Key Highlights

  • QNB reported a net loss of $14.774 million after a $29.049 million securities sale loss, against adjusted EPS of $1.30.
  • National Bank Holdings booked a $40.6 million provision, against $1.5 million in the second quarter.
  • Trustmark's $61.5 million branch sale-leaseback gain was offset by a $61.5 million securities restructuring loss.
  • Banc of California returned to EPS of $0.46 after a second-quarter loss of $1.61, a calculated swing of $2.07 per share.
  • Peapack-Gladstone's tax benefit of about $1.8 million lowered its effective tax rate to 20.5% from 28.4%.

Which One-Off Charges and Gains Shaped Bank EPS on October 27?

Seven banks reported on Tuesday, October 27, and in most of them the headline figure told only part of the story. QNB (NASDAQ:QNBC) posted a net loss of $14.774 million, or $2.67 per share, after a $29.049 million securities loss, against adjusted EPS of $1.30. National Bank Holdings (NYSE:NBHC) lost $0.20 per share on a $40.6 million provision, with adjusted EPS of $0.06. Independent Bank (NASDAQ:IBCP) earned $0.80, or $0.92 excluding merger costs, and Trustmark (NASDAQ:TRMK) earned $1.00 as a $61.5 million branch sale-leaseback gain was offset by a $61.5 million securities restructuring loss.

Eagle Bancorp Montana (NASDAQ:EBMT) earned $0.38 with no adjusted figure, Banc of California (NYSE:BANC) returned to a $0.46 profit after a second-quarter loss of $1.61, and Peapack-Gladstone (NASDAQ:PGC) earned $0.99 with help from a tax benefit of about $1.8 million.

QNB: Why Did a $14.8 Million Loss Sit Beside $1.30 of Adjusted EPS?

QNB, parent of QNB Bank in Quakertown, Pennsylvania, sold $250.712 million of available-for-sale securities at a $29.049 million loss under a repositioning announced on September 8. An interest rate swap unwound for a $1.336 million gain left a net restructuring loss of $27.713 million. Adjusted net income was $7.207 million, or $1.30 per share, against $1.09 a year earlier, a 17.12% surprise versus the screened $1.11. Net interest income rose 47.4% to $19.161 million after the Victory Bancorp deal. The release did not quantify the expected earnings benefit of the repositioning.

National Bank Holdings: How Large Was the Credit Hit Behind the Loss?

National Bank Holdings, the Denver-based holding company, took a $40.6 million provision tied to a handful of commercial credits, mainly in franchise and healthcare lending, against $1.5 million in the second quarter (about 27 times, calculated). Net charge-offs were 1.88% of average loans, and a further $4.0 million fintech investment impairment cut noninterest income to $13.5 million. Adjusted EPS of $0.06 compares with a $0.28 estimate, negative 78.57% as screened. Management targeted fourth-quarter earnings of a dollar or more per share, and the call was set for Wednesday, October 28.

Independent Bank: Why Did Merger Costs Push EPS to $0.80 Against $0.92 Adjusted?

Independent Bank, the Michigan holding company, closed the HCB Financial and Highpoint Community Bank acquisition on July 1. Net income was $17.9 million, or $0.80 per share, and $2.8 million of after-tax merger expenses explain the gap to adjusted EPS of $0.92, a 12-cent difference (calculated). The provision rose to $4.8 million on a specific reserve and loan growth, while net interest margin widened to 3.79% from 3.67%. Management reaffirmed quarterly margin expansion of 2 to 4 basis points, and the Highpoint system conversion is scheduled for November 9.

Trustmark: Did a Sale-Leaseback and Securities Reshuffle Mask the Third Quarter?

Trustmark, a bank holding company with $19.11 billion in assets, sold 34 branches on September 3 for net cash of $91.7 million and leased them back for 15 years, booking a $61.5 million pre-tax gain. A securities restructuring moved $1.118 billion to available-for-sale, sold $629.5 million yielding about 1.4% and bought $628.0 million yielding about 5.0%, for a loss of about $61.5 million. The two entries net to zero pre-tax (calculated). Diluted EPS was $1.00 against $1.08 in the second quarter, and the screened surprise was negative 0.33%.

Eagle Bancorp Montana: Why Did Profit Fall Without a One-Off to Blame?

Eagle Bancorp Montana reported net income of $3.014 million, or $0.38 per share, against $0.47 in the second quarter, with no adjusted EPS. The screen estimate was $0.54, negative 29.19% as screened. The provision rose to $1.859 million from $343,000 on record loan growth of $159.0 million, and nonperforming loans reached $8.7 million, or 0.51% of loans, mainly well-collateralized agricultural loans. Deposits rose only $11.9 million, so borrowings climbed to $196.8 million. The $0.1475 dividend is payable on December 4.

Banc of California: Is the Return to $0.46 After a $1.61 Loss a Real Recovery?

Banc of California's second-quarter loss stemmed from a securities repositioning, loan sales and a subordinated note redemption. The third quarter brought net earnings of $83.1 million, diluted EPS of $0.46 against a $0.45 screen estimate, and no adjusted EPS. Noninterest income was $31.4 million versus a loss of $234.1 million, and the provision fell to $10.4 million from $161.8 million, a drop of $151.4 million (calculated). Net interest margin was 3.34%. Management expects further improvement in the fourth quarter as the remaining held-for-sale loans are sold over the next several quarters.

Peapack-Gladstone: How Much Did a Tax Credit Purchase Add to $0.99?

Peapack-Gladstone, the New Jersey holding company for commercial banking, private banking and wealth management, earned $18.9 million, or $0.99 per share, against $0.54 a year earlier. A discrete tax benefit of about $1.8 million from purchasing transferable production tax credits cut the effective tax rate to 20.5% from 28.4%, equal to roughly 9.5% of net income (calculated). The screen showed a reported $1.01, which differs from GAAP, and the company reported no non-GAAP EPS. Revenue was $87.5 million, up 24%.

Bank One-Offs Compared: Which Items Moved EPS the Most?

Per share, QNB's adjusted figure sits $3.97 above its GAAP loss, National Bank Holdings' $0.26 above and Independent Bank's $0.12 above (all calculated), so the repositioning at QNB dwarfs the other adjustments. Trustmark's gain and loss net to zero pre-tax, while QNB's net restructuring loss was $27.713 million.

The sequential swings run the other way for Banc of California, whose EPS improved by $2.07 per share from the second quarter (calculated), and for National Bank Holdings, whose provision rose by $39.1 million (calculated). QNB's adjusted EPS of $1.30 is 19.3% above the $1.09 of a year earlier (calculated), a reminder that the underlying earnings can differ sharply from GAAP.

What to Watch Next: Wednesday's Calls, the November 9 Conversion and December Dividends

Trustmark, National Bank Holdings and Banc of California all host calls on Wednesday, October 28, where investors will look for detail on loan payoffs, the affected commercial credits and the pace of the remaining loan sales. Independent Bank's Highpoint conversion arrives on November 9, with about $3 million of further merger costs expected in the fourth quarter. Dividends follow, including Eagle Bancorp Montana's on December 4 and Trustmark's $0.25 on December 15, while QNB's margin near 3.25% and Peapack-Gladstone's November dividend reinvestment discount are also on the agenda.