Los Angeles may have lost most of its big publicly traded thrifts in recent months, including H.F. Ahmanson & Co. and Great Western Financial Corp., but it gained one last week when the parent of People’s Bank of California went public.
Shares in Miracle Mile-based PBOC Holding Inc. began trading on Nasdaq on May 13, with some 12.7 million shares sold to the public at $13.75 apiece.
Of the total, 8.9 million shares, worth approximately $122 million, were sold by the company, while another 3.8 million shares, worth around $52 million, were sold by pre-existing stockholders.
Michael Holmes, PBOC’s executive vice president and chief financial officer, said the money raised in the IPO would be used to fund the thrift’s ongoing transition into a full-service banking operation.
“With the recovery in the L.A. economy, there are great opportunities. We now have the growth capital to take advantage of that,” he said.
People’s Bank of California currently has 19 offices in Los Angeles, Ventura and Orange counties.
As of Dec. 31, 1997, the thrift had total assets of $2.2 billion, outstanding loans of $1.5 billion and total deposits of $1.3 billion, making it the fifth-largest savings and loan based in L.A. County.
The shares were sold through an underwriting syndicate headed by Sandler, O’Neill & Partners in New York.
Analysts predicted that the stock would trade higher during its first weeks on the market, given investors’ continuing strong appetite for banking and finance stocks.
With an initial price-earnings multiple of around 16, the stock looks relatively cheap compared with many other California financial institution stocks, analysts said.
“It will probably run up and then go flat until it garners some more attention from analysts,” said Donald Destino at Jefferies & Co. in West L.A.
It wasn’t long ago that PBOC looked like it was on the verge of insolvency.
Back in 1995, the thrift lost $57.4 million as it struggled with a big non-performing real estate loan portfolio. To turn the situation around, the thrift’s owners brought in a new management team Rudolf Guenzel as chief executive and Holmes as chief financial officer that had previously worked together at BancFlorida Financial Corp. in Naples, Fla.
At that time, the thrift changed its name from Southern California Federal Savings and Loan Association.
Since then, PBOC has posted net income of $12.5 million in 1996 and $10.9 million in 1997. At the same time, the thrift’s loan-loss provision was reduced to 1.16 percent of net income as of last year, down from 2.57 percent in 1995.
“There are few real turnaround stories left in California, so I think (the stock) is quite attractive,” said Joe Morford, an analyst at Van Kasper & Co. in San Francisco.
Indications that the newly traded thrift might be purchased by a larger institution could also drive up the share price, analysts said.
Prior to the IPO, all the capital stock was owned by three investor groups: the estate of Bernice Pauahi Bishop, a charitable education trust based in Hawaii; New Zealand-based Brierley Investments Ltd.; and Delaware-based Arbur Inc., which is wholly owned by former U.S. Secretary of the Treasury William Simon.
Following the public offering, the Bishop estate, BIL and Arbur own 24.97 percent, 10.03 percent and 3.34 percent of the common stock outstanding, respectively.
PBOC, like many other savings and loans, filed a damages claim against the U.S. government in connection with changes in supervisory goodwill regulations in 1989. Under the IPO agreement, the three original owners will retain all rights to any possible proceeds from that litigation.
Holmes said any goodwill-related settlement rightfully belongs to the original stakeholders because they are the ones who suffered the financial impact of the goodwill case.