November 10, 2008 - 4:31 PM EST
Beverly Hills Bancorp Announces Third Quarter Loss
Beverly Hills Bancorp Inc. (the “Company”) (NASDAQ:BHBC), the parent company of First Bank of Beverly Hills (the “Bank”), reported a net loss for the three months ended September 30, 2008 of $11.9 million, or $0.63 per diluted share, compared with net income of $2.3 million, or $0.12 per diluted share, for the three months ended September 30, 2007. The net loss for the first nine months of 2008 was $9.3 million, or $0.49 per diluted share, compared with net income of $7.1 million, or $0.38 per diluted share, for the first nine months of 2007.
The decline in net earnings from the third quarter of 2007 to the third quarter of 2008 was primarily attributable to a $21.7 million increase in the provision for loan losses, a $3.4 million decrease in other income for securities impairment charges, and a $0.3 million reduction in net interest income. These reductions in income were partially offset by a $1.7 million decrease in other expense.
The Company and the Bank continue to meet and substantially exceed all regulatory capital requirements. At September 30, 2008, the Company had total risk-based capital of $158.0 million and a total risk-based capital ratio of 16.83%. At that date, the Bank had total risk-based capital of $136.2 million and a risk-based capital ratio of 14.68%, exceeding by more than $43 million and 4% the requirements to be “well capitalized” under applicable regulations.
The Company’s total assets continued to decline during the third quarter of 2008 due to reduced levels of loan originations and no purchases of investment securities. Total assets at September 30, 2008, were $1.30 billion, a decline in total assets of $197.5 million and $70.0 million from December 31, 2007 and June 30, 2008, respectively.
At September 30, 2008, the Company’s non-performing assets totaled $76.6 million and were comprised of non-accrual loans of $75.5 million and real estate owned of $1.1 million. Nonaccrual loans primarily included construction loans of $36.8 million, commercial real estate and land loans of $25.5 million, and multifamily loans of $8.3 million. The Company is proactively managing the loan portfolio, and may selectively place loans on nonaccrual status before they become more than ninety days past due. At September 30, 2008, nonaccrual loans included $45.0 million of loans that were past due more than 90 days, $20.1 million of loans that were past due 31-90 days, and $10.4 million of loans that were past due less than 31 days.
The Company recorded a provision for loan losses of $22.8 million in the third quarter of 2008, as compared with a provision of $1.2 million in the third quarter of 2007. The higher loan loss provision mainly reflects declining collateral values for construction and land loans, reflecting the weak market from sales of single family homes. The Company has also increased the loan loss reserves for the higher risk associated with the construction and land loans. As of September 30, 2008, the allowance for loan losses totaled $41.2 million or 4.54% of the loan portfolio, as compared to $21.9 million or 2.19% of the loan portfolio at December 31, 2007.
Net interest income for the third quarter of 2008 was $7.6 million, compared with $7.9 million for the third quarter of 2007. The decline in net interest income resulted from the continued reduction in total assets as average interest-earning assets for the third quarter of 2008 were $266.7 million below the year ago period. The impact of fewer interest-earning assets more than offset a 32 basis point improvement in the net interest margin to 2.36%, up from 2.04% in the third quarter of 2007. The Company’s net interest margin has widened over the prior year as short-term liabilities have matured and been replaced with lower cost funding as a result of lower market interest rates.
The fair value of the investment securities portfolio experienced a significant decline during the third quarter due to disruptions in the mortgage-backed securities market and market illiquidity for certain types of securities. The Company evaluated its investment securities and concluded the decline in fair value for three non-agency mortgage-backed securities, a mutual fund investment and a trust preferred security was other than temporary. Accordingly, the Company recorded an impairment charge of $3.9 million in the third quarter of 2008 to reduce the carrying values of these securities.
Stockholders’ equity decreased by $20.2 million during the nine months ended September 30, 2008 to $127.9 million, or $6.81 book value per diluted share. The reduction in equity was attributable to net after-tax unrealized losses of $11.1 million on the portfolio of available-for-sale securities and the net loss of $9.3 million. Net after-tax unrealized losses on our available-for-sale securities are reported on the statements of financial condition as accumulated other comprehensive loss in stockholders’ equity, and not reported in our statements of operations.
Financial Highlights
The following table presents selected consolidated financial information for the Company for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Operating Data: 2008 2007 2008 2007
(Dollars in thousands, except per-share data)
Net (loss) income $ (11,860 ) $ 2,338 $ (9,269 ) $ 7,124
(Loss) income before taxes (19,858 ) 3,836 (15,469 ) 12,096
Net interest income 7,627 7,943 22,500 23,603
(Loss) earnings per share – diluted (0.63 ) 0.12 (0.49 ) 0.38
Net interest margin 2.36 % 2.04 % 2.20 % 2.03 %
Net interest spread 1.93 % 1.57 % 1.75 % 1.58 %
Return on average assets (annualized) -3.54 % 0.57 % -0.88 % 0.59 %
Return on average equity (annualized) -31.63 % 5.86 % -8.18 % 6.00 %
Efficiency ratio 35.41 % 40.10 % 40.56 % 44.02 %
Risk-based capital ratio 16.83 % 16.42 % 16.83 % 16.42 %
Average equity to average assets 11.19 % 9.81 % 10.71 % 9.81 %
The following table presents selected consolidated financial information for the Company as of the dates indicated:
September 30, December 31, September 30,
Balance Sheet Data: 2008 2007 2007
(Dollars in thousands, except per-share data)
Total assets $ 1,302,600 $ 1,500,114 $ 1,584,578
Loans, net 867,938 979,948 1,047,543
Deposits 667,489 637,471 736,519
Stockholders’ equity 127,883 148,108 156,127
Book value per share – diluted 6.81 7.87 8.30
Total assets per employee 37,217 31,917 33,012
The following table presents selected financial information for the Bank for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Operating Data: 2008 2007 2008 2007
(Dollars in thousands)
Net income $ (9,733 ) $ 2,842 $ (6,336 ) $ 8,923
Income before taxes (16,504 ) 4,622 (10,742 ) 15,115
Net interest income 7,795 8,243 22,860 24,443
Net interest margin 2.43 % 2.16 % 2.26 % 2.15 %
Net interest spread 2.04 % 1.72 % 1.85 % 1.72 %
Efficiency ratio 22.28 % 34.45 % 32.07 % 33.90 %
Risk-based capital ratio 14.68 % 13.90 % 14.68 % 13.90 %
For further information, please see our website (www.bhbc.com) for our Quarterly Report on Form 10-Q and related communications (available on or about November 10, 2008).
