UPDATE: New Resource Bank, San Francisco, CA (NWBN)

In the three years since my February 2014 Timyan™ Bank Alert review of New Resource Bank, the bank has inarguably "blossomed" — just not in quite the fashion I had hoped. This one-branch San Francisco institution is a much bigger tree now, having grown footings by 52% and built a fancy new headquarters, but it is nowhere near bearing fruit for its shareholders.

Personally, I think it's fine if Management and some shareholders would like to run this bank as a non-profit. (I can even get excited about their focus on "impact lending" to promote clean energy, green building, and sustainable commerce!) But if that's what they are up to, they should be honest, and offer outside shareholders a way off the farm at a fair price.

Given the looks of things today, I'd be happy to take $10/share for NWBN, even though the stock could garner $12/share were the bank to be acquired.

Disclosure: As of this posting, I own shares of NWBN and may subsequently either dispose of them or purchase more.

Prospective Buyers
New Resource Bank's CEO Vince Siciliano has been clear that he has zero intentions of ever selling the bank.
Bank of Marin, Novato, CA (BMRC)
First Republic Bank, San Francisco, CA (FRC)
SVB Financial, Santa Clara, CA (SIVB) 
Financial Snapshot
as of 12/31/2016
Total assets:
Tangible book value per share:
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month return on assets:
Trailing 12-month return on equity:
The Crew
Mark Finser, Chairman
Vince Siciliano, President and CEO
Stephen Rossi, CFO
The Skinny
For me, New Resource Bank's May 2016 Investor Presentation really says it all...

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Baraboo Bancorporation, Baraboo, WI (BAOB)

A Case of a Circus Cleaning Up Its Act

After a few bozos pushed Baraboo Bancorporation into a many-year freefall, it looks like the bank is finally back on its feet. BAOB stock recovered 85% last year, and is still a bargain at $3.15.

I foresee book value growing to over $5 per share by 2019 and stock trading at 125% of that, nearly double today's price. If 74-years young Chairman Merlin Zitzner were to sell the bank, shareholders could enjoy this performance even sooner. Given that he owns 47% of the stock, Merlin certainly has both the power and incentive to do so.

Disclosure: As of this posting, I own shares of BAOB and may subsequently either dispose of them or purchase more.

Prospective Buyers

Knowing that Baraboo National holds more than half the deposits in Baraboo, Wisconsin, any of these higher-performing, better-capitalized banks could be in line to buy Merlin's show.

Bank of Montreal, Toronto, Canada (BMO)
Bank of Prairie du Sac, Prairie du Sac, WI (private)
Bank of Wisconsin Dells, Wisconsin Dells, WI (private)
National Exchange Bank & Trust, Fond du Lac, WI (private)

Financial Snapshot
as of 9/30/2016
Total assets:
Tangible book value per share:
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month return on assets:
Trailing 12-month return on equity:
*Technically, no longer TARP, but Preferred Stock: 
The Bank received $20.7M in TARP 01/16/2009 
The Government auctioned it all off 12/03/2012 
The Bank redeemed all but $5.1M on 01/05/2017

The Crew

Merlin Zitzner, Chairman, President, Treasurer
Greg Linder, VP and Secretary
Jeff P. Blada, "acting" CEO, COO

The Skinny

Baraboo National Bank has weathered many challenges since its founding in 1857 — including both the Civil War and the Great Depression. It's probably safe to say, now, that it has survived the Great Recession, too, in spite of a 16-year sideshow that cost the bank over half its assets.

