Upbeat Profit Reports Lift Sector

Bank stocks climbed in stride with other stocks Monday as earnings season entered its second week.

The American Banker index of 225 bank stocks gained 1.01%, and the thrift index increased 1.06%. The Standard & Poor's 500 gained 0.38%, and the Dow Jones Industrial index rose 0.33%.

Bank of Hawaii Corp. shares rose 4.8%. The Honolulu company said Monday that its third-quarter profits rose 1.8% from a year earlier, to $47.8 million, or 96 cents a share, which beat the average forecast of analysts surveyed by Thomson Financial by a penny. Total revenue rose 1.6%, to $159.8 million, though net interest income slipped 1.7%, to $98.8 million.

"It's been a tricky environment, and our banking has maneuvered through it well," Allan R. Landon, Bank of Hawaii's chairman and chief executive officer, said in an interview. "We don't have any subprime business."

Frontier Financial Corp.'s shares rose 2.6%. The Everett, Wash., company said its third-quarter earnings rose 9.2% from a year earlier, to $20.2 million, or 46 cents a share, which beat the average analyst's expectations by 2 cents.

Wintrust Financial Corp.'s shares plunged fell 6.3% and hit a 52-week low. The Lake Forest, Ill., company reported that its third-quarter earnings fell 33% from a year earlier, to $9.9 million. Earnings per share fell 29%, to 40 cents.

Edward J. Wehmer, Wintrust's president and CEO, attributed the "disappointing" results to the "extreme mortgage-banking environment." He said concerns about mortgage defaults caused his company to reserve $6.7 million for estimated losses in its wholesale mortgage business. Nonperforming assets rose nearly 36% from a year earlier, to $48.7 million as of Sept. 30.

Popular Inc.'s shares slid 2.1%. The San Juan, Puerto Rico, company said that its third-quarter earnings fell 56% from a year earlier, to $36 million, and that it would shed a portion of its unprofitable U.S. branch network.

Late Friday, Popular said its U.S. operations lost $44.7 million in the third quarter. Its provision for loan losses jumped 134%, to $148.1 million.

On Monday, Popular also said that it would sell six Houston-area branches to Prosperity Bancshares Inc. The deal is set to close this quarter. Roberto R. Herencia, the president of Banco Popular North America, said Monday that its parent company expects to record a $10 million gain from the sale, and that it is looking "hard at anything that is not core banking," which could include its consumer finance business.

Cathay General Bancorp shares fell 6.4%. James Abbot, an analyst at Friedman, Billings, Ramsey Group Inc., downgraded the Los Angeles company's stock to "underperform," from "market perform," and lowered his earnings estimates by 5 cents for this year, to $2.39 a share, and by 30 cents for next year, to $2.30. He cited Cathay General's deteriorating credit quality in areas such as construction lending.

PremierWest Bancorp shares fell 2.4%. The Medford, Ore., company said it would buy the privately held Stockmans Financial Group in Elk Grove, Calif. for $91.1 million in cash and stock. The deal is expected to close next quarter.

Bear Stearns Cos. Inc. shares rose 1.2%. The New York investment bank said that it had an agreement to sell up to 9.9% of itself to China's Citic Securities Co. Bear Stearns would have an opportunity to build a stake of up to 7% in Citic.

The companies also agreed to form a joint venture in Hong Kong.

"We believe a capital swap is favorable in that both parties will have 'skin in the game,' which we view as imperative to making a capital markets JV work," Jeffrey Harte, an analyst at Sandler O'Neill & Partners LP, wrote in a note to clients.

Other gainers included Thornburg Mortgage Inc. of Santa Fe, N.M., which rose 10.6%; Union Bankshares Corp. of Bowling Green, Va., which rose 9%; and Centennial Bank Holdings Inc. of Denver, which rose 8.9%.

The decliners included American Home Mortgage Investment Corp. of Melville, N.Y., which fell 6.3%; Fremont General Corp. of Santa Monica, Calif., which fell 4%; and Ocwen Financial Corp. of West Palm Beach, Fla., which fell 3%.

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