Once again, Lincoln Bancorp has posted a big gain in quarterly profit. For a change, Lincoln’s stock is rising with the earnings.
Lincoln, the Encino parent of Lincoln National Bank, said net income for the quarter that ended Sept. 30 more than doubled to $1.26 million, or 41 cents a share, from $592,470, or 23 cents a share, a year earlier.
Sharply higher profits have been routine over the past two years for Lincoln, a moderately sized but fast-growing bank that caters mostly to businesses and operates two offices, in Encino and Beverly Hills. Lincoln’s assets Sept. 30 totaled $393 million, up 40% from a year ago.
But until recently, Lincoln’s stock had lagged the financial gains. Lincoln, which opened in April, 1982, had its first major stock offering to the public in June, 1987, when it sold 1 million shares for the equivalent of $8.33 a share, adjusted for a 5% stock dividend this past June.
By the end of 1987, after the market’s crash Oct. 19, Lincoln had slumped to $6 a share. But the stock has climbed steadily higher, closing Monday at a record $13.875 a share in over-the-counter trading.
Besides the crash, the stock previously suffered from having a small following among banking analysts and institutional investors. So in recent months, John J. Keating, Lincoln’s chief executive, stepped up “road show” visits to San Francisco, New York and other cities to promote the company to investors.
This apparently paid off. The stock’s advance “certainly does reflect an awakening in the market of the very good record Lincoln has established,” said Dan Williams, a bank analyst for the brokerage firm Sutro & Co. in San Francisco.
Keating agreed. Without the road shows, “you’d never see the appreciation in the stock,” Keating said.
For the first nine months of this year, Lincoln’s net income soared to $2.75 million, or 87 cents a share, from $1.31 million, or 62 cents a share, a year earlier. The profit reflected a surge in Lincoln’s net interest income--the amount of interest it earned beyond the interest it paid for deposits--to $13.5 million from $8.68 million a year earlier.
Now that more investors know about Lincoln, has the stock’s upswing run its course? To use one measure, the stock currently sells for 1.6 times Lincoln’s book value--its assets minus its liabilities--up from less than 1.0 when the year began. But Williams said some other banks similar to Lincoln sell for more than twice book value, and some sell for less than 1.5 times book value.
“There’s no rule of thumb for comparison,” he said.