That clumsy act in the bank's history began in 1999 when ringmaster Merlin Zitzner appears to have fallen under the spell of two ding-a-ling lenders, who proceeded to spend the next six years making unsafe, unsound, and self-dealing loans. That stunt left Baraboo National teetering on a tightrope before the Great Recession even came to town.
  • By year end 2008, Baraboo was scrambling to get a TARP safety net in place. 
  • By January 2013, the circus was such that Regulators put the bank under a 27-page Cease and Desist order (most are 3-5 pages).
  • By New Year's Day 2014, BAOB tangible common equity had fallen to 3.5% and NPAs had skyrocketed to 13.5%.
To their credit, Merlin and his troupe have worked some magic since. To pull off the turnaround they had to perform a major disappearing act on bad loans, foreclosed assets, and out-of-market branches. In the process, nearly half of the bank's assets went "poof!"
  • Baraboo National is now operating solidly in the black.
  • The bank earns 1% on assets and is achieving close to 10% ROE.
    • Total equity is a healthy 13.7%
    • Tangible common equity is still light at 8.3%, but is a leap above the 2013 low point of just 3.5%
  • NPAs are down to 2.8% and NPAs less TDRs to only 1.4% assets.
Backstage, Merlin has a few more tricks up his sleeve that may be less visible to the average investor: 
  • Wonderful deposits! Although Baraboo National is half its prior size, its total cost of funds is only 30 basis points, which means it can lend money very profitably.
  • Low loan to deposit ratio! Nearly $92M of the bank's $347M in deposits is still available for lending.
  • Deferred Tax Assets! Sooner or later, the bank will recognize an $11M DTA, which could add over $1 per share to book value.


Greer Bancshares, Inc, Greer, SC (GRBS)

The Case of a Greedy Grip on Greer

Grrrrrr! The guys at Greer Bancshares have me growling.

Even if they stopped their money grubbing today and all else goes well, I have trouble seeing how the market price of GRBS could reach much over $15 — not a terrible return, but also not optimal, especially considering the risks involved. In a sale, GRBS shares could garner $17, more than 40% above today's stock price.  

I agree with C Don Wall, a former Director and Greer's largest shareholder: the Board has a fiduciary responsibility to loosen its grip on the bank and let shareholders sell it if they wish.

Disclosure: As of this posting, I own shares of GRBS and may subsequently either dispose of them or purchase more.

Prospective Buyers

BNC Bancorp, High Point, NC (BNCN)
First Citizens BancShares, Inc, Raleigh, NC (FCNCA)
United Community Banks, Inc, Blairsville, GA (UCBI)

Financial Snapshot
as of 6/30/2016
Total assets:$378M
Tangible book value per share:$10.89
NPAs to assets:1.7%
Price to book:105%
Market cap:$28M
Dividend yield:1.7%
Trailing 12-month return on assets:0.74%
Trailing 12-month return on equity:11.3%
*Redeemed $10M 7/23/2014


Gary M. Griffin, Chairman
J Richard Medlock Jr, Secretary, President, and CEO

Red Flags

The Greed. These greedy guys (and gals)...
  • paid shareholders a paltry $248,669 in dividends over the past eight years (2007-2015) while they stuffed 8x that into their own pockets, reporting $2,007,693 in Board fees
  • have been paying themselves 10% interest for deferred Directors compensation (right up until last year), 20x the 0.5% rate they pay customers for 1-year CDs 
  • recently cut their deferred compensation interest rate by half, but it's still 10x the rate they pay their customers 
[No wonder that a full third of Greer's directors don't even own an amount of stock equal to a year's worth of board fees!]

The Grip. These same greedy guys are...
  • misusing an outdated requirement that 70% of the Board agree to a change of control, when the norm is 50%*
  • refusing to hand over corporate records shareholders have requested to inspect, in open defiance of their obligations under South Carolina law
  • persisting on a self-serving path of independence at the expense of the bank's core shareholder base
*Until this is changed, that aforementioned third of the Board that owns next to no GRBS stock can effectively block the interests of shareholders who own 99% of it.

Other Gripes. While their hands are busy grabbing profits and maintaining their grip on the bank, these guys are dropping the ball:
  • From 2011 to 2015 both loans and deposits declined. (Deposits have meagerly improved over the past few months.)
  • Instead of taking in deposits and lending them out, Greer is borrowing money from the FHLB and taking on debt to invest in the bond market — a risky wager given that interest rates are at record lows. (A 2% interest rate increase could wipe out more than half of the bank's equity.)
  • The bank's efficiency ratio increased from 69.9% in 2011 to 72.5% in 2015, in a game where the target is a healthy 60% or less.
- - - - - - - - - - - - - - 
My Gratitude to fellow shareholders C Don Wall, Dennis Hennett, and Paula Lawrence — who launched a proxy fight last year — for their shareholder advocacy and stand for right behavior.


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