Manhattan Bancorp Reports First Profitable Year of Operations
LOS ANGELES--(BUSINESS WIRE)-- Manhattan Bancorp (OTCQB: MNHN), holding company for subsidiary Bank of Manhattan, N.A., announced today its financial results for the year ended December 31, 2012.
For the year ended December 31, 2012, earnings were $686 thousand, or $0.08 per diluted share, after expensing $1.2 million for non-recurring costs related to the merger with Professional Business Bank (the "Merger") and $1.4 million of severance payments related to the Merger.
Additional highlights for 2012 include the following:
- Total assets were $465 million as of December 31, 2012 compared with $226 million at the beginning of the year.
- Total loans outstanding were $371 million as of December 31, 2012 compared with $205 million at the beginning of the year.
- Net interest margin for the year was 4.80%.
- The efficiency ratio for the year was 95.1%.
- Non-performing loans of $1.8 million represented 0.66% of the total loans held for investment outstanding as of December 31, 2012.
- The Bank's Tier 1 Leverage Ratio and Total Risk-Based Capital Ratio as of December 31, 2012 were 10.2% and 13.0%, respectively.
Terry Robinson, Chief Executive Officer, stated, "The results of operations for 2012 represent Manhattan Bancorp's first profitable year. Understanding the accounting required for the Merger, which closed effective May 31, 2012, is critical to understanding the financial results." Curt Christianssen, Interim Chief Financial Officer, went on to explain, "Although Manhattan Bancorp and Bank of Manhattan were the merger's surviving entities, the transaction was treated as a 'reverse acquisition' for accounting purposes, resulting in the Bank of Manhattan's balance sheet being subjected to 'fair value' accounting. As a result, earnings for the year ended December 31, 2012 consist of a full year of earnings of the former Professional Business Bank and seven month's earnings of Manhattan Bancorp. Reported earnings for 2011 only include the results of operations of Professional Business Bank. Thus, comparisons of the 2012 results with the prior year are difficult to analyze, at best."
Net Interest Income and Margin
The Company's net interest income totaled $15.6 million for the year ended December 31, 2012, an increase of $488 thousand or 3% compared with 2011. The increase in net interest income was largely due to an increase in earning assets as a result of the Merger partially offset by unfavorable changes in the net interest margin and spread. While average interest bearing assets increased in 2012 by $73.6 million (29%) compared with 2011, the spread decreased by 119 basis points to 4.78% and the net interest margin decreased by 121 basis points to 4.80%.
The decrease in the spread and net interest margin during 2012 was due primarily to lower asset yields, partially offset by a small favorable change in overall cost of funds. Loan yields decreased by 286 basis points to 5.71% in 2012 compared with 8.57% in 2011, reflecting heightened competition in an unprecedented low interest rate environment. Higher loan yields in 2011 were reflective of a greater amount of yield accretion associated with loans accounted for under ASC 310-30 during 2011 compared to 2012. During this same period, yields on interest bearing deposits held on deposit with other financial institutions decreased by 62 basis points to 0.59% in 2012 from 1.21% in 2011. The yield on investments, on the other hand, increased by 40 basis points to 3.58% in 2012 compared with 3.18% in 2011. The unfavorable loan yield trend was also mitigated by a slight reduction in funding costs, primarily due to a 5 basis point decrease in rates paid on our interest-bearing liabilities. The reduction in the overall cost of funding was due primarily to a $41.7 million increase in average non-interest bearing demand deposit accounts ("DDAs") within the commercial division that largely resulted from the Merger.
Non-interest income for the years ended December 31, 2012 and 2011 was $24.4 million and $2.3 million, respectively. This $22.1 million increase was due primarily to revenue provided by mortgage division activity along with revenues generated by Manhattan Bancorp's subsidiary, Manhattan Capital Markets, LLC ("MCM"), which was divested on November 9, 2012.
