Manhattan Bancorp Reports Three Consecutive Quarters 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 three months ended March 31, 2013.
For the quarter ended March 31, 2013, net income was $377 thousand, or $0.03 per diluted share, compared to a net loss of $548 thousand, or $(0.12) per diluted share, for the same period in 2012.
Additional highlights for the first quarter of 2013 include the following:
Total assets were $495 million as of March 31, 2013, an increase of $30 million from $465 million as of December 31, 2012.
Total net loans outstanding were $393 million as of March 31, 2013, an increase of $22 million from $371 million as of December 31, 2012.
Net interest margin for the quarter was 4.67%.
The efficiency ratio for the year was 98.7%.
Non-performing loans of $3.1 million represented 1.15% of the total loans held for investment outstanding as of March 31, 2013.
The Bank's Tier 1 Leverage Ratio and Total Risk-Based Capital Ratio as of March 31, 2013 were 9.95% and 13.28%, respectively.
Terry Robinson, Chief Executive Officer, stated, "The results of operations for the first quarter of 2013 represent the third consecutive quarter of profitable operations, reflecting synergies from the Merger with Professional Business Bank, which closed effective May 31, 2012." Curt Christianssen, Interim Chief Financial Officer, went on to explain, "Although Manhattan Bancorp and Bank of Manhattan were the surviving entities in the Merger, 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 quarter ended March 31, 2013 reflect the results of operations for the combined banks, while the reported earnings for the same period in 2012 only include the results of operations of Professional Business Bank. Thus, comparisons of the 2013 results with the same quarter in the prior year are difficult to analyze, at best."
Net Interest Income and Margin
The Company's net interest income totaled $4.7 million for the quarter ended March 31, 2013, an increase of $2.2 million or 89% compared with the $2.5 million reported in the same quarter of 2012. The increase in net interest income was largely due to an increase in earning assets as a result of the Merger partially offset by increased interest bearing liabilities and a slight decrease in our net interest margin and spread. Average interest earning assets increased to $418 million for the first quarter in 2013 from $212 million during the same quarter in 2012 - an increase of $206 million, or 97%. Similarly, average interest bearing liabilities increased to $269 million for the first quarter in 2013 from $124 million during the same quarter in 2012 - an increase of $145 million, or 116%. At this same time the interest spread decreased by 13 basis points to 4.56% and the net interest margin decreased by 14 basis points to 4.57%.
The decrease in the spread and net interest margin in the first quarter of 2013 compared to the same quarter in 2012 was due to a decrease in the yield on interest earning assets combined with an increase in the average cost of interest bearing liabilities. The yield on earning assets decreased 6 basis points to 4.89% for the first quarter of 2013 compared to 4.95% during the first quarter of 2012. The cost of interest bearing liabilities increased 7 basis points to 0.33% for the first quarter of 2013 compared to 0.26% for the same quarter in 2012. The principal contributor to the decrease in the yield on earning assets was a decrease in loan yields of 71 basis points to 5.37% during the first quarter of 2013 compared with 6.08% for the same period in 2013. Higher loan yields in the first quarter of 2012 compared to the same period in 2013 were reflective of a greater amount of yield accretion in 2012 associated with loans accounted for under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 310-30 - Accounting for Certain Loans or Debt Securities Acquired in a Transfer. The primary contributor to the increase in the cost of interest bearing liabilities was an increase in the cost of savings and money market accounts of 30 basis points to 0.57% for the first quarter of 2013 compared to 0.27% for the same period in 2012.
Non-interest income for the quarters ended March 31, 2013 and 2012 was $7.4 million and $911 thousand, respectively. This $6.5 million increase was due primarily to revenue provided by mortgage division activity.
As a result of the Merger, non-interest income for the first quarter of 2013 includes revenues generated from the mortgage division, which totaled $6.5 million, compared to no revenue from mortgage activity reflected during the first quarter of 2012. The mortgage division revenue is a function of the volume of loan origination during the period, which totaled $274 million. Approximately 70% of mortgage loans originated during the first quarter of 2013 were made to refinance existing mortgages while 30% were made to finance the purchase of a home.
