Oxford Bank Corp, Oxford, MI (OXBC)

Another Case of Book-ish and 10x

If you read my October review of Central Federal Corp, you heard that I've been seeing a number of well-run banks where investors can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling their money in three or four years.

Oxford Bank Corp is just one of these. It hasn't been particularly well-run historically, but the side story of its top shareholders has me excited for the next chapter.

In three years, I see OXBC's book value approaching $30 per share, earnings $3.50, and trading price $40.

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

Prospective Buyers

I can name eight banks that would find Oxford Bank's leading market share in several Michigan cities appealing. Here are the three I believe can most afford to book a deal.

Independent Bank Corp, Grand Rapids, MI (IBCP)
Horizon Bancorp, Michigan City, IN (HBNC)
Waterford Bancorp, Toledo, OH (private)

Financial Snapshot
as of 06/30/2019

Total assets:
Tangible book value per share:   
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month ROA:
Trailing 12-month ROE:

The Crew

Karen Mersino, Chairman
David P. Lamb, President and CEO
Richard K. Thompson, Director, largest shareholder

The Skinny

There are a few scoundrels in the Oxford Bank Corp story, but Director Richard Thompson's history in bank stocks investing and governance gives me hope for a happy ending.

The Oxford Bank Corp Story

In recent chapters, OXBC insiders have crossed some lines.

December 2014 - Oxford Bank Corp is accused of self-dealing after selling shares mostly to its own directors at a depressed price of $8 per share when OXBC book value per share was $18. Chairman Mersino alone bought a quarter of the shares sold.

December 2015 - The bank expanded its self-dealing sale of OXBC stock to include friends, again at the depressed price of $8 per share, again excluding other shareholders.

March 2018 - Oxford entered into a Cease and Desist Order for BSA violations. The Order stated that Oxford Bank Corp was to immediately notify OXBC shareholders. The bank did not. Clearly, its board has little regard for the law.

June 2019 - The bank entered a Consent Order for violation of Consumer Protection and Compliance, which again required OXBC to notify shareholders. In the bank's August quarterly earnings press release, which typically includes management's commentary and would have been the right and expected place and time for this notification, there is an oddly blank page.

To date, Oxford Bank Corp Management has ignored all inquiries from me and other OXBC shareholders about these matters.

In the next chapter, OXBC shareholders should put the heat on Oxford's Board. Technically, Oxford Bank Corp has another chance to notify shareholders of its Consumer Protection and Compliance violations. Let's see if they tell us in their "notice or proxy statement preceding the Bank's next shareholder meeting" (scheduled for May 2020), as the Consent Order requires.

The Thompson - Clemente Side Story

The tale of OXBC's two largest shareholders of gives me hope for the future of the stock.

In 2015, Richard Thompson was one of the lucky friends invited to buy OXBC. He bought 201,000 shares in that $8/share deal, took a board seat, and picked up another another 118,000 shares in the open market. Today, Thompson has a 14% stake in OXBC and is the bank's largest shareholder. At current OXBC trading levels, his stake is worth $6.5M.

Thompson and OXBC's second largest shareholder, Robert Clemente, have been governing businesses together for over 25 years. In 1993, 26-year old Thompson served on the board of Secom, where Clemente was Chairman and Thompson's father was the largest shareholder. Together, Thompson and Clemente own 25% of OXBC. (The next largest insider, Chairman Mersino, owns a mere 2%).

Thankfully, OXBC is neither the first nor only bank stock in the pair's portfolio. Thompson and Clemente also own 18% of First National Bank in nearby Howell (FNHM), where Clemente has a board seat. The two also have a combined 39% stake in nearby Clarkston Financial Corporation (CKFC), on whose board Thompson serves. The pair's involvement with Clarkston pre-dates their relationship with OXBC by at least three years.

This past June, Thompson and his fellow Directors at Clarkston, agreed to sell their bank to Waterford Bancorp for 189% of book value. That merger is in progress. Applying the same 189% valuation to Oxford Bank Corp would yield a sale price of $35.70 per share, increasing the value of Thompson’s stake in OXBC to $11.4M.

Clearly, OXBC's largest shareholders are professional businessmen, directors, and investors with a thorough understanding of their area banking marketplace. I believe it safe to assume they are profit motivated advocates of good governance. In the final chapter, they will be the heroes of the Oxford Bank Story.


Central Federal Corp, Worthington, OH (CFBK)

A Case of Book-ish and 10x

This is a fun time to be a bank stock investor! So many really nice banks are trading at compelling values that it’s hard to choose which one to feature first.

For example, I'm seeing a number of well-run banks where you can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling your money in three or four years.

CFBank is just one of these. CFBK is trading cheaply at 7.8x rapidly-growing earnings. In three years, earnings could be $2.50, book value could be $16, and CFBK could trade at $24.

It's smart to hold a few low-stress stocks like this that just compound earnings and don't require babysitting, no?

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

Prospective Buyers

CFBank's leading market share in four towns would be especially attractive for these acquisitive neighbors.

Farmers National Banc Corp, Canfield, OH (FMNB)
LCNB Corp, Lebanon, OH (LCNB)
Peoples Bancorp, Marietta, OH (PEBO)

Financial Snapshot
as of 06/30/2019

Total assets:
Tangible book value per share:   
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month ROA:
Trailing 12-month ROE:

The Crew

Robert E. Hoeweler, Chairman
Timothy T. O'Dell, President and CEO
Edward W. Cochran, Director, largest shareholder

The Skinny

These four characteristics inform my assessment that Central Federal Corp is well run and in a good position to grow:

1. Location, location! CFBank's branches are located in Ohio's top four metropolitan areas: Akron, Cincinnati, Cleveland, and Columbus.

2. Sizable branches. Between them, CFBank's Fairlawn and Worthington branches hold over $500 million in deposits. On average, deposits in the bank's other four branches exceed $37 million. (It takes about $15 million in deposits for a bank branch to break even.)

3. Effective CEO. Before Tim O'Dell arrived on the scene, CFBank was a sh*tty little thrift. O'Dell attracted good lenders, reduced problem loans, and exponentially increased both the size and profitability of the bank.

4. Invested Board. Collectively, the Central Federal Corp board owns 19% of CFBK stock, and every director is invested (which isn't always the case).


LETTER: Pacific Enterprise Bancorp, Irvine, CA (PEBN)

There's no review of Pacific Enterprise Bancorp in Timyan Bank Alert.

But since other investors seemed to appreciate my sharing last month's letter to Peoples Financial Corp, I figured I could let you "in" on this aspect of my work more often.

Pacific Enterprise is a good bank that can sell for 50% higher than its last trade price, and I hope it does!

Below is a letter I am sending to the Chairman of Pacific Enterprise Bancorp.

See also
Pacific Enterprise Bank website
Q2 2019 Quarterly Report

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

My Letter to Pacific Enterprise Bancorp

Dennis H. Guida Jr. Chairman
Pacific Enterprise Bancorp
17748 Sky Park Circle
Suite 100
Irvine, CA 92614

Dear Mr. Guida,

I own 2% of Pacific Enterprise Bancorp. Thank you for your fine stewardship of the bank. Thanks to your team, too, for their fine execution of the business plan. Since its founding in 2007, Pacific Enterprise has had a fine run.

I was happy to hear you tried to sell the bank last year, but found your unrealistic expectations for what you'd get in a sale disappointing. Your board should know that you have shareholders, including me, who would prefer you sell Pacific Enterprise to the highest bidder, instead of holding out for a magical number.

Please share this letter with the board.


Philip J. Timyan
PEBN Shareholder