Two Irvine-based banks with declining share prices last week announced they would issue dividends in their latest efforts to impress Wall Street.
Pacific Premier Bancorp Inc. said it would pay 22 cents a share dividend every quarter while First Foundation Inc. began with 5 cents apiece.
“It’s a good move,” said Gary Findley, who publishes an Anaheim-based newsletter for senior management and directors in the banking industry.
The new dividends “are a sign of the confidence of the boards of directors and the management of the direction of their banks in 2019 and 2020. Institutions are becoming more aggressive in cash dividends and stock buybacks,” he said.
Also, the initiation of dividends is a signal that the companies might not expect as much growth through acquisitions or organic sales as in prior years, Findley said.
“When you’re looking at the economy, it probably won’t grow at the same level as the last couple of years,” he said.
Meanwhile, Opus Bank, also headquartered in Irvine, reversed a disappointing third quarter by issuing fourth-quarter results that caused shares to rise about 5% in the trading session afterwards.
Five of Orange County’s biggest publicly traded banks issued fourth-quarter results between Jan. 24 and Jan. 30.
For the most part, the banks reported increasing loan originations and disclosed plans to issue more loans this year.
Each of the five banks have seen share prices rebound between 15% and 30% since Dec. 20.
Here’s a summary of those results:
Opus
Opus (Nasdaq: OPB), whose founder Stephen Gordon left as chief executive in November, reported a fourth-quarter loss of $6.9 million as it took a $20.4 million restructuring charge. It also missed the Zacks consensus profit estimate by 1 cent a share.
None of that appears to matter to investors, who pushed up shares immediately after the earnings announcement.
“We saw positive core earnings trends during the quarter, including higher net interest income, an expanding net interest margin, and improved credit metrics,” interim Chief Executive Paul Greig said.
The bank’s net interest margin, or NIM, a key metric of a bank’s profitability, climbed to 3.07% from 2.98% in the third quarter.
“NIM expansion outpaced our expectations,” Keefe, Bruyette & Woods analyst Jacquelynne Bohlen wrote in a note to investors.
Three months ago, the bank reduced its NIM forecast for 2018 and the shares tumbled 22% that day. A month later, Gordon left his position as chief executive and director.
Last week, Opus said its restructuring charge included $7.1 million for a “CEO transition.”
Greig, who is also chairman, made his intentions clear to analysts that he didn’t want to become permanent chief executive.
“The search is progressing favorably as a number of highly qualified candidates have expressed interest in the position,” Greig said on a conference call.
Pacific Premier
Pacific Premier (Nasdaq: PPBI) reported adjusted profit of 66 cents a share, topping the Zacks consensus estimate of 60 cents. Its net interest margin rose to 4.49%, about 12 basis points above consensus.
“Pacific Premier reported strong Q4 ’18 results as the company generated double-digit annualized average loan growth and NIM expansion, while expenses were below our estimate,” Raymond James analyst Donald Worthington said in a report.
Shares of the bank rose 3.4% in the trading session following its Jan. 29 announcement.
“Our focus on protecting our net interest margin through disciplined loan and deposit pricing and further improving our operating leverage enabled us to deliver solid returns,” Gardner told analysts.
The bank’s shares are still down about 47% from a 52-week high last March.
After the bank’s shares declined 16% in two trading sessions after its October report, Gardner and the company’s board authorized $100 million worth of buybacks, saying the stock price didn’t “accurately reflect our franchise value.”
The shares still didn’t rebound and as it turned out, the bank didn’t buy back shares in the fourth quarter. Last week, the bank took a different route by initiating its dividend.
Its $1.9 billion market cap is still twice as high as its nearest OC competitor.
First Foundation
The company (Nasdaq: FFWM), which also has a wealth management unit, reported fourth-quarter earnings jumped sevenfold to $14.1 million. A big reason was that its tax rate dropped to 29% compared to 83% a year before when it recorded a $5.4 million charge resulting from the then new tax law.
Excluding some costs, it reported a 31-cent profit, topping the 28-cent average consensus.
Its big news was the new dividend.
“In light of our proven ability to manage our balance sheet, I believe we are well positioned and I am optimistic regarding our ability to provide strong results in 2019,” First Foundation Chief Executive Scott Kavanaugh said in a statement.
However, the shares still fell 1.1% after the release to $14.36 and a $638 million market cap. The shares reached a 52-week high last June of more than $20 each and then dropped to almost $12 in December.
Banc of California
The Santa Ana-based bank (NYSE: BANC) reported adjusted profit of 5 cents a share, missing the Zacks consensus estimate of 23 cents.
It also reported its net interest margin fell to 2.88% from 2.93% in the third quarter. Analyst Bohlen reduced her forecast for profit in 2019 and 2020, citing a lower NIM.
The declining NIM wasn’t surprising “given the increasing competition for deposits that we are seeing in our markets,” Chief Financial Officer John Bogler told analysts.
Chief Executive Doug Bowers, who took the post in May 2017, implemented a restructuring program that is still in progress.
“We continue to lay the foundation to support the development of our core commercial banking platform,” Bowers said in the Jan. 24 statement announcing the results.
In the session following the report, the shares declined 2.8%. At press time they were still about 26% below their 52-week high in September.
Pacific Mercantile
Costa Mesa-based Pacific Mercantile Bancorp (Nasdaq: PMBC) reported fourth-quarter net income climbed 81% to $4.36 million, citing an increase in interest earned on loans and short-term investments.
“We finished 2018 with our strongest quarter of the year, generating positive trends in revenue, net interest margin, efficiency ratio and asset quality,” Chief Executive Tom Vertin said in a statement.
However, it didn’t see a share increase even though its net interest margin rose to 3.78% from 3.57% in the third quarter. After its report, the shares declined 1.1% to $7.97 and a $176 million market cap. Shares were down about 22% from a 52-week high in September.