Following the Merger, non-interest revenues include revenues generated from the mortgage division, which totaled $15.9 million in 2012. The mortgage division began originating loans in the fourth quarter of 2010, but due to the accounting treatment in the Merger, these revenues are not reflected in the historic earnings of the Company prior to the Merger. The mortgage division revenue is a function of the volume of loan origination during the period beginning with the Merger through the end of the year, which totaled $653 million. The loans originated during 2012 were comprised of approximately 79% in loans made to refinance existing mortgages and 21% to finance the purchase of a home.
For the year ended December 31, 2012, non-interest income from the commercial division totaled $3.1 million, up $810 thousand (35%) from 2011. The increase was partly related to gains on the recovery of acquired loans totaling $755 thousand in 2012, where none were recognized in 2011. The increase was also related to incremental earnings from the Bank's participation in the MIMS-1 limited partnership fund, service charges on customer accounts and gains from the sale of investment securities. These increases were partially offset by decreases in banking service charges and other fees.
Following the Merger, the Company recorded revenues from MCM, which derived from three primary sources: trading income, facilitating trades in whole loans between institutional clients, and advisory services assisting other institutions with evaluating and packaging their bond portfolios. The Company no longer has these sources of revenue after the sale of its 70% interest in MCM effective November 9, 2012.
Non-interest expense for the years ended December 31, 2012 and 2011 was $38.0 million and $14.8 million, respectively, an increase of $23.2 million (157%). Most of the $23.2 million increase in non-interest expenses was driven by growth in the Company's staffing levels due to the Merger, including the increase in infrastructure to support expansions in the mortgage and commercial divisions. The Company also experienced increases in other categories of non-interest expense that were largely the result of the Merger.
Four expense categories comprised 90% and 82% of the Company's operating expenses in 2012 and 2011, respectively: compensation and benefits, occupancy and equipment, technology and communication, and professional fees. These four expense categories, which totaled $34.3 million in 2012, increased by $22.3 million (185%) compared with 2011 and accounted for almost all of the total increase in non-interest expenses in 2012 compared with 2011.
Compensation and Benefits
Compensation and benefits expense totaled $25.0 million and $6.8 million in the years ended December 31, 2012 and 2011, respectively. These expenses comprised 66% and 46% of total non-interest expenses in 2012 and 2011, respectively, the largest category of operating expenses.
Compensation and benefits expense grew by $18.2 million (269%) in 2012 compared with 2011. These increases primarily reflected growth in the Company's staffing levels due to the Merger and to support planned expansions in both the mortgage division and, to a lesser extent, the commercial division. The following table provides a breakdown of the Company's compensation expense by operating segments for the years ended 2012 and 2011.
Occupancy and Equipment
Occupancy and equipment costs totaled $2.7 million and $1.4 million in 2012 and 2011, respectively. These expenses, which comprised 7% and 10% of total operating expenses in 2012 and 2011, respectively, increased by $1.3 million (94%) in 2012 compared with the prior year. This increase primarily reflected the additional offices acquired in the Merger along with the requisite growth in the Company's infrastructure to support expansions in the mortgage and commercial divisions.
Technology and Communication
Technology and communication expense, which totaled $2.6 million and $1.3 million in 2012 and 2011, respectively, comprised 7% and 9% of the Company's total operating expenses in 2012 and 2011, respectively. These expenses increased by $1.3 million (101%) in 2012 compared with the prior year. These increases primarily reflected the additional cost of operations acquired in the Merger and the requisite growth in the Company's infrastructure to support expansions in the mortgage division and, to a lesser extent, the commercial division.
Professional fees, which totaled $4.0 million and $2.6 million in 2012 and 2011, respectively, comprised 11% and 18% of the Company's total operating expenses during these same respective periods. This category of expense increased by $1.4 million (55%) in 2012 compared with the prior year, primarily due to outlays for professional services related to various strategic initiatives undertaken by the Company, including approximately $1.2 million related to the Merger and $34 thousand related to the sale of the Company's interest in MCM.
Assets at December 31, 2012 totaled $465.4 million, up $226.0 million or 94% from December 31, 2011. The significant increase in assets was driven almost entirely by the Merger and growth in the loan portfolios, primarily driven by the mortgage division.
