For many investors, banking stocks are more of a headache than they seem to be worth. You've got funny concepts like "efficiency ratios" and "tier one capital," and everybody seems to remember the savings-and-loan fiasco, even if relatively few people can recall what it was all about. And then here we have the case of California's Commercial Capital Bancorp
To be sure, this is no Citigroup
All the same, the fourth quarter was a challenging one. Reported net income dropped 25%, and even adding back costs tied to building up its commercial-banking unit leaves the company a bit shy of the average forecast. For the quarter, net interest income was down almost 3%, while non-interest income fell 9%. And as the increase in cost of funds outstripped the yield on assets, the net interest margin shrank by 17 basis points from last year to 3.21%.
This is a bank story with a fair bit of flux to it. The company is buying another bank (Calnet Business Bank), facing an injunction from Comerica
Parts of this bank's story strike me as odd. Now, I understand that management said the bank saw the majority of its asset growth in December, but it looks to me as though average loans increased just 5% and deposits were actually down from the year-ago period. I'll be the first to grant that Commercial Capital is a different sort of bank, but that's still a cause for some concern -- though the sequential growth from the third quarter was pretty promising.
Given the state of housing affordability in California and the influx of population, I think there will be pretty decent demand for new multifamily dwellings -- and, therefore, more loans from Commercial Capital. I also think the valuation on these shares could prove to be very interesting. Still, it's a very different breed of bank, so investors would do well to take extra care with their due diligence before making any investing decisions.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).