Manhattan Bancorp Reports First Quarter Financial Results

LOS ANGELES--()--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, 2014.

For the quarter ended March 31, 2014, the Company reported net loss was $1.90 million, or $(0.15) per diluted share, compared to net income of $377 thousand, or $0.03 per diluted share, for the comparable period in 2013.

Terry Robinson, Chief Executive Officer, stated, “While reporting a loss in the first quarter of 2014 is very disappointing, it does not represent a fundamental change in the direction of our Company. The loss is entirely attributed to a one-time operational loss and a depressed mortgage market coupled with normal seasonal factors. We anticipate a return to sustained profitability in the second quarter of 2014.”

Richard Pimentel, Chief Financial Officer, went on to explain, “The first quarter of the year recorded growth in our commercial loans and customer deposits that were in line with expectations. However, as stated by our CEO, the quarter was negatively impacted by a continued depressed mortgage market and an operating loss related to foreign-based wire fraud. Management initiated actions over the last six months directed at improving net income and lowering overhead that will have a positive effect on earnings for the remainder of 2014 and beyond.”

Additional highlights for the first quarter of 2014 include the following:

  • Total assets were $504.4 million as of March 31, 2014, an increase of $0.5 million from $503.9 million as of December 31, 2013.
  • Investment securities were $20.5 million as of March 31, 2014, an increase of $14.7 million from $5.6 million as of December 31, 2013.
  • Total net loans outstanding were $338.2 million as of March 31, 2014, an increase of $11.4 million from $326.8 million as of December 31, 2013.
  • Net interest margin for the quarter was 3.64%.
  • Non-performing loans of $2.2 million represented 0.72% of the total loans held for investment outstanding as of March 31, 2014.
  • The Bank’s Tier 1 Leverage Ratio and Total Risk-Based Capital Ratio as of March 31, 2014 were 9.58% and 14.25%, respectively.

Net Interest Income and Margin

The Company’s net interest income totaled $4.1 million for the quarter ended March 31, 2014, a decrease of $0.6 million or 13% compared with the $4.7 million reported in the comparable quarter of 2013. The decrease in net interest income was largely due to a decrease in loans as a result of a decline in residential mortgage loans held for sale and the elimination of loans for mortgage warehouse lines. Average interest earning assets increased to $455.6 million for the first quarter in 2014 from $417.9 million during the same quarter in 2013 – an increase of $38 million, or 9%. However, average loans for the three months ended March 31, 2014 decreased $52.4 million, or 14% to $322.2 million from $374.6 million for the same period last year, while at the same time average Federal funds sold increased by $81.7 million, or 246.9% to $114.7 million for 2014 compared to $33.1 million for the same period of time in 2013. Similarly, average interest bearing liabilities increased to $437.6 million for the first quarter in 2014 from $408.9 million during the same quarter in 2013 – an increase of $29 million, or 7%. At this same time the interest spread decreased by 93 basis points to 3.63% and the net interest margin decreased by 93 basis points to 3.64%.

The decrease in the spread and net interest margin in the first quarter of 2014 compared to the comparable quarter in 2013 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 principal contributor to the decrease in the yield on earning assets was a decrease in average loan balances during the first quarter of 2014 compared with the comparable period in 2013. The yield on earning assets decreased 87 basis points to 4.02% for the first quarter of 2014 compared to 4.89% during the first quarter of 2013. The cost of interest bearing liabilities increased 6 basis points to 0.39% for the first quarter of 2014 compared to 0.33% for the comparable quarter in 2013. The primary contributor to the increase in the cost of interest bearing liabilities was an increase in the cost of certificates of deposit of 53 basis points to 1.08% for the first quarter of 2014 compared to 0.53% for the comparable period in 2013.

Non-Interest Income

Non-interest income for the quarters ended March 31, 2014 and 2013 was $4.2 million and $7.4 million, respectively. This $3.2 million decrease was due primarily to revenue provided by mortgage division activity.

For the quarter ended March 31, 2014, non-interest income from the mortgage division totaled $3.4 million, a decrease of $3.2 million from $6.5 million for the first quarter of 2013. The mortgage division revenue is largely a function of the volume of loan origination during the period, which totaled $106 million for the first quarter of 2014 compared to $274 million for the first quarter of 2013. Approximately 45% of mortgage loans originated during the first quarter of 2014 were made to refinance existing mortgages while 55% were made to finance the purchase of a home.

For the quarter ended March 31, 2014, non-interest income from the commercial division totaled $839 thousand, a decrease of $7 thousand from the $846 thousand for the first quarter of 2013. The decrease was related to decreases in rental income and earnings from the Bank’s participation in the MIMS-1 limited partnership fund which was $25 thousand and $60 thousand, respectively for the first quarter of 2014 compared to $158 thousand and $100 thousand for the comparable period in 2013. The decline was offset by gains on the recovery of acquired loans totaling $405 thousand in the first quarter of 2014, where $225 thousand was recognized in the comparable period of 2013.

