Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter and Six Months Ended June 30, 2008

    LA JOLLA, Calif., July 15 /EMWNews-FirstCall/ -- Imperial Capital

Bancorp, Inc. (NYSE: IMP) today reported net income for the quarter ended

June 30, 2008, primarily resulting from the operations of its wholly-owned

subsidiary, Imperial Capital Bank (the Bank), of $2.4 million or $0.43 per

diluted share compared to $6.0 million or $1.08 per diluted share for the

same period last year. President and Chief Executive Officer George W.

Haligowski stated that: "I'm encouraged by our second quarter results.

We've been able to remain profitable throughout this prolonged banking

crisis, and have consistently increased our book value per share and

maintained our capital ratios above the 'well capitalized' thresholds.

During the quarter, we've continued to focus on identifying and addressing

credit related matters and maintaining adequate reserves to absorb any

inherent losses. As a result, we recorded a provision for loan losses of

$6.3 million during the quarter and increased the ratio of our allowance

for loan loss to total loans to 1.73% as compared to 1.51% and 1.38% at

December 31, 2007 and June 30, 2007, respectively."



    Net interest income before provision for loan losses increased 13.5% to

$24.8 million for the quarter ended June 30, 2008, compared to $21.8

million for the same period last year. The increase was primarily due to an

increase in interest earned on our investment securities held-to-maturity,

as well as a decline in our average cost of funds, as deposits have

repriced to current market interest rates. During the quarters ended June

30, 2008 and 2007, the average balance of our investment securities

held-to-maturity was $567.4 million and $181.6 million, respectively. At

June 30, 2008, our investment securities held-to-maturity totaled $914.4

million as compared to $159.0 million at December 31, 2007. These increases

were primarily related to the purchase of approximately $784.6 million of

AAA rated corporate sponsored collateralized mortgage obligations (CMOs)

during the current year, which are secured by Alt A first lien residential

mortgage loans, predominantly all of which carry fixed interest rates. Mr.

Haligowski noted: "We have acquired only those CMOs that we were able to

finance using match funding sources and that are consistent with our risk

management objectives. Prior to their acquisition, we assessed and

evaluated the risks and our potential returns over the expected life of the

CMOs and in a variety of interest rate, yield spread, financing cost,

credit loss and prepayment scenarios." These CMOs were acquired at an

average cost of 88% of their current par value (actual cost ranged from 68%

to 96% of current par value, depending on estimated average lives, credit

enhancement through subordination levels, and underlying collateral

performance). These investments were priced to earn a weighted average

effective yield of 8.9%, and they carry an average credit enhancement of

8.6% through subordination provided by junior CMO tranches that bear the

initial losses on the underlying loans. The average expected life of these

CMOs is approximately 5 years. The increase in net interest income was

partially offset by a decline in the yield earned on our loan portfolio, as

higher yielding loans have paid-off and were replaced by loan production

that was originated at lower spreads over our cost of funds due to

competitive pricing pressures. Haligowski continued: "These AAA rated CMO

investments represent opportunistic acquisitions that have been matched

funded to lock an expected spread over our cost of funds of approximately

4.5%. We feel comfortable with the risk profile of these securities given

the credit enhancements provided by the purchase price discounts and credit

subordination in the bond structures. We anticipate that these acquisitions

will provide a significant increase to our net interest income and, at a

time of limited loan origination activity, will provide the Company with an

additional revenue stream beyond our core lending products."



    The provision for loan losses was $6.3 million and $500,000,

respectively, for the quarters ended June 30, 2008 and 2007. The provision

for loan losses recorded during the quarter was primarily due to the

increase in our non-performing loans. Non-performing loans as of June 30,

2008 were $116.8 million, compared to $91.5 million and $38.0 million at

March 31, 2008 and December 31, 2007, respectively. The increase in

non-performing loans during the year was primarily related to

non-performing construction and land development loans, which increased

from $8.8 million at December 31, 2007 to $78.7 million at June 30, 2008.

With the housing and secondary mortgage markets continuing to deteriorate

and showing no signs of stabilizing in the near future, we continue to

aggressively monitor our real estate loan portfolio, including our

construction and land loan portfolio. Our construction and land loan

portfolio at June 30, 2008 totaled $460.0 million, of which $296.2 million

were residential and condominium conversion construction loans and land

development loans, representing 10.0% of our total loan portfolio. Within

this portfolio, approximately 58.3%, 23.9% and 5.3% were located in

California, New York and Florida, respectively. At June 30, 2008, we had

$74.9 million of non-performing lending relationships within our

residential and condominium conversion construction and land development

loan portfolio, consisting of ten lending relationships. Of these

non-performing construction loans, five relationships, with an aggregate

balance of $57.2 million, were located in California (Huntington Beach,

Cathedral City, Indio, Corona and Palmdale).