For the quarter ended March 31, 2013, non-interest income from the commercial division totaled $836 thousand, an increase of $353 thousand from the $383 thousand for the first quarter of 2012. The increase was partly related to gains on the recovery of acquired loans totaling $225 thousand in the first quarter of 2013, where $135 thousand was recognized in the same period of 2012. The increase was also related to incremental earnings from the Bank's participation in the MIMS-1 limited partnership fund, which resulted in income of $100 thousand during the first quarter of 2013, while none was recorded in the same period of 2012.
The increases in non-interest income from the mortgage and commercial banking activities in the first quarter of 2013 over the first quarter of 2012 were partially offset by a decrease in income from gains realized on the sale of securities that totaled $528 thousand for the first quarter of 2012, while none were realized during the first quarter of 2013.
Non-interest expense for the quarters ended March 31, 2013 and 2012 was $11.9 million and $4.4 million, respectively, an increase of $7.6 million, or 174%. Most of the increase in non-interest expense was driven by growth in the Company's staffing levels due to the Merger, including the increase in infrastructure to support expansions in our 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 88% and 81% of the Company's operating expenses for the first quarter of 2013 and 2012, respectively: compensation and benefits, occupancy and equipment, technology and communication, and professional fees. These four expense categories totaled $10.6 million for the first quarter of 2013, an increase of $7.0 million, or 197%, compared with $3.6 million for the same period of 2012, and accounted for almost all of the total increase in the Company's non-interest expenses for the first quarter of 2013 compared to the same period in 2012.
Compensation and Benefits
Compensation and benefits expense totaled $7.7 million and $2.3 million in the quarters ended March 31, 2013 and 2012, respectively. These expenses comprised 64% and 52% of total non-interest expense for the first quarter of 2013 and 2012, respectively.
Compensation and benefits expense grew by $5.4 million, or 235%, for the first quarter of 2013 compared with the same period in 2012. This increase 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 Company had a total of 195 full-time equivalent employees as of March 31, 2013, which was comprised of 117 in the mortgage division and 78 in the commercial division. As of March 31, 2012 the Company had a total of 48 full-time equivalent employees, which were all related to the commercial division.
Occupancy and Equipment
Occupancy and equipment costs totaled $910 thousand and $298 thousand for the first quarter of 2013 and 2012, respectively. These expenses, which comprised 8% and 7% of total operating expenses for the first quarter of 2013 and 2012, respectively, increased by $612 thousand, or 205%, in for the first quarter of 2013 compared with the same period in 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 $839 thousand and $241 thousand for the first quarter in 2013 and 2012, respectively, comprised 7% and 6% of the Company's total operating expenses in the first quarter of 2013 and 2012, respectively. These expenses increased by $598 thousand, or 248%, in the first quarter of 2013 compared with the same period of 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 our mortgage division and, to a lesser extent, commercial division. In addition, expenses incurred during the first quarter of 2013 include expense related to the integration of technology platforms as a result of the Merger.
Professional fees, which totaled $1.1 million and $726 thousand for the first quarter of 2013 and 2012, respectively, comprised 10% and 17% of the Company's total operating expenses during these same respective periods. This category of expense increased by $412 thousand for the first quarter of 2013 compared with the same period in the prior year, primarily due to outlays for professional services related to the mortgage division during the first quarter of 2013 for which there were no operations reflected in the first quarter of 2012.
Total assets at March 31, 2013 totaled $494.7 million, up $29.3 million or 6% from $465.4 million at December 31, 2012. The increase in our total assets was driven almost entirely by the growth in loan portfolios, primarily driven by the mortgage division.
Net loans totaled $393.5 million at March 31, 2013, up $22.5 million, or 6%, from $371.0 million at December 31, 2012. Most of this growth was generated by the mortgage division, as reflected by the $28.9 million increase in loans held for sale to $124.9 million at March 31, 2013 compared with a total of $96.0 million at December 31, 2012. Loans held for investment decreased by $6.4 million, or 2%, to $270.8 million at March 31, 2013 compared with $277.4 million at December 31, 2012.
