EX-99 2 ex99-0207.htm

Contact:
Timothy M. Doyle
Executive Managing Director, CFO
858.551.0511

FOR IMMEDIATE RELEASE

ITLA CAPITAL CORPORATION REPORTS
EARNINGS FOR THE QUARTER AND YEAR ENDED
DECEMBER 31, 2006

La Jolla, California (February 5, 2007) --- ITLA Capital Corporation (NYSE-IMP) today reported net income for the year ended December 31, 2006, primarily resulting from the operations of its wholly-owned subsidiary, Imperial Capital Bank (the Bank), of $26.9 million or $4.71 per diluted share compared to $24.1 million or $4.04 per diluted share for the prior year. President and Chief Executive Officer George W. Haligowski stated: "I'm pleased to report our 11th consecutive year of record core profitability. 2006 truly marked the year that we successfully transformed ourselves from a regional bank to a national commercial real estate lender with a production team that's capable of servicing customers throughout the continental United States. After initiating our national expansion effort over three years ago, our expansion offices are now providing significant contributions to our financial performance and to the record loan production achieved during the year."

Net income for the year ended December 31, 2006 increased to $26.9 million or $4.71 per diluted share, compared to $24.1 million or $4.04 per diluted share for the prior year. Net interest income before provision for loan losses increased 3.0 percent to $94.4 million for the year ended December 31, 2006, compared to $91.7 million for the prior year. This increase was primarily due to the growth in the average balance of our loan portfolio, and variable rate loans repricing to higher current market interest rates, partially offset by additional interest expense incurred due to the growth in the average balance of interest bearing liabilities, deposits and other interest bearing liabilities repricing to higher current market interest rates, and the addition of new borrowings at higher current market interest rates.

The provision for loan losses was $5.0 million for the year ended December 31, 2006, compared to $10.3 million for the prior year. These provisions for loan losses were recorded to provide reserves adequate to support known and inherent losses in our loan portfolio and for specific reserves as of December 31, 2006 and 2005, respectively. The provision recorded during 2005 reflects a $29.3 million increase in the Bank's other loans of concern and a $9.6 million increase in non-performing loans during the year. Despite the increase in our overall loan portfolio during 2006, the level of other loans of concern and non-performing loans stabilized in 2006 compared to the prior year. Other loans of concern were $67.0 million and $66.4 million, respectively, at December 31, 2006 and 2005. Other loans of concern consist of performing loans which have known information that have caused management to be concerned about the borrowers ability to comply with present loan repayment terms. Non-performing loans totaled $26.3 million and $24.3 million, respectively, at December 31, 2006 and 2005. As a percentage of our total loan portfolio, the amount of other loans of concern and non-performing loans decreased to 2.22% and 0.88%, respectively, at December 31, 2006, compared to 2.32% and 0.95%, respectively, at December 31, 2005.

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ITLA Capital Corporation reports earnings
For the quarter and year ended December 31, 2006
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Non-interest income was $2.8 million for the year ended December 31, 2006, compared to $6.6 million for the prior year. This decrease primarily related to a $4.9 million gain recorded during 2005 in connection with the sale of substantially all of the Bank's franchise loan portfolio.

General and administrative expenses were $46.4 million for the year ended December 31, 2006, compared to $46.3 million for the prior year. The Company's efficiency ratio was 47.8 percent for the year ended December 31, 2006, as compared to 47.1 percent for the prior year.