Non-Interest Expense

Non-interest expense for the quarters ended March 31, 2014 and 2013 was $9.9 million and $11.9 million, respectively, a decrease of $2.0 million, or 17%. Most of the decrease in non-interest expense was the result of decreases in compensation and professional fees.

Four expense categories comprised 92% and 81% of the Company’s operating expenses for the first quarter of 2014 and 2013, respectively: compensation and benefits, occupancy and equipment, technology and communication, and other non-interest expense. These four expense categories totaled $9.1 million for the first quarter of 2014, a decrease of $1.4 million, or 13%, compared with $10.5 million for the comparable period of 2013, and accounted for almost all of the total increase in the Company’s non-interest expenses for the first quarter of 2014 compared to the first quarter in 2013.

Compensation and Benefits

Compensation and benefits expense totaled $6.1 million and $7.7 million in the quarters ended March 31, 2014 and 2013, respectively. These expenses comprised 61% and 64% of total non-interest expense for the first quarter of 2014 and 2013, respectively.

Compensation and benefits decreased $1.6 million, or 21%, for the first quarter of 2014 compared with the first quarter in 2013. The decrease is primarily due to reduced commission expense related to decreased production in the mortgage division. The Company had a total of 204 full-time equivalent employees as of March 31, 2014, which was comprised of 129 in the mortgage division and 75 in the commercial division. As of March 31, 2013 the Company had a total of 195 full-time equivalent employees, which comprised of 117 in the mortgage division and 78 in the commercial division.

Occupancy and Equipment

Occupancy and equipment costs totaled $896 thousand and $910 thousand for the first quarter of 2014 and 2013, respectively. These expenses, which comprised 9% and 8% of total operating expenses for the first quarter of 2014 and 2013, respectively, decreased by $14 thousand, or 2%, in for the first quarter of 2014 compared with the first quarter in the prior year.

Technology and Communication

Technology and communication expense, which totaled $701 thousand and $839 thousand for the first quarter in 2014 and 2013, respectively, comprised 7% and 7% of the Company’s total operating expenses in the first quarter of 2014 and 2013, respectively. These expenses decreased by $138 thousand, or 17%, in the first quarter of 2014 compared with the first quarter of the prior year.

Other Non-Interest Expense

Other non-interest expense, which totaled $1.5 million and $1.1 million for the first quarter of 2014 and 2013, respectively, comprised 15% and 9% of the Company’s total operating expenses during respective periods. This category of expense increased by $366 thousand for the first quarter of 2014 compared with the first quarter in the prior year, primarily due to a non-recurring loss in the commercial division and increased business development costs.

Balance Sheet

Total assets at March 31, 2014 totaled $504.5 million, up 0.1% from $503.9 million at December 31, 2013. The increase in our total assets was driven by growth in commercial and mortgage loans.

Net loans totaled $338.2 million at March 31, 2014, up $11.4 million, or 4%, from $326.8 million at December 31, 2013. Loans held for investment increased by $7.4 million, or 3%, to $303.0 million at March 31, 2014 compared with $295.6 million at December 31, 2013. Loans held for sale increased by $4.2 million, or 12.3%, to $38.1 million at March 31, 2014 compared with $33.9 million at December 31, 2013.

The principal source of funding for the Company comes from depository accounts that increased by $2.6 million, or 0.6%, to $435.2 million at March 31, 2014 from $432.6 million at December 31, 2013. Most of the increase in deposits resulted in non-interest bearing demand accounts offset by a decrease in certificates of deposit balances.

Most of the increase in deposits came from a $9.8 million increase in non-interest bearing deposits to $186.3 million at March 31, 2014 from $176.5 million at December 31, 2013.

Credit Quality

At March 31, 2014, the Company’s allowance for loan losses totaled $2.9 million, or 0.96% of loans held for investment, compared with $2.7 million, or 0.90% of loans held for investment, at December 31, 2013. During the first quarter of 2014, the Company had net charge offs of $9 thousand, which compared favorably to $16 thousand during the first quarter of 2013. The Company had $2.2 million in non-accrual loans in its portfolio of loans held for investment at March 31, 2014, or 0.73% 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, 2014. Included in the loans that have been placed on non-accrual are two loans that were classified as troubled debt restructuring, which totaled $168 thousand as of March 31, 2014. There were no non-performing loans in the Company’s portfolio of loans held for sale. As of December 31, 2013, the Bank had $2.1 million in non-accrual loans, or 0.72% of total loans held for investment, including $27 thousand classified as troubled debt restructuring.

