Profit Worries Loom for Expanding Thrift

Commercial Capital Bancorp has been California’s fastest-growing thrift by assets for the past three years.

But the past three months have seen anything but growth on Wall Street.

Irvine-based Commercial Capital’s stock is off about 25% since the start of the year. The drop has sunk Commercial Capital’s market value from $1 billion to $770 million last week.

The worry: profits.

The costs of a buying spree may be catching up with Commercial Capital. At the same time, rising interest rates have pushed up what the thrift pays to lure deposits.

There are other issues.

A newly formed commercial banking unit is the subject of litigation with Comerica Inc. and has brought “court-imposed operational limitations” on the business.

And starting this quarter, the thrift plans to start provisioning for loan losses.

Results for the first quarter are due April 24. Analysts expect the company to earn $16 million, off by about a third from a year earlier.

Revenue is seen coming in at $46 million, up nearly 10% from $42 million a year ago and helped in part by acquisitions.

Lending to buyers of apartment buildings and office buildings is a big part of Commercial Capital’s business.

The thrift has a complex strategy based on deposits,and how they are gathered. If Commercial Capital isn’t growing deposits fast enough, or from the right sources, it may have to turn to more expensive backing for its loans.

When funding costs rise faster than loan returns,as they are now with rising short-term interest rates,profits get squeezed.

Last week, the company said it plans to lay off some of its 550 workers and cut other expenses. No area of the company was left untouched.

Commercial Capital, which has an estimated 100 jobs locally, also said it would take a one-time pretax charge of about $850,000 this quarter to pay for severance and other compensation costs. A company spokesman declined to say how many jobs would be cut.

Boosting Deposits

Since going public in 2002, Commercial Capital has boosted its deposits in different ways. Last year, it picked up a pair of tax-deferred real estate exchanges, Timcor Exchange Corp. and North American Exchange.

They contributed about $600 million in deposits to Commercial Capital. Last month, it added another exchange, Oakland-based Lawyers Asset Management Inc.

Tax-deferred exchanges use Section 1031 of the tax code to help investors avoid paying capital gains taxes on profits from other building sales. As long as investors use proceeds from one sale to buy another building within about six months, they can put off the tax bill.

Commercial Capital also has bought financial institutions. The latest was a $40 million in stock buy of Sacramento-based Calnet Business Bank, which analyst Mike McMahon of Sandler O’Neill