by $0.3 million and $0.7 million, respectively, over the corresponding 2004 periods, due primarily to an increase in the Bank's lending staff and the opening of the Bank's new branch in Calabasas in March 2005. --As of September 30, 2005, the Bank's risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. was 14.50%, exceeding the 10.0% ratio required to be categorized cat·e·go·rize tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es To put into a category or categories; classify. cat as "well capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. " under applicable regulations. The following tables present selected operating and balance sheet data for First Bank of Beverly Hills for the periods and as of the dates indicated:
Operating Data: Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2005 2004 2005 2004
--------- ---------- --------- ----------
(Dollars in thousands)
Net income $ 4,562 $ 3,503 $ 12,339 $ 9,276
Income before taxes 7,703 5,988 21,208 15,856
Net interest income 8,116 8,552 26,446 22,869
Net interest margin 2.38% 2.81% 2.70% 2.78%
Net interest spread 2.12% 2.67% 2.48% 2.62%
Efficiency ratio 29.58% 30.51% 31.32% 34.41%
Balance Sheet Data: Sept. 30, June 30, Dec. 31, Sept. 30,
2005 2005 2004 2004
----------- ----------- ----------- -----------
(Dollars in thousands)
Total assets $1,373,301 $1,401,513 $1,298,625 $1,278,742
Loans, net of
allowance for loan
losses 936,315 973,585 915,447 870,564
Deposits 595,668 593,558 580,085 595,862
Nonperforming assets 2,518 3,352 6,304 16,344
Nonperforming assets
to total assets 0.18% 0.24% 0.49% 1.28%
Risk-based capital
ratio 14.50% 12.33% 11.88% 11.85%
Total assets per
employee 24,523 23,754 21,644 22,434
For further information, please see our website (www.bhbc.com) for our 10-Q Report and related communications (available on or about November November: see month. 4, 2005). 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 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.
BEVERLY HILLS BANCORP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(Dollars in thousands, except share data)
September 30, December 31,
2005 2004
---------------- ---------------
ASSETS
Cash and cash equivalents $ 25,317 $ 15,526
Mortgage-backed securities available
for sale, at fair value 344,658 307,461
Investment securities available for
sale, at fair value 13,754 13,819
Investment securities held to
maturity, at amortized cost (fair
value of $9,807 and $9,795) 9,695 9,657
Loans, net of allowance for loan
losses of $7,104 and $7,277 936,275 915,383
Discounted loans, net of allowance
for loan losses of $228 and $367 1,808 1,587
Stock in Federal Home Loan Bank of
San Francisco, at cost 27,313 22,681
Real estate owned, net 62 1,769
Leasehold improvements and equipment,
net 1,503 854
Accrued interest receivable 6,150 5,333
Deferred tax asset, net 36,992 37,412
Goodwill, net 3,054 3,054
Other tangible assets, net -- 129
Prepaid expenses and other assets 3,811 3,449
--------------- --------------
TOTAL $ 1,410,392 $ 1,338,114
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Noninterest-bearing deposits $ 4,928 $ 4,473
Interest-bearing deposits 569,657 537,487
Repurchase agreements 103,000 120,000
Accounts payable and other
liabilities 13,775 10,559
FHLB advances 525,837 474,837
Junior subordinated notes payable
to trust 20,619 20,619
--------------- --------------
Total liabilities 1,237,816 1,167,975
--------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
0 and 10,000,000 shares
authorized, 0 shares outstanding -- --
Common stock, $0.01 par value,
30,000,000 and 90,000,000 shares
authorized, 26,945,478 and
26,777,554 shares issued
(including treasury shares of
5,639,368) 269 268
