Imperial Bancorp Hurt by Steep Drop in Tech Stocks

Like thousands of investors, Imperial Bancorp is learning that loading up on technology stocks can cut both ways.

Shares in the Inglewood-based bank have plummeted 38% this month, reflecting Imperial’s aggressive move into courting and serving risky tech start-ups in Southern California and nationwide.

Over the last two years, Imperial has been chasing venture capitalists in search of technology companies with promising ideas, if shaky balance sheets. In return for making loans and providing financial services to the fledgling companies, Imperial pockets stock warrants that it can cash in once the company goes public.

It has been a lucrative niche, with tidy paydays from investments in such companies as Yahoo and EBay. The bank booked $15 million from its warrants in its first quarter alone. Proceeds from those investments and other technology-driven ventures by Imperial accounted for about 25% of the bank’s profit last year and about half of first-quarter profit, executives said.

Then came the Nasdaq composite index’s 9.7% plunge on April 14. “Wall Street views us as a ‘new- economy’ bank, so when the market correction occurred, it affected our stock,” said Dennis Lacey, Imperial’s chief financial officer.

Making matters worse was the higher-than-expected loss announced Thursday by San Ramon, Calif.-based Official Payments Corp., an online tax payment firm that is majority-owned by Imperial.

Official Payments, which allows consumers to pay taxes with credit cards for a fee, surprised analysts by announcing that its CFO had resigned and that the company was processing fewer tax payments than expected.

Official Payments shares plunged 70% on Thursday, closing at $5.25, down $11.50 in Nasdaq trading.

Stock in Imperial, which owns a 56% stake in Official Payments, lost 13% on Thursday, closing at $19.19, down $2.94 in New York Stock Exchange trading.

Imperial executives say they are taking the declines in stride. The company had expected that its stock might rise this week after reporting Thursday that its first-quarter earnings were up 36%, to 41 cents a share.

“We are prudent businesspeople,” Lacey said. “But there is no reason so far to believe that we need to change our course of action.”

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Battered Bank Stock

Although Imperial Bancorp reported robust earnings this week, its shares have slumped on concern about its “new- economy” investments. Weekly closes and latest:

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Thursday: $19.19, down $2.94

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Source: Bloomberg News