    Non-interest income was ($1.1 million) for the quarter ended June 30,

2008, compared to $843,000 for the same period last year. The decline in

non-interest income primarily related to a loss provision recorded during

the current period for unfunded commitments, as well as a loss on sale of

loans recognized in connection with the sale of approximately $53.2 million

of multi-family loans in June 2008. Non-interest income typically consists

of fees and other miscellaneous income earned on customer accounts.



    General and administrative expenses were $12.7 million for the quarter

ended June 30, 2008, compared to $11.9 million for the same period last

year. The Company's efficiency ratio (defined as general and administrative

expenses as percentage of net revenue) was 53.7% for the quarter ended June

30, 2008, as compared to 52.5% for the same period last year.



    Loan originations were $87.1 million for the quarter ended June 30,

2008, compared to $337.7 million for the same period last year. During the

current quarter, the Bank originated $31.7 million of commercial real

estate loans, $46.1 million of small balance multi-family real estate

loans, and $9.2 million of entertainment finance loans. Loan originations

for the same period last year consisted of $191.6 million of commercial

real estate loans, $117.1 million of small balance multi-family real estate

loans, and $29.0 million of entertainment finance loans. In addition, the

Bank's wholesale loan operations acquired $29.7 million of commercial and

multi-family real estate loans during the quarter ended June 30, 2007. The

Bank did not have any wholesale loan purchases during the current quarter.



    Net income for the six months ended June 30, 2008 was $3.0 million or

$0.56 per diluted share, compared to $12.8 million or $2.26 per diluted

share for the same period last year. Net interest income before provision

for loan losses decreased 2.1% to $44.9 million for the six months ended

June 30, 2008, compared to $45.8 million for the same period last year. The

decrease was primarily due to the decline in the yield earned on our loan

portfolio, as higher yielding loans have paid-off and were replaced by loan

production that was originated at lower spreads over our cost of funds due

to competitive pricing pressures. This decline was partially offset by a

decrease in our average cost of funds, as deposits have repriced to current

market interest rates, as well as an increase in interest earned on our

investment securities held-to-maturity. During the six months ended June

30, 2008 and 2007, the average balance of our investment securities

held-to-maturity was $363.3 million and $185.8 million, respectively.



    The provision for loan losses was $10.5 million and $1.3 million,

respectively, for the six months ended June 30, 2008 and 2007. As discussed

above, the increase in the provision related primarily to the increase in

our non-performing loans during 2008.



    Non-interest income was ($881,000) for the six months ended June 30,

2008, compared to $1.6 million for the same period last year. As discussed

above, the decline in non-interest income primarily related to a loss

provision recorded during the current period for unfunded commitments, as

well as a loss on sale of loans recognized in connection with the sale of

approximately $53.2 million of multi-family loans in June 2008.



    General and administrative expenses were $26.2 million for the six

months ended June 30, 2008, compared to $24.3 million for the same period

last year. The Company's efficiency ratio was 59.5% for the six months

ended June 30, 2008, as compared to 51.4% for the same period last year.

The increase in our efficiency ratio was primarily caused by the $1.9

million increase in general and administrative expenses, as well as the

$1.0 million decrease in net interest income, which, as discussed above,

was primarily caused by the decrease in our net interest spread.



    Loan originations were $175.5 million for the six months ended June 30,

2008, compared to $677.1 million for the same period last year. During the

current six month period, the Bank originated $74.4 million of commercial

real estate loans, $65.1 million of small balance multi-family real estate

loans, and $34.9 million of entertainment finance loans. Loan originations

for the same period last year consisted of $428.9 million of commercial

real estate loans, $191.0 million of small balance multi-family real estate

loans, and $57.2 million of entertainment finance loans. In addition, the

Bank's wholesale loan operations acquired $47.3 million of commercial and

multi-family real estate loans during the six months ended June 30, 2007.

The Bank did not have any wholesale loan purchases during the current six

month period.