The principal source of funding for the Company comes from depository accounts that increased by $43.7 million, or 11%, to $427.0 million at March 31, 2013 from $383.3 million at December 31, 2012. Most of the increase in deposits came from a $47.8 million increase in certificates of deposit to $144.7 million at March 31, 2013 from $96.9 million at December 31, 2012. During the first quarter of 2013, the Company was able to obtain lower cost certificates of deposit that allowed for a decrease in short-term borrowings with the Federal Home Loan Bank ("FHLB"). Total FHLB borrowings at March 31, 2013 were $4.5 million, a decrease of $15.1 million from $19.6 million at December 31, 2012.
Total deposits in savings and money market accounts decreased by $21.1 million, or 14%, to $124.9 million at March 31, 2013 from $146.0 million at December 31, 2012. The majority of the decrease in savings and money market accounts related to temporary customer deposits at December 31, 2012 that were withdrawn shortly after the start of 2013. The decrease in savings and money market accounts during the first quarter of 2013 was partially offset by increases in non-interest bearing demand accounts. Total deposits in non-interest bearing demand accounts increased $15.9 million, or 13%, to $141.2 million at March 31, 2013 from $125.3 million at December 31, 2012. Non-interest bearing demand accounts represented one-third of the Company's total deposits at March 31, 2013 and December 31, 2012.
As a result of the increase in funding liabilities in excess of loan growth, investable balances (Federal funds sold, interest bearing deposits and investment securities) increased by $6.4 million, or 13%, to $55.8 million at March 31, 2013, compared with $49.4 million at December 31, 2012. The Company maintains most of these balances in interest bearing accounts at other banks, including the Federal Reserve, in order to support the day-to-day fluctuating cash requirements during the month in its deposit accounts and the funding and sale of mortgage loans in its mortgage division.
At March 31, 2013 the Company's allowance for loan losses totaled $2.2 million, or 0.80% of loans held for investment, compared with $2.4 million, or 0.87% of loans held for investment, at December 31, 2012. During the first quarter of 2013, the Company had net charge offs of $16 thousand, which compared favorably to $28 thousand during the first quarter of 2012. As a result of its analysis of the adequacy of the allowance for loan losses as of March 31, 2013, the Company made a negative provision for loan losses of $220 thousand for the first quarter of 2013; similarly, the Company recorded a negative provision of $415 thousand during the first quarter of 2012.
The Company had $3.1 million in non-accrual loans in its portfolio of loans held for investment at March 31, 2013, or 1.15% of total loans held for investment. There were no loans past due 90 days or more that had not been placed on non-accrual at March 31, 2013. Included in the loans that have been placed on non-accrual are four loans that were classified as troubled debt restructuring, which totaled $152 thousand as of March 31, 2013. There were no non-performing loans in the Company's portfolio of loans held for sale. As of December 31, 2012, the Bank had $5.2 million in non-accrual loans, or 1.89% of total loans held for investment, including $331 thousand classified as troubled debt restructuring.
Stockholders' equity totaled $58.0 million at March 31, 2013, an increase of $900 thousand from $57.1 million at December 31, 2012. Total comprehensive income of $373 thousand plus the net proceeds of $499 thousand from a rights offering conducted by the Company contributed to this increase in shareholders' equity. In February of 2013, the Company completed a rights offering, which resulted in the issuance of 152,711 shares of its common stock at $4.52 per share for gross proceeds of $690 thousand and net proceeds of $499 thousand.
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 March 31, 2013, the Bank's total risk-adjusted capital ratio, tier 1 risk-adjusted capital ratio, and tier 1 capital ratio were 13.28%, 12.52%, and 9.95%, 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 $495 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 eight mortgage loan production offices in Southern California. For more information about Manhattan Bancorp, please visit www.bankofmanhattan.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
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Common stock - no par value; 30,000,000 authorized; issued and outstanding: 12,508,268 in 2013 and 4,513,501 in 2012
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Manhattan Bancorp and Subsidiaries
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