Capital Adequacy

Stockholders’ equity totaled $57.7 million at March 31, 2014, a decrease of $1.8 million from $59.5 million at December 31, 2013.

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, 2014, the Bank’s total risk-adjusted capital ratio, tier 1 risk-adjusted capital ratio, and tier 1 capital ratio were 14.25%, 13.21%, and 9.58%, 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 $504 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.

Forward-Looking Statement

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
(Unaudted)
(Dollars in thousands)
 
      March 31,       December 31,
2014 2013
 
Assets
Cash and due from banks $ 10,119 $ 6,983
Federal funds sold/interest bearing demand funds   83,046     118,460  
Total cash and cash equivalents 93,165 125,443
Time deposits - other financial institutions 12,663 5,750
Investment securities - available for sale, at fair value 20,477 5,751
Loans held for sale, at fair value 38,106 33,944
Loans held for investment 303,012 295,566
Allowance for loan losses   (2,917 )   (2,661 )
Net loans held for investment   300,095     292,905  
Total loans, net 338,201 326,849
Premises and equipment, net 8,145 8,377
Federal Home Loan Bank and Federal Reserve stock 4,487 4,487
Goodwill 6,718 6,718
Core deposit intangible 2,074 2,224
Other real estate owned - -
Investment in limited partnership fund 7,170 7,110
Mortgage servicing rights 6,994 6,584
Accrued interest receivable 883 817
Other assets   3,490     3,825  
Total assets   504,467     503,935  
 
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing demand 186,299 176,507
Interest bearing:
Demand 23,201 21,797
Savings and money market 143,485 143,212
Certificates of deposit equal to or greater than $100,000 48,812 54,419
Certificates of deposit less than $100,000   33,386     36,616  
Total deposits 435,183 432,551
FHLB advances and other borrowings 6,000 6,000
Accrued interest payable and other liabilities   5,611     5,867  
Total liabilities 446,794 444,418
 
Stockholders' equity
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: 12,598,268 in 2013 and 12,355,857 in 2012
Additional paid in capital 61,720 61,644
Accumulated other comprehensive income 37 65

Accumulated deficit

  (4,084 )   (2,192 )
Total stockholders' equity   57,673     59,517  
Total equity 57,673 59,517
   
Total liabilities and stockholders' equity $ 504,467   $ 503,935  
 
Book value per share $ 4.58 $ 4.82
Tangible book value per share $ 3.88 $ 4.09
 
 
Manhattan Bancorp and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
 
      For the Three Months
Ended March 31,
2014       2013
 
Interest income
Interest and fees on loans $ 4,349 $ 4,953
Interest on investment securities 88 56
Interest on federal funds sold 71 17
Interest on time deposits-other financial institutions   7     1  
Total interest income 4,515 5,027
 
Interest expense
NOW, money market and savings 180 173
Time deposits 230 141
FHLB advances and other borrowed funds   16     15  
Total interest expense 426 329
   
Net interest income 4,089 4,698
 
Provision for loan losses 275 (220 )
   
Net interest income after provision for loan losses   3,814     4,918  
 
Non-interest income
Whole loan sales and warehouse lending fees - -
Advisory income - -
Trading income - -
Mortgage banking, including gain on sale on loans held for sale 3,363 6,546
Earnings on MIMS-1 limited partnership fund 60 100
Other bank fees and income 349 363
Rental income 25 158
Gain on recovery of acquired loans 405 225
Gain on sale of securities   -     -  
Total non-interest income 4,202 7,392
 
Non-interest expenses
Compensation and benefits 6,069 7,672
Occupancy and equipment 896 910
Technology and communication 701 839
Professional fees 519 1,138
FDIC insurance and regulatory assessments 120 153
Amortization of intangibles 149 135
Other non-interest expenses   1,452     1,086  
Total non-interest expenses 9,906 11,933
   
Income (loss) before income taxes (1,890 ) 377
 
Provision for income taxes 1 -
   
Net income (loss) $ (1,891 ) $ 377  
Less: Net income attributable to the non-controlling interest   -     -  
Net income (loss) attributable to common $ (1,891 ) $ 377  
stockholders of Manhattan Bancorp
Weighted average number of shares outstanding
(basic and diluted) 12,598,268 12,450,183
 
Earnings per Share
Basic and diluted earnings (loss) per share $ (0.15 ) $ 0.03

Contacts

Investor Relations Contact:
Manhattan Bancorp
Terry Robinson, Chief Executive Officer
310-606-8080

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Contacts

Investor Relations Contact:
Manhattan Bancorp
Terry Robinson, Chief Executive Officer
310-606-8080