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| MNHN.OB > SEC Filings for MNHN.OB > Form 10-Q on 10-Nov-2009 | All Recent SEC Filings |
10-Nov-2009
Quarterly Report
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q, that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are based upon management's current expectations and beliefs concerning further developments and their potential effects on Manhattan Bancorp and its subsidiary. The Company's forward-looking statements involve risks and uncertainties, including the risks and uncertainties described in the Company's December 31, 2008 10-K ITEM 1A. Risk Factors. There can be no assurance that future developments affecting Manhattan Bancorp will be the same as those anticipated by management, and actual results may differ from those projected in the forward-looking statements. Statements regarding policies and procedures are not intended, and should not be interpreted to mean, that such policies and procedures will not be amended, modified, or repealed at any time in the future.
The Company
Manhattan Bancorp ("Bancorp") is a bank holding company, which was incorporated in August 2006 in order to acquire Bank of Manhattan, N.A. (the "Bank"), a de novo bank which was acquired on August 14, 2007. The Bank is a nationally-chartered banking association which was organized under the laws of the United States on August 15, 2007. The Bank is located in El Segundo, California and as of September 30, 2009 had $110.0 million in assets, $71.7 million in net loans receivable and $74.9 million in deposits. Through the period covered by this report, the Bancorp operated primarily through the Bank, and the capital stock of the Bank was its principal assets. On October 1, 2009, MBFS Holdings, Inc., a recently-formed wholly-owned subsidiary of the Bancorp, acquired a 70% ownership interest in BOM Capital, LLC ("BOM"). BOM engages in the "riskless principal" securities trading business. Unless the context requires otherwise, references in this Form 10-Q to the "Company," "we" or "us" refer to the Bancorp and its consolidated subsidiaries, the Bank and MBFS.
Management's discussion and analysis of financial condition and results of operation is intended to provide a better understanding of the significant changes in trends relating to the Company's financial condition, results of operation, liquidity and interest rate sensitivity. The following discussion and analysis should be read in conjunction with the unaudited financial statements contained within this report including the notes thereto.
Earnings and Financial Condition Overview
For the three months ended September 30, 2009, the Company recorded a loss of $1,274,000 or $0.32 per basic share of common stock. Comparing the Company's 2008 third-quarter loss of $998,000 or $0.38 per basic share of common stock with the current operating quarter reflects an approximate 27.6% increase in the reported comparable quarterly loss for 2009. Similarly, the nine-month recorded loss for the period ended September 30, 2009 was $3,961,000 or $0.99 per basic share of common stock reflecting a 19.4% increase in the reported comparable nine-month loss of $3,318,000 or $1.33 per share for the first nine months of 2008.
Outstanding gross loans reflect a modest growth in the third quarter of 2009 over the more robust growth experienced in the preceding quarter. The Company's loan portfolio as of September 30, 2009 contains no delinquent loans in excess of thirty days or loans on non-accrual. The reduction in the dollar size of loans with recognized credit concerns has allowed the Company to maintain the allowance for loan losses
at acceptable levels, although the percentage of the allowance has decreased from 1.70% as of December 31, 2008 to 1.50% as of September 30, 2009. The allowance for loan losses percentage, as reported in both December 31, 2008 and March 31, 2009, reflected the potential deficiency associated with certain credits, where specific reserves were set aside to acknowledge the possible shortfall. The recognition of the loss, even though the credits were technically still performing, removed the need for a specific reserve, thus allowing the allowance to return to the level noted above.
The provision for loan losses for the three-month period ended September 30, 2009 was $469,000 compared to only $102,000 for the same three-month period ended September 30, 2008. Similarly, the provision for the nine-month period ended September 30, 2009 was $1,096,000 compared to only $431,000 for the similar nine-month period ended September 30, 2008. The recognition of losses of approximately $990,000 is reflected in the higher 2009 provisions.
Net interest income after provision for loan losses for the three-month period ended September 30, 2009 was approximately $535,000, an increase of approximately $39,000 over the prior year's three-month period ended September 30, 2008. This was an 8% improvement in net interest income, despite the recognition of the third quarter loan loss. This was possible because of a significant increase in interest income, up approximately $295,000 (32%), coupled with a significant decrease in interest expense, down approximately $110,000 (36%), for the comparable three-month period ended September 30, 2009 over the same period in 2008.
Net interest income after provision for loan losses for the nine-month period ended September 30, 2009 was approximately $1,573,000, an increase of approximately $419,000 over the prior year's nine-month period ended September 30, 2008. This was a 36% improvement in net-interest income, despite the recognition of the loan losses, and was possible because of an increase in interest income, up approximately $1,099,000 (51%) for the comparable nine-month period ended September 30, 2009 over the same period in 2008. Interest expense also increased but by a smaller percentage (3%) for the comparable nine-month period ended September 30, 2009 over September 30, 2008 with the actual dollar amount only increasing approximately $15,000.
Non-interest expense for the three-month periods ended September 30, 2009 compared to September 30, 2008 increased by approximately $344,000 or 23%. Non-interest expense for the nine-month periods ended September 30, 2009 compared to September 30, 2008 increased by approximately $1,119,000 or 25%. A detailed analysis is found under Non-Interest Expense.
As of September 30, 2009, total assets of the Company were approximately $110.3 million. This represents an increase of approximately $18.2 million or 19.8% over the amount reported as of December 31, 2008. The growth in total assets can be attributed to an increase of approximately $15.6 million in gross loan balances or 27.2% from the approximately $57.4 million reported as of December 31, 2008.
Funding for the loan growth was obtained primarily from deposit growth and advances from the Federal Home Loan Bank. At September 30, 2009, total deposits were approximately $68.8 million compared with the balance of approximately $48.0 million as of December 31, 2008. This represents an approximately $20.8 million increase or 43.3%. A net increase of $2.0 million in overnight Federal Home Loan Bank advances provided another source of funding.
In December 2008, the Company issued 1,700 shares of its Series A Preferred Stock and a warrant to purchase 29,480 shares of the Company's common stock to the United States Department of the Treasury ("Treasury") in connection with Treasury's TARP Capital Purchase Program for a total price of $1,700,000. In August, 2009, the Company's Board authorized the Company to redeem the preferred stock for $1,700,000 plus all accrued and unpaid dividends on the preferred stock. The redemption of the
preferred stock was approved by both Treasury and the Federal Reserve Board, the Company's primary federal banking regulator, and the preferred stock was redeemed on September 16, 2009. On September 29, 2009 the Company informed the Treasury of its intent to repurchase the warrant at a purchase price to be agreed upon by the Company and Treasury. Upon acceptance of the Company's valuation of the warrant by the Treasury on October 9, 2009, the warrant was repurchased by the Company on October 14, 2009 at the agreed-upon price of approximately $63,000.
The following table provides selected financial data that highlights the Company's financial performance for each of the eight full quarters that it has been in operation:
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