Loan originations were $1.1 billion for the year ended December 31, 2006, compared to $919.6 million for the prior year. During the current year, the Bank originated $693.1 million of commercial real estate loans, $293.7 million of small balance multi-family real estate loans, and $102.7 million of entertainment finance loans. Loan originations for the prior year consisted of $525.8 million of commercial real estate loans, $322.8 million of small balance multi-family real estate loans, $68.7 million of entertainment finance loans, and $2.4 million of franchise loans. In addition, the Bank's wholesale loan operations acquired $497.8 million and $595.3 million of commercial and multi-family real estate loans during the years ended December 31, 2006 and 2005, respectively. The Bank's wholesale loan operations also acquired a $128.5 million single-family residential loan portfolio during the year ended December 31, 2005. Haligowski commented that: "Our annual internal production exceeded $1.0 billion for the first time in the Company's 32 year history. This achievement was a team effort with contributions coming from all areas of our operations. Approximately 50% of our real estate loan originations were produced by our expansion offices, while over 70% of our overall real estate production consisted of higher yielding commercial real estate loans."

Net income for the quarter ended December 31, 2006 increased to $7.0 million or $1.22 per diluted share, compared to $6.3 million or $1.08 per diluted share for the same period last year. Net interest income before provision for loan losses decreased 3.0 percent to $23.2 million for the quarter ended December 31, 2006, compared to $24.0 million for the same period last year. The decrease was primarily caused by additional interest expense incurred due to the growth in the average balance of interest bearing liabilities, deposits and other interest bearing liabilities repricing to higher current market interest rates, and the addition of new borrowings at higher current market interest rates, partially offset by additional interest income earned due to the growth in the average balance of our loan portfolio and variable rate loans repricing to higher current market interest rates.

The provision for loan losses was $1.3 million for the quarter ended December 31, 2006, compared to $6.5 million for the same period last year. These provisions for loan losses were recorded to provide reserves adequate to support the known and inherent risk of loss in our loan portfolio and for specific reserves as of December 31, 2006 and 2005, respectively. The decrease in the provision for loan losses related primarily to an increase in the provision recorded during the quarter ended December 31, 2005, as a result of a $14.3 million increase in the Bank's other loans of concern during that period.

Non-interest income was $870,000 for the quarter ended December 31, 2006, compared to $5.6 million for the same period last year. As discussed above, this decrease primarily related to the gain recorded during 2005, in connection with the sale of the Bank's franchise loan portfolio.

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ITLA Capital Corporation reports earnings
For the quarter and year ended December 31, 2006
Page 3 of 4


General and administrative expenses decreased to $11.1 million during the current quarter, compared to $12.0 million for the same period last year. Our efficiency ratio (defined as general and administrative expenses as percentage of net revenue) was 46.0 percent for the quarter ended December 31, 2006, as compared to 40.5 percent for the same period last year. The efficiency ratio was lower in 2005 compared to 2006, due to the $4.9 million gain recognized during 2005 in connection with the sale of the franchise loan portfolio.

Loan originations were $388.3 million for the quarter ended December 31, 2006, compared to $280.6 million for the same period last year. During the current quarter, the Bank originated $203.4 million of commercial real estate loans, $122.9 million of small balance multi-family real estate loans, and $62.0 million of entertainment finance loans. Loan originations for the same period last year consisted of $186.0 million of commercial real estate loans, $90.3 million of small balance multi-family real estate loans, and $4.3 million of entertainment finance loans. In addition, the Bank's wholesale loan operations acquired $150.5 million and $102.2 million of multi-family real estate loans during the quarters ended December 31, 2006 and 2005, respectively. Haligowski commented that: "For the first time since commencing the national expansion, our expansion offices out produced the lending offices in California on a quarterly basis, and assisted in achieving the highest level of quarterly internal production in our Company's history. During the quarter, over 45% of the commercial real estate loan originations were produced by our expansion offices, representing a 67% increase in their commercial real estate loan production compared to the same period last year."

Total assets increased $364.3 million to $3.4 billion at December 31, 2006, compared to $3.1 billion at December 31, 2005. The increase in total assets was primarily due to a $449.9 million increase in our loan portfolio, partially offset by a $63.3 million decrease in cash and cash equivalents and a $40.4 million decline in investment securities held-to-maturity.

