Continuing my effort to explore banks both large and small, today I bring you California's Capital Corp. of the West
While the bank's first-quarter results look pretty respectable in their own right, a little adjustment makes them look even more impressive. Reported net income rose 11% in the quarter, but if you strip out insurance proceeds from the year-ago period, the growth rate balloons to 25%. Likewise with the return on assets and equity. The absolute values for this quarter (1.28% and 17.6%) aren't bad in their own right, and stripping out that gain turns the year-on-year performance reverse into an improvement.
The growth here has a pretty basic fuel -- growth in underlying earning assets. Net interest income rose 23% in the quarter, with 19% growth in those underlying average assets. Net interest margin was also quite good (4.72%), even if the year-on-year improvement is due mostly to a change in asset mix. One small fly in the ointment: Non-interest income really isn't too substantial here -- and I tend to like banks with nice, fat, non-interest income.
As you might suspect from the prior paragraph, loan growth was pretty substantial. Average loan balances increased more than 24%, and the bank saw good growth in both commercial and mortgage lending (now, about half the total). It's also worth noting that about three-quarters of these loans have floating rate. Deposit growth was also robust -- up almost 18% on balance, with non-interest-bearing deposit balances up over 12%.
While Capital Corp. has already established a good record for itself, there could be more to come. This Central Valley area is apparently becoming a more popular place to live, and the University of California recently opened a new branch in Merced -- this company's hometown. And so while I'm sure that large banks like Wells Fargo
Although I'm pleased with the way my valuation models handle larger (and generally slower-growing) banks, I'm in the process of rethinking my approach to these small, fast-growing companies. Consequently, instead of buy/sell/hold, I'll simply say, "Stay tuned," and maybe suggest that bank stock investors looking for some riskier growth take a look here.
For more Foolish thoughts on banks great and small:
- A Closer Look at Bank Stocks
- Today Arkansas. Tomorrow the World?
- Will Housing Boost Commercial Capital?
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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).