CU Bancorp Upped to Strong Buy - Analyst Blog

Zacks Investment Research upgraded CU Bancorp (CUNB) to a Zacks Rank #1 (Strong Buy) on Jun 5, 2014. Going by the Zacks model, companies holding a Zacks Rank #1 have strong chances of performing better than the broader market.

Why the Upgrade?

CU Bancorp has entered into an agreement with 1st Enterprise Bank (FENB), according to which the latter will merge with California United Bank, the wholly owned company of CU Bancorp. The deal has been valued at $103.4 million. Each share of 1st Enterprise Bank will be exchanged for 1.3450 shares of CU Bancorp (worth $24.47 on Jun 2). The merger is expected to be complete in fourth-quarter 2014.

The transaction will create one of the leading commercial banking franchises in southern California, with combined assets of $2.2 billion. Also, the new entity will operate as California United Bank and serve small and middle-market businesses, entrepreneurs, non-profits and professionals.
 
Following the completion of the transaction, shareholders of CU Bancorp will hold a 68.5% stake in California United Bank, while the remaining 31.5% will rest with 1st Enterprise Bank's shareholders.

Prior to this transaction, CU Bancorp reported impressive results for first-quarter 2014 on Apr 25. Earnings were 24 cents per share versus 20 cents per share earned in the year-ago quarter and above the Zacks Consensus Estimate of 22 cents. Total loans increased 9.8% year over year while total deposits grew 10.4%. Non-performing assets to total assets declined 0.60%. Net interest margin inched up 13 basis points to 3.82%.    

The company's stellar performance in first-quarter 2014 triggered positive revisions in earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for CU Bancorp has increased by 4.1% to $1.02 for 2014 and by 3.4% to $1.22 for 2015. This, along with the recent merger announcement and expected earnings growth rate of 13.3% for 2014 and 19.1% for 2015, has made us hopeful of another quarter of upbeat results.

Other Stocks to Consider

CU Bancorp currently has a $208 million market capitalization. Other banks worth considering include BofI Holding, Inc. BOFI, Central Pacific Financial Corp. CPF and Western Alliance Bancorporation WAL. All these stocks sport the same Zacks Rank as CU Bancorp.