Additional paid-in capital 165,417 164,740
Treasury stock, 5,639,368 shares,
at cost (15,224) (15,224)
Retained earnings 24,668 21,442
Accumulated other comprehensive
loss, net (2,554) (1,087)
--------------- --------------
Total stockholders' equity 172,576 170,139
--------------- --------------
TOTAL $ 1,410,392 $ 1,338,114
=============== ==============
BEVERLY HILLS BANCORP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
INTEREST INCOME:
Loans $ 14,205 $ 11,824 $ 41,307 $ 32,876
Mortgage-backed
securities 3,846 3,351 10,848 8,841
Securities and
federal funds
sold 438 288 1,217 863
----------- ----------- ----------- -----------
Total interest
income 18,489 15,463 53,372 42,580
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 4,665 3,033 12,044 9,424
Borrowings 5,695 3,802 15,051 9,816
----------- ----------- ----------- -----------
Total interest
expense 10,360 6,835 27,095 19,240
----------- ----------- ----------- -----------
NET INTEREST
INCOME 8,129 8,628 26,277 23,340
(RECAPTURE OF)
PROVISION FOR
LOSSES ON LOANS (48) 338 (52) 552
----------- ----------- ----------- -----------
NET INTEREST
INCOME AFTER
(RECAPTURE OF)
PROVISION FOR
LOSSES ON LOANS 8,177 8,290 26,329 22,788
----------- ----------- ----------- -----------
OTHER INCOME:
Loan related fees
and charges 2,401 143 3,264 664
Deposit fees and
charges 16 78 52 273
Gain (loss) on
sales of loans,
net 13 7 (8) 55
Gain on sale of
securities, net -- 113 -- 386
Real estate
owned, net -- -- 192 70
FHLB stock
dividend income 285 213 795 507
Other income
(loss), net 522 (27) 596 (1)
----------- ----------- ----------- -----------
Total other
income 3,237 527 4,891 1,954
----------- ----------- ----------- -----------
OTHER EXPENSES:
Compensation and
employee
benefits 1,911 1,594 5,675 4,988
Professional fees 718 857 2,346 2,484
Occupancy 235 203 746 605
FDIC insurance
premiums 85 127 252 352
Loan expenses 76 13 272 114
Data processing 95 151 325 418
Insurance 171 290 518 636
Depreciation 92 75 238 261
Amortization of
intangibles -- 65 129 194
Directors expense 149 93 419 473
Other general and
administrative
expense 407 282 1,098 1,089
----------- ----------- ----------- -----------
Total other
expenses 3,939 3,750 12,018 11,614
----------- ----------- ----------- -----------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAX
PROVISION 7,475 5,067 19,202 13,128
INCOME TAX
PROVISION 3,053 2,103 8,019 5,515
----------- ----------- ----------- -----------
INCOME FROM
CONTINUING
OPERATIONS 4,422 2,964 11,183 7,613
----------- ----------- ----------- -----------
DISCONTINUED
OPERATIONS:
INCOME FROM
OPERATIONS OF
DISCONTINUED
SEGMENT
(INCLUDING GAIN
ON DISPOSAL OF
$18,516 IN 2004) -- -- -- 19,000
INCOME TAX
PROVISION -- -- -- 7,885
----------- ----------- ----------- -----------
INCOME FROM
DISCONTINUED
OPERATIONS -- -- -- 11,115
----------- ----------- ----------- -----------
NET INCOME $ 4,422 $ 2,964 $ 11,183 $ 18,728
=========== =========== =========== ===========
Earnings per share
- basic:
Income from
continuing
operations $ 0.21 $ 0.14 $ 0.53 $ 0.37
Discontinued
operations -- -- -- 0.54
----------- ----------- ----------- -----------
Net income $ 0.21 $ 0.14 $ 0.53 $ 0.91
=========== =========== =========== ===========
Earnings per share
- diluted:
Income from
continuing
operations $ 0.21 $ 0.14 $ 0.52 $ 0.36
Discontinued
operations -- -- -- 0.52
----------- ----------- ----------- -----------
Net income $ 0.21 $ 0.14 $ 0.52 $ 0.88
=========== =========== =========== ===========
Weighted average
number of shares
- basic 21,243,550 21,136,519 21,187,687 20,650,550
Weighted average
number of shares
- diluted 21,517,100 21,458,548 21,488,239 21,344,523
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