    Total assets increased $549.0 million to $4.1 billion at June 30, 2008,

compared to $3.6 billion at December 31, 2007. The change in total assets

was primarily due to a $755.4 million increase in investment securities

held-to-maturity, resulting from the AAA rated CMOs purchased during the

current year, as discussed above, partially offset by a $207.4 million

decrease in our loan portfolio. In addition, we increased our deposit

balances and FHLB advances by $310.7 million and $239.5 million,

respectively, during the six months ended June 30, 2008.



    Non-performing assets were $137.7 million and $57.4 million,

representing 3.36% and 1.62% of total assets as of June 30, 2008 and

December 31, 2007, respectively. The increase in non-performing assets

during the six months ended June 30, 2008 consisted of the addition of

$107.6 million of non-performing loans, partially offset by paydowns

received of $10.6 million, charge-offs of $7.7 million and loan upgrades of

$1.5 million from non-performing to performing status. As of June 30, 2008

as compared to December 31, 2007, the net increase in non-performing loans

primarily consisted of $48.4 million residential and condominium

construction real estate loans, representing six lending relationships,

$23.0 million of residential land development loans and $20.1 million of

multi-family and commercial real estate loans. The allowance for loan loss

coverage ratio (defined as the allowance for loan losses divided by

non-accrual loans) was 43.8% at June 30, 2008 as compared to 125.9% at

December 31, 2007. In addition, our other real estate and other assets

owned increased to $20.9 million at June 30, 2008, as compared to $19.4

million at December 31, 2007.



    The allowance for loan losses as a percentage of our total loans was

1.73% and 1.51% at June 30, 2008 and December 31, 2007, respectively. We

believe that these reserves levels were adequate to support known and

inherent losses in our loan portfolio and for specific reserves as of June

30, 2008 and December 31, 2007, respectively. The allowance for loan losses

is impacted by inherent risk in the loan portfolio, including the level of

our non-performing loans and other loans of concern, as well as specific

reserves and charge-off activity. Other loans of concern increased from

$27.4 million at December 31, 2007 to $144.4 million at June 30, 2008, as

compared to $115.7 million at March 31, 2008. The increase during the

current year was primarily caused by the addition of $55.9 million of

single-family and condominium construction and land development loans,

$15.7 million of commercial and retail construction projects, and $52.4

million of commercial and multi-family real estate loans. Other loans of

concern consist of performing loans which have known information that has

caused management to be concerned about the borrower's ability to comply

with present loan repayment terms. During the quarter and six months ended

June 30, 2008, we had net charge-offs of $3.4 million and $7.1 million,

respectively, as compared to $4.7 million and $4.3 million, respectively,

for the same periods last year.



    At June 30, 2008, shareholders' equity totaled $225.9 million or 5.5%

of total assets. The Company's book value per share of common stock was

$44.88 as of June 30, 2008, an increase of 1.5% and 2.6%, respectively,

from $44.22 per share as of December 31, 2007 and from $43.75 per share as

of June 30, 2007.



    The Bank had Tier 1 leverage, Tier 1 risk-based and total risk-based

capital ratios at June 30, 2008 of 7.68%, 9.79% and 11.05%, respectively,

which represents $140.9 million, $173.8 million and $91.4 million,

respectively, of capital in excess of the amount required to be "adequately

capitalized" for regulatory purposes. Capital in excess of the amount

required to be "well capitalized" for regulatory purposes were $102.6

million, $113.7 million and $31.4 million, respectively. In addition, the

Company, the Bank's holding company, had Tier 1 leverage, Tier 1 risk-based

and total risk-based capital ratios at June 30, 2008 of 7.79%, 9.93% and

11.49%, respectively, which represents $145.8 million, $179.0 million and

$105.3 million, respectively, of capital in excess of the amount required

to be "adequately capitalized". Capital in excess of the amount required to

be "well capitalized" for regulatory purposes were $107.3 million, $118.6

million and $44.9 million, respectively.



    Haligowski concluded: "Although banking and financial stocks have been

subject to unprecedented volatility due to current fear in the capital

markets, we want to be clear to point out that we have recorded our 52nd

consecutive quarter of profitability and have not sustained a quarterly

loss during our tenure as a public company, which commenced in October

1995. With industry giants and competitors in our own backyard recording

staggering losses, we have been able to maintain our profitability while

increasing our loan loss reserves and capital ratios. Despite these

achievements, we remain concerned about the current economic and capital

market conditions, but are optimistic about our ability to navigate through

these difficult conditions."