Non-performing assets were $33.0 million or 0.97 percent of total assets as of December 31, 2006, as compared to $28.2 million or 0.92 percent of total assets as of December 31, 2005. The allowance for loan loss coverage ratio (defined as the allowance for loan losses divided by non-accrual loans) at December 31, 2006 was 175.4 percent as compared to 180.6 percent at December 31, 2005.

The allowance for loan losses as a percentage of our total loans was 1.5% at December 31, 2006, as compared to 1.7% at December 31, 2005. The decrease in this percentage primarily reflects the growth in our total loan portfolio during the year, which increased by 17.6 % compared to the prior year, as well as the continuing decline in our overall risk profile due to a broader geographic diversification of our real estate loan portfolio resulting from a higher concentration of non-California multi-family and commercial real estate loans as a percentage of our total loan portfolio. As of December 31, 2006, over 46% of our real estate loans were secured by properties outside of California compared to 41% in 2005. During the years ended December 31, 2006 and 2005, we had net charge-offs of $2.8 million and $1.9 million, respectively.

At December 31, 2006, shareholders' equity totaled $221.3 million or 6.5 percent of total assets. During the current quarter, we repurchased 39,050 shares at an average price of $54.97 per share. For the year ended December 31, 2006, we repurchased 228,781 shares at an average price of $49.19 per share. Since beginning share repurchases in April 1997, a total of 3.5 million shares have been repurchased, returning approximately $101.1 million of capital to our shareholders at an average

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ITLA Capital Corporation reports earnings
For the quarter and year ended December 31, 2006
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price of $28.64 per share. The Company's book value per share of common stock was $42.07 as of December 31, 2006, an increase of 11.1 percent, from $37.85 per share as of December 31, 2005.

The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at December 31, 2006 of 9.1 percent, 10.3 percent and 11.5 percent, respectively, which represents $130.0 million, $120.3 million and $42.6 million, respectively, of capital in excess of the amount required to be "well capitalized" for regulatory purposes. In addition, the Company, the Bank's holding company, had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at December 31, 2006 of 9.0 percent, 10.2 percent and 11.9 percent, respectively, which represents $130.0 million, $120.3 million and $53.5 million, respectively, of capital in excess of the amount required to be "well capitalized".

Haligowski concluded: "2006 culminated with the Company's listing on the New York Stock Exchange, which I believe will increase our visibility in the capital markets. This achievement is a tribute to our success and the hard work and dedication of our associates, and further marks the evolution of the Company from our modest beginnings at the time of our IPO in 1995 to a national commercial real estate lender. Our share price ended the year at $57.91, a 19% increase over last year's closing price of $48.85, while our total assets exceeded $3.4 billion, with record loan footings of $3.0 billion. In an effort to provide further value to our shareholders, we announced our first regular quarterly dividend of $0.15 per share during the first quarter of 2006, and we declared total dividends of approximately $3.2 million throughout the year."

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995:
This release contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, changes in economic conditions in the Company's market areas, changes in policies by regulatory agencies, the impact of competitive loan products, loan demand risks, the quality or composition of the loan or investment portfolios, increased costs from pursuing the national expansion of our lending platform and operational challenges inherent in implementing this expansion strategy, fluctuations in interest rates, and changes in the relative differences between short- and long-term interest rates, levels of non-performing assets and other loans of concern, and operating results, the economic impact of terrorist actions and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause the Company's actual results for 2007 and beyond to differ materially from those expressed in any forward looking statements by, or on behalf of, the Company.

ITLA Capital Corporation is a publicly traded diversified bank holding company specializing in commercial real estate lending on a national basis and is headquartered in San Diego, California. The Company conducts its operations through Imperial Capital Bank and Imperial Capital Real Estate Investment Trust. Imperial Capital Bank has seven retail branch locations and 23 loan origination offices serving the Western United States, the Southeast, the Mid-Atlantic states, the Ohio Valley, the Metro New York area and New England.

For additional information, contact Timothy M. Doyle, Executive Managing Director and Chief Financial Officer, at (858) 551-0511.