This release contains forward-looking statements 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 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)
September 30,
2008
December 31,
2007
ASSETS
Cash and cash equivalents $ 29,022 $ 12,964
Mortgage-backed securities available for sale, at fair value 316,689 413,875
Investment securities available for sale, at fair value 5,611 6,941
Investment securities held to maturity, at amortized cost (fair value of $10,147 in 2007) — 9,809
Loans, net of allowance for loan losses of $41,216 in 2008 and $21,882 in 2007 867,938 979,948
Stock in Federal Home Loan Bank of San Francisco, at cost 26,263 31,880
Real estate owned, net 1,072 44
Leasehold improvements and equipment, net 740 927
Accrued interest receivable 6,764 8,663
Income taxes receivable 5,326 3,601
Deferred tax asset, net 39,646 28,340
Prepaid expenses and other assets 3,529 3,122
TOTAL $ 1,302,600 $ 1,500,114
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Noninterest-bearing deposits $ 1,128 $ 886
Interest-bearing deposits 666,361 636,585
Total deposits 667,489 637,471
Repurchase agreements 30,000 40,000
Federal Home Loan Bank advances 430,000 611,000
Junior subordinated notes payable to trusts 36,084 46,393
Accounts payable and other liabilities 11,144 17,142
Total liabilities 1,174,717 1,352,006
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value, 30,000,000 shares authorized, 27,176,462 issued (including 8,389,368 treasury shares) 272
272
Additional paid-in capital 166,622 166,430
Treasury stock, 8,389,368 shares, at cost (39,974 ) (39,974 )
Retained earnings 13,633 22,902
Accumulated other comprehensive loss (12,670 ) (1,522 )
Total stockholders’ equity 127,883 148,108
TOTAL $ 1,302,600 $ 1,500,114
BEVERLY HILLS BANCORP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2008 2007 2008 2007
INTEREST INCOME:
Loans $ 14,815 $ 20,220 $ 48,074 $ 59,277
Mortgage-backed securities 4,602 5,811 14,538 17,711
Securities and federal funds sold 168 468 771 1,357
Total interest income 19,585 26,499 63,383 78,345
INTEREST EXPENSE:
Deposits 5,814 9,839 20,018 29,993
Borrowings 6,144 8,717 20,865 24,749
Total interest expense 11,958 18,556 40,883 54,742
NET INTEREST INCOME 7,627 7,943 22,500 23,603
PROVISION FOR LOSSES ON LOANS 22,839 1,182 27,600 2,028
NET INTEREST (EXPENSE) INCOME AFTER PROVISION FOR LOSSES ON LOANS (15,212
)
6,761
(5,100
)
21,575
OTHER (EXPENSE) INCOME:
FHLB stock dividends 410 406 1,283 1,173
(Loss) gain on sale of securities (15 ) — 31 —
Impairment charge on securities (3,871 ) — (4,105 ) —
Other income, net 464 28 699 454
Total other (expense) income (3,012 ) 434 (2,092 ) 1,627
OTHER EXPENSES:
Compensation and employee benefits 1,133 1,868 4,952 5,682
Professional fees 560 603 1,884 1,985
Occupancy 161 135 508 435
Loan expenses 185 37 406 119
Regulatory assessments 61 45 182 157
Data processing 75 76 230 252
Insurance 312 167 617 486
Depreciation 69 91 251 280
Directors expense 90 99 295 318
Real estate owned, net (1,331 ) 50 (1,331 ) 410
Other general and administrative expense 319 188 283 982
Total other expenses 1,634 3,359 8,277 11,106
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION (19,858 ) 3,836 (15,469 ) 12,096
INCOME TAX (BENEFIT) PROVISION (7,998 ) 1,498 (6,200 ) 4,972
NET (LOSS) INCOME $ (11,860 ) $ 2,338 $ (9,269 ) $ 7,124
(Loss) earnings per share – basic $ (0.63 ) $ 0.12 $ (0.49 ) $ 0.38
(Loss) earnings per share – diluted $ (0.63 ) $ 0.12 $ (0.49 ) $ 0.38
Dividends declared per share $ 0.00 $ 0.13 $ 0.00 $ 0.38
Weighted average number of shares – basic 18,787,094 18,786,757 18,787,094 18,768,637
Weighted average number of shares – diluted 18,787,094 18,813,327 18,787,094 18,807,723
Beverly Hills Bancorp Inc.
Larry B. Faigin, President and CEO
800-515-1616
Source: Business Wire (November 10, 2008 - 4:31 PM EST)
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