    "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 our market areas, changes in policies by

regulatory agencies, the impact of competitive loan products, loan demand

risks, the quality or composition of our 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 any terrorist actions and other risks detailed from

time to time in our filings with the Securities and Exchange Commission. We

caution readers not to place undue reliance on any forward-looking

statements. We do not undertake and specifically disclaim 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 our actual results for 2008 and beyond

to differ materially from those expressed in any forward-looking statements

by, or on behalf of, us, and could negatively affect the Company's

operating and stock price performance.



    Imperial Capital Bancorp, Inc. 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 nine retail branch

locations and 19 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.










               IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS



                                                  June 30,

                                                    2008          December 31,

                                                (unaudited)           2007

                                      (in thousands, except per share amounts)



                Assets



    Cash and cash equivalents                        $4,922            $8,944

    Investment securities available-for-sale,

     at fair value                                  106,434           117,924

    Investment securities held-to-maturity,

     at amortized cost                              914,433           159,023

    Stock in Federal Home Loan Bank                  62,025            53,497

    Loans, net (net of allowance for loan losses

     of $51,159 and $47,783 as of June 30, 2008

     and December 31, 2007, respectively)         2,914,301         3,125,072

    Interest receivable                              22,044            20,841

    Other real estate and other assets owned, net    20,912            19,396

    Other assets                                     55,111            46,522



              Total assets                       $4,100,182        $3,551,219





           Liabilities and Shareholders' Equity



    Liabilities:

      Deposit accounts                           $2,492,526        $2,181,858

      Federal Home Loan Bank advances and

       other borrowings                           1,260,707         1,021,235

      Accounts payable and other liabilities         34,433            33,959

      Junior subordinated debentures                 86,600            86,600



            Total liabilities                     3,874,266         3,323,652



    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, 9,146,256 and 9,142,256

       issued as of June 30, 2008 and

       December 31, 2007, respectively               85,286            85,009

      Retained earnings                             258,126           255,947

      Accumulated other comprehensive

       (loss) income, net                            (1,956)              267

                                                    341,456           341,223

      Less treasury stock, at cost - 4,112,832

       and 3,995,634 shares as of June 30, 2008

       and December 31, 2007, respectively         (115,540)         (113,656)

            Total shareholders' equity              225,916           227,567



              Total liabilities and shareholders'

               equity                            $4,100,182        $3,551,219







               IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF INCOME

                                 (UNAUDITED)



                                      For the Three Months  For the Six Months

                                              Ended               Ended

                                             June 30,            June 30,

                                         2008       2007      2008      2007

                                     (in thousands, except per share amounts)

     Interest income:

       Loans receivable,

        including fees                  $49,921   $58,464  $104,756  $117,227

       Cash, cash equivalents and

        investment securities            13,446     4,519    17,695     9,088

         Total interest income           63,367    62,983   122,451   126,315



     Interest expense:

       Deposit accounts                  24,302    27,485    49,385    54,073

       Federal Home Loan Bank advances

        and other borrowings             12,494    11,593    24,412    22,270

       Junior subordinated debentures     1,798     2,088     3,803     4,166

         Total interest expense          38,594    41,166    77,600    80,509



           Net interest income before

            provision for loan losses    24,773    21,817    44,851    45,806

     Provision for loan losses            6,250       500    10,500     1,250

           Net interest income after

            provision for loan losses    18,523    21,317    34,351    44,556



     Non-interest income:

       Late and collection fees             196       236       415       539

       Loss on sale of loans               (531)        -      (479)        -

       Other                               (814)      607      (817)    1,020

         Total non-interest income       (1,149)      843      (881)    1,559



     Non-interest expense:

       Compensation and benefits          5,695     5,056    12,559    11,238

       Occupancy and equipment            1,914     1,998     3,856     3,941

       Other                              5,081     4,849     9,765     9,145

         Total general and

          administrative                 12,690    11,903    26,180    24,324



       Real estate and other assets owned

        expense, net                        259       195       687       358

       Provision for losses on real estate

        and other assets owned              478         -     1,105         -

       Loss on sale of real estate and

        other assets owned, net              63         -       463         -

         Total real estate and other assets

          owned expense, net                800       195     2,255       358



           Total non-interest expense    13,490    12,098    28,435    24,682



     Income before provision for income

      taxes                               3,884    10,062     5,035    21,433

     Provision for income taxes           1,534     4,024     1,988     8,658



       NET INCOME                        $2,350    $6,038    $3,047   $12,775



       BASIC EARNINGS PER SHARE           $0.43     $1.10     $0.56     $2.32



       DILUTED EARNINGS PER SHARE         $0.43     $1.08     $0.56     $2.26