Rising earnings estimates on the back of solid third quarter
results - including a 38.1% earnings surprise - helped
Bridge Capital Holdings
) achieve a Zacks #1 Rank (Strong Buy) on December 25. Moreover,
this bank has delivered three positive earnings surprises in the
last four quarters with an average beat of 19.9%.
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With a solid year-to-date return of 46.2% and a trend of beating
quarterly earnings estimates, this stock offers an attractive
The Rank Driver
Better-than-expected third quarter earnings, decent loan growth
and fundamental strength - including strong credit quality and
capital ratios - are the primary rank drivers for this stock.
Bridge Capital reported its third quarter results on October 23
with earnings per share of 29 cents, beating the Zacks Consensus
Estimate of 21 cents by 38.1% and prior quarter earnings of 22
cents by 31.8%. Strong results for the quarter were primarily
aided by higher net interest income and non-interest income,
partly offset by higher operating expenses.
Net interest income came in at $15.4 million, up nearly 6.2% from
$14.5 million in the previous quarter. The marginal hike was
driven by increases in average earning assets. Net interest
margin came in at 5.26% compared with 5.28% in the prior quarter.
Further, non-interest income increased 27.3% sequentially to $3.8
million. The rise was facilitated by increased service charges on
deposits as well as other income.
Operating expenses increased nearly 2.0% from the previous
quarter to $11.6 million. The rise was mainly due to higher
salaries and benefits along with premises and fixed assets
Credit quality continued to improve. Non-performing assets were
approximately $9.0 million as of September 30, 2012, down 27.4%
from $12.3 million in the prior quarter. The allowance for loan
losses was $19.8 million or 2.25% of total loans as of September
30, 2012, compared with $19.5 million or 2.30% of total loans as
of June 30, 2012.
As of September 30, 2012, Bridge Capital's total risk-based
capital ratio was 15.70%, Tier 1 risk-based capital ratio was
14.44%, and tangible common equity ratio was 11.39%. Book value
per share came in at $9.02 versus $8.99 in the prior quarter.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 2.2% to 92 cents
per share as all four estimates moved north over the last 60
days. The current estimate implies year-over-year growth of
For 2013, 2 out of 4 estimates were revised higher over the same
time frame, lifting the Zacks Consensus Estimate by 1.0% to 98
cents per share. The current estimate implies year-over-year
growth of 6.0%.
Bridge Capital currently trades at a forward P/E of 17.1x, a 6%
discount to the peer group average of 18.1x. On a price-to-book
basis, the shares are trading at 1.7x, a 60% premium to peer
group average of 1.06%. Given the company's strong fundamentals,
the valuation is justified.
Bridge Capital has a trailing 12-month ROE of 9.4% compared with
the peer group average of 6.6%. This implies that the company
re-invests its capital more efficiently that its industry peers.
About the Company
Bridge Capital is a bank holding company for Bridge Bank,
National Association that provides commercial and retail banking
services primarily in California. It is headquartered in San
Jose, California. The company operates two branch offices in the
Silicon Valley region, as well as five loan production offices in
San Francisco, Pleasanton, and Orange County, California; Dallas,
Texas; and Reston, Virginia. The headcount at the company is 203
Other Zacks #1 Rank bank stocks include
Pacific Continental Corp.