The biggest banks headquartered in Orange County reported a gusher of profits in the first quarter.
Opus Bank (Nasdaq: OPB) reported net income soared 69% from $7.7 million and 21 cents a share a year earlier to $12.9 million, or 34 cents a share.
Irvine-based Opus felt good enough about the start to the year to boost its dividend by a penny to 11 cents.
“Opus’ first quarter results marked a successful beginning to 2018, demonstrated by our disciplined growth and improving profitability,” Chief Executive Stephen Gordon said in a March 23 statement.
Starting in late 2016, the bank faced a number of problematic loans. It responded by raising capital, reducing loans and eliminating its dividend. Besides the reinstated dividend, another sign of progress is new loan funding doubling to $452.3 million from a year earlier.
Opus continued to show improvement on criticized loans, or those with potential weakness, which decreased 31% to $247.4 million from a year earlier.
Its nonperforming assets rose $5.5 million, or 10%, to $63.8 million.
The increase was due to a bad loan to Weinstein Co., Senior Credit Officer Brian Fitzmaurice told analysts. Opus had extended $28.6 million in two credit lines to the company, which filed for bankruptcy in March after sexual harassment charges were filed against Harvey Weinstein.
Fitzmaurice said in October that credit lines in its entertainment unit are structured in a manner that has “a very high success rate of collection in the event of default and bankruptcy.”
In another issue regarding a legal matter, this one it didn’t identify, the bank reported a $2.9 million recovery of a professional services expense related to a settlement. It said it will no longer have a quarterly legal expense of $750,000.
In March it said it resolved its lawsuit against crosstown rival First Foundation Inc. (Nasdaq: FFWM) over alleged theft of employees.
Opus executives are assuming the Federal Reserve will raise interest rates two more times this year.
Net interest margin rose five basis points to 3.20% with a target of 3.2% to 3.25% by year-end. When executives were asked why the margin wasn’t jumping higher along with increasing interest rates, Chief Financial Officer Kevin Thompson expressed caution about the Opus goal of a $2 billion target in new loan funding this year.
“We’re seeing loan growth being very anemic across the country,” he said. “We are facing headwinds when it comes to loan growth.”
Shares rose 2.3% after the report was released and are up 4.2% this year.
First Foundation
First Foundation’s first-quarter results looked good on the surface as the company’s revenue rose 28% to $43.2 million while earnings increased 47% to $9 million.
“We experienced another strong quarter of growth across key financial metrics,” Chief Executive Scott Kavanaugh told analysts on a conference call. “I am particularly proud of these results as our industry faces challenges, including a flattening of the yield curve and increased market volatility.”
However, first-quarter net income of 23 cents missed the street estimate of 26 cents of four analysts. First Foundation profit topped consensus in the prior three quarters.
Shares fell 1.2% in the trading session after the report was issued and are now down about 2.6% year to date.
Pacific Mercantile
First-quarter net income at the Costa Mesa bank (Nasdaq: PMBC) doubled to $3.7 million, or 16 cents a share, year-over-year.
“Our first-quarter performance reflects the progress we are making in driving improved profitability,” Chief Executive Tom Vertin said in a statement. “Our loan pipeline is strong entering the second quarter, and we believe that higher balance sheet growth should contribute to further improvement in our level of profitability over the remainder of 2018.”
Its net interest margin rose from 3.63% in December to 3.84%. One reason was that Vertin continued his goal of reducing the bank’s reliance on certificates of deposit, which fell 5.6% to $341 million. In April he told the Business Journal that CDs are typically for consumers and are “the most expensive funding that you can find.”
Shares fell 1% to $9.60 and have risen 9.7% year to date.
US Metro Bank
At first glance, it looked like Garden Grove-based US Metro Bank (OTC Pink: USMT), which caters to Koreans, suffered a disastrous first quarter as net income slid from $4.27 million, or 26 cents a share, a year earlier to $1.19 million, or 7 cents. However, the year-earlier result was boosted by a $4.1 million tax asset.
The bank, which was under regulatory consent orders from 2013 to 2015, raised $21 million in capital a year earlier to help finance expansion of branches and lending.
A sign of its health was a 48% year-over-year increase in total assets to $329.9 million.
“We are excited about continuing the growth of the bank in 2018 and look forward to the future profitable deployment of our new capital,” Chief Executive Dong Il Kim said in a statement.
Shares, which are lightly traded, with a daily average of 3,214 in the past three months, were unchanged in the trading session following the report. They’re down 13% this year to date.
Banc of California
The Santa Ana bank (NYSE: BANC) was the exception to a rising tide of profits. It reported net income fell 72% to $3.45 million, or 3 cents a share. The decline was due to a previously reported $13.9 million loss resulting from “an isolated event” involving a fraudulent line of credit, the bank said in a statement.
Even so, the bank’s profit topped consensus analyst estimate of a loss of 6 cents a share. Shares rose about 3% after the announcement and are now down 7.2% year to date.
Pacific Premier Bancorp Inc. (Nasdaq: PPBI), which has OC’s highest market cap for a bank, at $1.86 billion, is scheduled to report on May 1.
