Imperial Bancorp's shares ride high - but why is open to debate.

Imperial Bancorp stock price last week soared to its highest level in four years.

Shares of Inglewood-based Imperial, parent of Imperial Bank, the second largest bank in Los Angeles County, closed at $18.25 on May 31 -- the highest it has been since 1990.

The stock, which is traded on NASDAQ, posted a 52-week low of $9 a share. From 1991 through 1993, it traded between $6.57 and $14.29 a share.

David Sklar, chief financial officer for Imperial, said the rise in the stock price may be due to the fact that the $2.6 billion in assets bank has slashed bad loans and foreclosed real estate by $100 million in the last 12 months. Sklar added that the bank sold off the assets one by one, rather than in bulk which tends to cause deeper discounts.

Imperial has reduced its nonperforming assets from a high of $180 million, or 5.5 percent of total assets, at year-end 1992 to $81 million, or 3 percent, in first quarter 1994.

Another reason for the increase in stock price, Sklar noted, is two New York-based investment firms have issued buy recommendations on the bank's stock in recent months.

In an April report, CS Boston noted that Imperial's "credit quality in its real estate exposure (to loss) appears to have stabilized."

And Keefe, Bruyette & Woods Inc. noted in a September 1993 report that "classified" assets, or loans identified by the bank as at risk of default, peaked in December 1992.

"We have said for some period of time now, it's an exciting story at Imperial," said Tom Theurkauf, financial institutions analyst at Keefe, Bruyette & Woods. "There is a credit recovery under way."

Both investment firms stated that once Imperial worked through the problems, it was poised to reap profits in 1994 and 1995, when the California economy is expected to improve.

Campbell Chaney, a financial institutions analyst with San Francisco-based investment firm Dakin Securities Corp., noted that Imperial's stock price may have been boosted because it is on several investment firms' lists of potential "takeover" targets.

"It's on a lot of hit lists for investors wanting to buy takeover stocks," Chaney said. "Whether it's on any lists for acquirers to buy is another matter."

Imperial has three qualities that make it a takeover target; asset size, older management and a large ownership stake held by management, he said.

Chaney noted two of Imperial's top managers are over 70 and those two managers own 25 percent of the stock. According to CS Boston's report, 44 percent of Imperial's stock is held by Imperial management, directors and employees.

Investors tend to speculate that older management with a large stake in a company may want to "cash out" and retire, he said.

In addition, Imperial fits within the $2 billion to $20 billion asset size range that banks and thrifts are reportedly interested in buying, Chaney said.

Theurkauf disagreed with Chaney's view that takeover rumors are boosting Imperial's stock price. He said he would agree if the stock was at $25 a share, but the "fundamentals" of the recovering company are enough to justify the current stock price.

But Theurkauf added, "In a consolidating industry, yes, it is possible that Imperial could be on someone's shopping list."

Imperial CFO Sklar declined to comment on whether the bank was the target of another institution.

"We're aware that with the change in interstate banking regulations, we may be an attractive company to another financial institution seeking a California (franchise)," Sklar said. "However, our own focus is to strengthen our balance sheet ... to set the foundation for future positive earnings performance."

Although Chaney said he thinks takeover speculation is fueling Imperial's stock price increase, he added, "that is not to say the company's financial health is not improving, which it is."

Imperial reported net income of $1.12 million or 9 cents a share for the first quarter vs. $506,000 or 4 cents a share for the same period in 1993.

For the year 1993, Imperial posted net earnings of $1.05 million or 8 cents a share, compared with $7.9 million or 64 cents a share for 1992.