Four of the five largest publicly traded banks based in Orange County reported last week that profits improved in the third quarter over the same period a year earlier.
Three said their ongoing turnarounds are reaping rewards. Shares of four of the five banks rose after their quarterly reports, led by Banc of California Inc.
Following is a roundup of banks’ recent numbers in order of market cap that includes results and comments by executives and analysts.
Pacific Premier Bancorp
The Irvine-based bank (Nasdaq: PPBI) reported third-quarter adjusted net income of 50 cents a share, topping the 47-cent average of five analysts and the 35 cents reported a year ago.
Its assets climbed from $6.44 billion in the second quarter to $6.53 billion. The bank expects to complete its acquisition of Plaza Bancorp on Nov. 1, pushing its assets to nearly $8 billion.
“We continue to be open to M&A, both in California and as we expand,” Chief Executive Steven Gardner said on a conference call with analysts.
Keefe, Bruyette & Woods analyst Jacquelynne Chimera Bohlen boosted her profit estimates for 2017-19, saying the bank is growing revenue faster than expenses. D.A. Davidson analyst Gary Tenner increased his target price from $43.50 to $50 a share because of strong earnings growth.
Shares climbed 2.32% to $41.95 in the trading session following the report and have surged 69% in the past year. The company now has a $1.67 billion market cap, the highest among OC-based banks.
Banc of California
During Doug Bowers’ second report as chief executive of the beleaguered bank (NYSE: BANC), he said it’s still undergoing a transformation.
“These actions are centered on derisking and remixing the balance sheet and very important management changes,” he told analysts on a conference call.
Bowers said he’s proud of his recruiting, which brought on new executives, like Chief Financial Officer John Bogler, and said to expect “continued key additions.”
The Santa Ana bank reported adjusted net income of 25 cents, topping the 19-cent average estimate of six analysts, according to Zacks.com research. It was below the 38-cent profit a year earlier.
Deposits fell from $8 billion in the second quarter to $7.4 billion as the bank purposely reduced its higher-cost deposit accounts. Its net interest margin rose from 3.09% in the second quarter to 3.15%.
This year, the bank underwent a battle with large shareholders, two of whom became directors. Longtime Chief Executive Steven Sugarman left in January at the same time the bank announced a Securities and Exchange Commission investigation. The bank cut employment in half in March by selling its home mortgage unit to focus on commercial banking.
Shares rose 3.9% to $21.30 in the trading session following the report and are now up 4% since Bowers joined the bank on May 8. Its market cap is $1.02 billion.
Opus Bank
Chief Executive Stephen Gordon said the Irvine-based bank (Nasdaq: OPB) is making progress on fixing its lending standards.
“The investments we made earlier this year to enhance our credit administration, enterprise risk management, and banking operations are now resulting in improved profitability,” Gordon said in a statement.
The bank’s adjusted earnings were 54 cents a share, up from a loss of 9 cents a year earlier.
JMP Securities analyst Christopher York said the bank topped his forecast because it released $10.7 million from its loan loss reserve. The bank’s shares are fairly valued, he wrote in a report to investors.
Investors have been closely following its criticized loans—those with potential weakness—which were flat in the third quarter at $290.6 million compared with $289 million in the second quarter. Such loans tripled in the first quarter to $359 million from a year earlier.
New loan funding climbed 3.6% from $362 million in the second quarter to $375 million. The core net interest margin fell from 3.2% to 3.15%.
Deposits declined from $6.3 billion to $6.1 billion as the bank sold five branches and reduced balances of certain higher-cost deposits.
Opus extended about $28.6 million in two credit lines to the Weinstein Co., which may sell its assets because of allegations against founder Harvey Weinstein. Opus Senior Chief Credit Officer Brian Fitzmaurice declined to discuss their status but told analysts 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.”
Shares rose 3.1% in the trading session following the report and are up 28% in the past year for a $962 million market cap.
First Foundation Inc.
The Irvine-based firm (Nasdaq: FFWM), which also includes a wealth management unit, reported third-quarter net income of $9.58 million, or 27 cents a share, compared with $9.06 million, also 27 cents, a year earlier. Analysts had expected 24 cents on average, according to Zacks Investment Research.
“Upside was driven by a combination of higher fee income, lower expenses and lower provision, offset by lower than expected top-line revenue,” D.A. Davidson’s Tenner wrote in a report to analysts. Tenner, who raised his target price from $20 to $22, said the outlook for loan production remains strong.
Shares rose 3.4% to $19.27 in the trading session following the report and have climbed about 57% in the past year for a $654 million market cap (more on First Foundation’s growth, page 24).
Pacific Mercantile Bancorp
The Costa Mesa bank (Nasdaq: PMBC) reported third-quarter profit of 16 cents compared with a loss of $1.33 in the same period a year earlier.
“We have a very healthy pipeline that we believe should result in a higher level of client acquisition in the fourth quarter,” Chief Executive Tom Vertin said in a statement.
Its net interest margin rose from 3.63% in the second quarter to 4.06%.
The bank said it reduced its nonperforming assets from $22.6 million to $10.4 million because of paydowns.
“Credit has improved following a significant review of the loan portfolio and the hiring of a new chief credit officer,” KBW analyst Bohlen wrote in a report.
Shares were unchanged at $9.50 in the trading session following the report and have climbed about 25% in the past year for a $219 million market cap.