Net loans totaled $371.0 million at December 31, 2012, up $204.7 million or 123% from December 31, 2011. Approximately 47% of this growth was generated by the mortgage division, as reflected by the $96.0 million increase in loans held for sale compared with no loans held for sale at December 31, 2011. Loans held for investment, which increased due to the Merger and generated by the commercial bank, grew by $108.7 million or 65% compared with December 31, 2011.
As a result of the Merger and loan growth, investable balances (Federal funds sold, interest bearing deposits and investment securities) decreased by $9.8 million, or 19%, to $42.4 million at December 31, 2012, compared with $52.2 million at December 31, 2011.
Increased funding requirements were met primarily by generating an additional $182.2 million in deposits, which totaled $383.3 million at December 31, 2012, a 91% increase from December 31, 2011. Most of the increase in savings and money market deposits which grew by $83.4 million to $146.0 million at December 31, 2012, a 133% increase from December 31, 2011. Additionally, certificates of deposits ("CDs") grew by $39.1 million to $96.9 million, at December 31, 2012, a 68% increase from December 31, 2011. As previously noted, increased funding requirements were due primarily to the increase in mortgage loans held for sale which, in turn, typically are sold within 30 days. Therefore, in order to mitigate risk, wholesale deposit channels were utilized to generate additional short-term CDs, almost all of which had one-month maturities, thereby approximating a "matched funding" strategy for the mortgage division. To this end, wholesale CDs increased by $30.2 million to $48.8 million at December 31, 2012, of which $24.9 million had one-month maturities. Additionally, $4.5 million in existing longer-term wholesale deposits were replaced with time deposits that had two-month maturities.
As of December 31, 2012, borrowings totaled $19.6 million, compared with no borrowings at December 31, 2011.
At December 31, 2012, the Company's allowance for loan losses totaled $2.4 million or 0.87% of gross loans held for investment, compared with $2.4 million or 1.4% of gross loans held for investment at December 31, 2011. There were no commercial loans past due 90 days or more that had not been placed on non-accrual at December 31, 2012. However, the Company had $1.8 million in non-accrual loans at year-end 2012 consisting of ten loans held for investment. There were no non-performing loans held for sale. The non-performing loans held for investment were current as of December 31, 2012, with the exception of one $535 thousand loan that is 75 days past due at that same date. The loans have been placed on non-accrual status and deemed to be credit impaired with no specific loan loss. As of December 31, 2011, the Bank had $2.4 million in non-accrual loans, $2.4 in troubled debt restructurings and $6.8 million of loans past due 90 days or more.
Stockholders' equity totaled $57.1 million at December 31, 2012, an increase of $24.6 million or 75.6% from December 31, 2011. This increase was due primarily to the Merger plus $686 thousand of net income in 2012.
Capital ratios for the Company and the Bank continue to exceed levels required by banking regulators to be considered "well-capitalized" (the highest level specified by regulators). As of December 31, 2012, the Bank's total risk-adjusted capital ratio, tier 1 risk-adjusted capital ratio, and tier 1 capital ratio were 13.01%, 12.21%, and 10.18%, respectively, well above the regulatory requirements of 10%, 6%, and 5%, respectively, to be considered "well-capitalized."
About Manhattan Bancorp/Bank of Manhattan
Manhattan Bancorp is a bank holding company with $465 million in assets. Its principal subsidiary, Bank of Manhattan, N.A., is a full service bank headquartered in the South Bay area of Los Angeles, California. Founded in 2007, Bank of Manhattan specializes in delivering relationship banking services and residential mortgages to entrepreneurs, family-owned and closely-held middle market businesses, real estate investors and professional service firms. The Bank has five full-service offices in El Segundo, Manhattan Beach, Pasadena, Glendale and Montebello as well as six mortgage loan production offices in Southern California. For more information about Manhattan Bancorp, please visit www.thebankofmanhattan.com.
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements.
All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business prospects, strategic alternatives, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, acquisition and divestiture opportunities, plans and objectives of management for future operations and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as "will likely result," "aims," "anticipates," "believes," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "projects," "seeks," "should," "will," and variations of these words and similar expressions are intended to identify these forward-looking statements.
Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, the regulatory environment, the economy and other future conditions. The Company's actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in reports filed by the Company with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and subsequently filed Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, whether as a result of new information, future developments or otherwise, except as may be required by law.
|Manhattan Bancorp and Subsidiaries|
|Consolidated Balance Sheets|
|(Dollars in thousands)|
|December 31,||December 31,|
|Cash and due from banks||$||6,949||$||6,779|
|Federal funds sold/interest bearing demand funds||33,221||38,756|
|Total cash and cash equivalents||40,170||45,535|
|Time deposits - other financial institutions||829||3,952|
|Investment securities - available for sale, at fair value||8,364||9,460|
|Loans held for sale, at fair value||96,014||-|
|Loans held for investment||277,443||168,736|
|Allowance for loan losses||(2,414||)||(2,355||)|
|Net loans held for investment||275,029||166,381|
|Total loans, net||371,043||166,381|
|Premises and equipment, net||9,039||4,201|
|Federal Home Loan Bank and Federal Reserve stock||4,526||1,986|
|Core deposit intangible||2,574||1,863|
|Other real estate owned||3,581||3,581|
|Investment in limited partnership fund||6,655||-|
|Mortgage servicing rights||5,123||-|
|Accrued interest receivable||754||675|
|Liabilities and Stockholders' Equity|
|Non-interest bearing demand||125,254||70,188|
|Savings and money market||146,042||62,678|
|Certificates of deposit equal to or greater than $100,000||75,800||25,949|
|Certificates of deposit less than $100,000||21,079||31,857|
|FHLB advances and other borrowings||19,590||-|
|Accrued interest payable and other liabilities||5,338||3,044|
Serial preferred stock - no par value; 10,000,000 shares authorized; issued and outstanding: none in 2012 and 2011
Common stock - no par value; 30,000,000 authorized; issued and outstanding: 12,355,857 in 2012 and 357,500 in 2011
|Additional paid in capital||61,617||36,006|
|Accumulated other comprehensive income||112||483|
|Total stockholders' equity||57,128||32,497|
|Total liabilities and stockholders' equity||$||465,387||$||239,384|
|Manhattan Bancorp and Subsidiaries|
|Consolidated Statements of Operations|
|(Dollars in thousands, except per share amounts)|
|For the Year Ended|
|Interest and fees on loans||$||16,113||$||15,330|
|Interest on investment securities||279||346|
|Interest on federal funds sold||84||123|
|Interest on time deposits-other financial institutions||18||111|
|Total interest income||16,494||15,910|
|NOW, money market and savings||420||191|
|FHLB advances and other borrowed funds||(15||)||-|
|Total interest expense||897||801|
|Net interest income||15,597||15,109|
|Provision for loan losses||1,203||2,717|
|Net interest income after provision for loan losses||14,394||12,392|
|Whole loan sales and warehouse lending fees||695||-|
|Mortgage banking, including gain on sale on loans held for sale||15,923||-|
|Earnings on MIMS-1 limited partnership fund||399||-|
|Other bank fees and income||1,173||2,316|
|Gain on recovery of acquired loans||749|
|Gain on sale of securities||529||-|
|Total non-interest income||24,364||2,333|
|Compensation and benefits||25,005||6,772|
|Occupancy and equipment||2,724||1,404|
|Technology and communication||2,592||1,290|
|FDIC insurance and regulatory assessments||509||285|
|Amortization of intangibles||445||473|
|Other non-interest expenses||2,699||1,944|
|Total non-interest expenses||37,999||14,762|
|Income (loss) before income taxes||759||(37||)|
|Provision for income taxes||20||202|
|Net income (loss)||739||(239||)|
|Less: Net income attributable to the non-controlling interest||53||(1||)|
Net income (loss) attributable to common stockholders of Manhattan Bancorp
Weighted average number of shares outstanding (basic and diluted)
|Basic and diluted earnings (loss) per share||$||0.08||$||(0.05||)|
Terry L. Robinson, Chief Executive Officer
KEYWORDS: United States North America California
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