CCF Holding Co, Jonesboro, GA (CCFH)

The Case of a Southern Revival


The Heritage Bank resurrection story warms my heart. Of the 12 banks that were headquartered in Georgia's Clayton and Henry Counties in 2008, Heritage is the only one that survived the Great Recession.

The Heritage Bank franchise lost a huge percentage of its equity at the time, but clearly it did not lose faith! Since then, asset quality, growth, and scarcity value have all risen to such a glorious degree that I can see CCFH stock trading at 150% of book value within the next two years. And if the bank's board decides to sell, the stock could deliver twice book.


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


Prospective Buyers

Wrapping Heritage Bank into its fold would fill a real need for any one of these organizations that suffer from lack of marketshare in the area:

Ameris Bancorp, Moultrie, GA (ABCB)
State Bank Financial, Atlanta, GA (STBZ)
United Community Banks, Inc, Blairsville, GA (UCBI)

Financial Snapshot
as of 06/30/2016
Total assets:$415M
Tangible book value per share:$1.08†*
NPAs to assets:2%
Price to book:88%*
Market cap:$37M*
Dividend yield:0%
Trailing 12-month return on assets:5.6%†**
Trailing 12-month return on equity:64.2%
*Tangible book value per share, price to book, and market cap adjusted for exercise of warrants and conversion of preferred shares.
**ROE and ROA numbers are misleading due to the bank's DTA recapture.

Luminaries

David Turner, Chairman
Leonard Moreland, President and CEO
Katherine Zovlonsky, Senior VP and COO

Gold Stars

The Heritage Bank resurrection story in a nutshell:



THEN*
NOW
NPAs to Loans
Over 24%
3%
Texas Ratio
267%
20% and falling
Equity
$7.7M
$38M
Net Loans
$242M
$275M
Deposits
$327M
$362M
* YE 2012, 2013

Sources

  • Confidential interviews with shareholders and analysts

UPDATE: Northern California National Bank, Chico, CA (NCNB)


In the two and a half years since I first reviewed Northern California National Bank in the Timyan Bank Alert™, assets are up 45%, book value has grown by 21%, loans have grown by 33%, deposits by 40%, a dividend has been instituted, NPAs have remained negligible and the value of the franchise has grown by $10 per share in my estimation.

And since the stock is only up 20% since then, NCNB is an even better bargain for bank investors today. It's conceivable that an acquirer could and would pay $28 per share to own this beautiful one-branch bank.

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

Prospective Buyers
Banner Corp, Walla Walla, WA (BANR)*
TriCo Bancshares, Chico, CA (TCBK)
Umpqua Holdings, Portland, OR (UMPQ)

* I had listed SKBHC here in my original post, but Banner Corp has since acquired it. Banner's lone Chico branch has a paltry $9M in deposits, so I'd say BANR should either buy NCNB or leave Chico to bankers that care more about it.
Financial Snapshot
(as of 06/30/2016)

Total assets:
$198M
Tangible book value per share:
$13.19
NPAs to assets:
0.09%
Price to book:
83.4%
Market cap:
$15M
Dividend yield:
1.4%
Trailing 12-month return on assets:
0.55%
Trailing 12-month return on equity:
6.22%
Luminaries
John Lucchesi, former Chairman, President, and CEO (deceased)
Stephen Gonsalves, Chairman
Todd Lewis, President, CEO, and CFO
Gold Stars
I am sad to report that since I first reviewed Northern California National Bank in the Timyan Bank Alert™, its Founder has died. I had hoped to trek out West to meet him and to acknowledge him personally. Banking needs more folks like John Lucchesi! And life really is short.

John Lucchesi is one of my favorite bankers of all time. He grew up in Chico, went to Chico State University and returned to his hometown after a 25-year career with Bank of America that took him to Asia. Back in Chico, Lucchesi ran North State National Bank until he sold it to Tri Counties Bank in 2002. 

Apparently, Lucchesi was one of those ambitious guys who just couldn't retire, so in 2006, at the young age of 67, he started Northern California National. When other banks were reeling from bad loans in the Great Recession, Northern California National was growing without loan problems due to Lucchesi's careful stewardship. 

Lucchesi's Northern California National is a case study in how to build a great community bank from the ground up. Today, months after he left us, it may be the sturdiest bank in Chico and a highly coveted franchise.

I know this updated blog post is a small tribute, unworthy of the man and his end-of-life's work.  I had hoped to at least be able to shake his hand...

    Sources
    • Confidential interviews with shareholders

    Southern Banc Co. Inc., Gadsden, AL (SRNN)

    One Bank Stock I Hesitate to Recommend


    I own stock in Southern Banc Co, but if you don't, consider yourself lucky! The Little brothers have really run it into the ground over the past 15 years. And although it's true that value can generally be salvaged out of almost any wreck in a sale, I don't see these guys letting go of the bank until there's next to nothing left of value in it.


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


    Prospective Buyers

    Southern Banc's deposits could really help one of these three nearby community banks compete with Big Banks in the area:

    Exchange Bank of Alabama, Altoona, AL (private)
    First Bancshares of Stevenson, Stevenson, AL (private)
    Peoples Bank of Alabama, Cullman, AL (private)

    Financial Snapshot
    as of 03/31/2016
    Total assets:
    $100M
    Tangible book value per share:
    $17.77
    NPAs to assets:
    1.49%
    Price to book:
    57%
    Market cap:
    $7.9M
    Dividend yield:
    0%
    Trailing 12-month return on assets:
    - 0.18%
    Trailing 12-month return on equity:
    - 1.30%

    Scoundrels

    Gates B. Little, Chairman, President, and CEO
    Jim Little III, Director
    Thomas F. Dowling III, Director

    Red Flags

    Since going public in 1995, SRNN has suffered a 3% decline in assets and incurred roughly $1.8M in losses. I've heard of a lost decade, but these scoundrels are working on their third!

    Considering Southern Banc Co in the context of its peers may help to illustrate the extent of its fall into disrepair.

    • The Southern Bank Company has four branches: Its two biggest — in Gadsden and Center — hold a mere $28M and $31M in deposits, respectively. 
    • Six other banks in Gadsden are bigger, including two solid, and growing, community banks: River Bank & Trust and Exchange Bank of Alabama. The Gadsden branch of River Bank & Trust has $90M in deposits. The two branches of Exchange Bank of Alabama in Gadsden hold $95M between them.
    • Since 2010, deposits at the Gadsden branch of Southern Banc Co have shrunk by 15%, while River Bank & Trust grew its deposits there by 35%, and Exchange Bank of Alabama grew its by 11%.

    As a shareholder, I would like to see Southern Banc Co sold. Given that its been in the Little family since it was founded in 1936 and is run by brothers who are still a long way from retirement age, I doubt it will be.

    Sources

    • Confidential interviews with shareholders and analysts