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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2006 December 31,
(unaudited) 2005
(in thousands except share amounts)
Assets
Cash and cash equivalents $ 30,448 $ 93,747
Investment securities available-for-sale, at fair value 99,527 92,563
Investment securities held-to-maturity, at amortized cost 193,512 233,880
Stock in Federal Home Loan Bank 48,984 43,802
Loans, net (net of allowance for loan losses of $46,049 and
   $43,817 in 2006 and 2005, respectively) 2,973,368 2,523,480
Interest receivable 20,753 16,287
Other real estate owned, net 6,729 3,960
Premises and equipment, net 7,851 6,718
Deferred income taxes 11,513 12,717
Goodwill 3,118 3,118
Other assets 19,707
 20,924
Total assets $ 3,415,510 $ 3,051,196


Liabilities and Shareholders' Equity
Liabilities:
Deposit accounts $ 2,059,405 $ 1,735,428
Federal Home Loan Bank advances and other borrowings 1,010,000 992,557
Accounts payable and other liabilities 38,168 32,130
Junior subordinated debentures 86,600
 86,600
Total liabilities 3,194,173
 2,846,715
Commitments and contingencies
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized, none issued - -
Contributed capital - common stock, $.01 par value; 20,000,000 shares
authorized, 9,065,672 and 8,978,998 issued in 2006 and 2005, respectively 82,073 78,004
Retained earnings 243,823 220,095
Accumulated other comprehensive income (loss), net 35
 (364)
325,931 297,735
Less treasury stock, at cost - 3,803,969 and 3,576,695 shares
in 2006 and 2005, respectively (104,594)
 (93,254)
Total shareholders' equity 221,337
 204,481
Total liabilities and shareholders' equity $ 3,415,510 $ 3,051,196
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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months Ended
 For the Years Ended
December 31,
 December 31,
2006
 2005
 2006
 2005
(in thousands except per share amounts)
Interest income:
  Loans receivable, including fees $ 55,496 $ 46,321 $ 207,320 $ 159,720
  Cash, cash equivalents and investment securities 4,687
 4,575
 19,181
 18,438
    Total interest income 60,183
 50,896
 226,501
 178,158
Interest expense:
  Deposit accounts 25,097 16,885 85,156 53,807
  Federal Home Loan Bank advances and other borrowings 9,735 8,142 38,722 25,508
  Junior subordinated debentures 2,109
 1,907
 8,197
 7,171
    Total interest expense 36,941
 26,934
 132,075
 86,486
      Net interest income before provision for loan losses 23,242 23,962 94,426 91,672
Provision for loan losses 1,250
 6,500
 5,000
 10,250
      Net interest income after provision for loan losses 21,992
 17,462
 89,426
 81,422
Non-interest income:
  Gain on sale of loans, net - 4,911 - 4,911
  Late and collection fees 278 152 970 536
  Other 592
 537
 1,802
 1,127
    Total non-interest income 870
 5,600
 2,772
 6,574
Non-interest expense:
  Compensation and benefits 4,735 5,422 21,265 21,737
  Occupancy and equipment 1,871 1,796 7,439 7,177
  Other 4,497
 4,768
 17,743
 17,344
    Total general and administrative 11,103
 11,986
 46,447
 46,258
  Real estate owned expense, net 118 204 334 204
  Loss (gain) on sale of other real estate owned, net 35
 -
 35
 (11)
    Total real estate owned expense, net 153
 204
 369
 193
      Total non-interest expense 11,256
 12,190
 46,816
 46,561
Income before provision for income taxes 11,606 10,872 45,382 41,545
Provision for income taxes 4,643
 4,567
 18,493
 17,482
  NET INCOME $ 6,963 $ 6,305 $ 26,889 $ 24,063
  BASIC EARNINGS PER SHARE $ 1.26 $ 1.11 $ 4.83 $ 4.19
  DILUTED EARNINGS PER SHARE $ 1.22 $ 1.08 $ 4.71 $ 4.04