A Stock Pick for (Almost) Every State

A Stock Pick for (Almost) Every State


2019 is a year to break the mold.  Deliver and obtain more value per effort and minute. So I'm giving myself "literary license" to step out of my review-one-bank-stock-at-a-time format.

This month, I took inventory of my current community bank stock holdings "by State" to let others "in" on my portfolio and research a bit more.

If you've been following me, you know I believe America and Americans would be well served to invest in our community banks. Hopefully this exercise will help everyday investors across the country to see opportunities close to home.


Disclosure: As of this posting, I own shares of all the bank stocks reviewed in the Timyan Bank Alert except $TBBK, $CDAB, $MELR, $CESO and $PUB, and I may subsequently either dispose of them or purchase more. For full disclosure, please note, I personally own many other bank stocks that are not represented in the Timyan Bank Alert portfolio or record.

Timyan's Top Community Bank Stock Pick(s) Per State as of January 2019

Some of these I have reviewed previously. Just click the stock symbol to access its most recent Timyan Bank Alert review.

State
Stock
Why It’s My Favorite in The State
Yield
P/B
P/E
AK
DENI
Denali Bancorporation — stock is cheap and directors own over 20%.
5.7%
104%
12x
AL
United Bancorporation of Alabama – has high returns, low price and does good in local Opportunity Zones.
0.7%
117%
6x
AR
OZK
Bank of the Ozarks — stock is cheap from being overly punished by the market for two bad loans.
3.3%
93%
8x
AZ
MPHX
MetroPhoenix Bank — not great, but the only one I own since State Bank $SBAZ got too expensive.
0%
128%
15x
CA
Northern California National — stock in Chico's hometown bank is undervalued, earns good money, and has high takeover appeal.
1%
125%
12x
CO
Solera National – Marty May expertly runs this one-branch bank and it’s fair to assume Chairman Michael Quagliano will want a return on his investment in 22% of the stock.
0%
110%
15x
CT
BWFG
Bankwell Financial Group — Larry Seidman is the largest investor and he makes things happen for shareholders.
1.7%
129%
13x
DE
TBBK
Bancorp, Inc — I don’t own this or any other Delaware-based bank, but board members Shiv Govinden and John Eggemeyer are savvy bank directors.
0%
121%
8x
FL
FCIT
First Citrus Bank — I love the team Jack Barrett has put together in Tampa and especially love recent results:1.3% ROA and 15% ROE.
0%
132%
11x
GA
CCF Holding Co — my largest holding. I love Leonard Moreland’s turnaround, have high hopes for the amalgamation of the two Heritage Banks and Providence Bank, and trust largest shareholder and Chairman, Ken Lehman.
0%
110%
15x
HI
OHPB
Ohana Pacific Bank in Honolulu — it’s ugly, but cheap. I’m hoping they sell to someone who knows what they’re doing.
0%
87%
13x
IA
MOFG
MidWestOne Financial — it’s selling nearly 30% below their last stock offering. I hope they’ll either get their returns in line with peers or sell the bank.
3%
89%
9x
ID
CDAB
Couer d’Alene Bancorp — earnings like these plus a slight discount to book make it hard to resist this tiny gem.
2.7%
98%
12x
IL
RYFL
Royal Financial — DISCLOSURE: I own 9.99% and have been a director since 2011, but I like Royal’s footprint in the backyards of serial acquirers FMBI and WTFC.
0%
105%
9x
IN
MFSF
MutualFirst Financial — attractive takeover target owned by two activist investors, PL Capital and Ancora Advisors.
2.93%
121%
10x
KS
BVBC
Blue Valley Ban Corp — a tad pricey, but very valuable branch network near Kansas City, with an ace director, Tony Scavuzzo of Castle Creek.

SOLD 01/16/2019
0%
142%
9x
KY
KFFB
Kentucky First Federal — returns are inadequate, so I hope they one day do a full conversion and sell three years later.

*Price to book would be 60% under full conversion scenario
5.8%
111%*
20x
LA
CTUY
Century Next Financial Corp — it’s undervalued and the perfect acquisition candidate for First Guaranty Bancshares.
3%
107%
11x
MA
MELR
Melrose Bancorp — only buy this if you believe activist investors Seidman and Maltese will be successful in pressing for a sale.
3%
105%
28x
MD
Delmar Bancorp — earnings are improving rapidly and Chairman Ken Lehman is heavily invested in turning a profit on his 41% ownership.
1.4%
112%
9x
ME
KTHN
Katahdin Bankshares — it’s cheap and has a branch network that should be appealing to acquirers.
2.6%
96%
9x
MI
EFIN
Eastern Michigan Financial of Crosswell — Michigan has many great publicly traded community banks, but this 127 year old has the cheapest stock.
2.94%
82%
9x
MN
Merchants Financial Group of Winona — my hands down favorite for the State, big enough for the Russell Index and trades for a fraction of its true value.
2.1%
107%
10x
MO
LBCP
Kansas City’s Liberty Bancorp — I’ve owned it since its conversion in 2005, because it has stayed too cheap to sell.
1.1%
115%
9x
MS
CIZN
Citizens of Arkadelphia — nice dividend, but Citizens never earns enough to justify its independence. 
4.7%
125%
14x
MT
EBMT
Eagle Bancorp — pickings are slim for cheap bank stocks in Montana. This is it. 
2%
107%
13x
NC
UWHR
Uwharrie Capital — if this one sells, it’ll pay off. If not, I’ll be stuck holding a cheap bank stock with crummy returns.
0%
103%
20x
ND
BNCC
BNCCORP — could more than double if sold, and many activists and unhappy shareholders are pushing for just that.
0%
101%
13x
NE
FINN
First National of Nebraska — an undervalued, high performing, 150 year old family run bank.
0%
109%
10x
NH
Northway Financial — expertly run by the energetic Bill Woodward for the past 43 years.
2.4%
102%
12x
NJ
PKBK
Parke Bancorp — started in a trailer by one of my favorite bankers, Vito Pantilione. Now it has $1.3B in assets in seven branches making it the envy of acquisitive banks in the area.
3%
135%
11x
NM
None
Unfortunately, there are no community bank stocks in New Mexico that I want to own.
-
-
-
NV
None
Sadly, there are no publicly traded community banks headquartered in Nevada.
-
-
-
NY
GLDT
Gold Coast Bancorp in Islandia — a valuable franchise, 22% management owned, but it doesn’t earn enough to remain independent. I’m hoping it sells.
0%
93%
25x
OH
CBKM
Consumers Bancorp in Minerva — steady insider purchases at higher prices are a clue that this stock will soon be worth more.
3%
108%
9x
OK
CESO
Central Service Corp — a nice 100-year old institution to own a stake in, if you can find shares near a $30 bid price.
0%
46%
8x
OR
CLAT
Clatsop Community Bank — cheap for a reason. It’s ten years old and still doesn’t make enough money to be independent. Original shareholders are still under water. Needs to sell!
2.1%
94%
19x
PA
First Resource Bank, Chester County PA — I'm not alone in rating it the best bank in the wealthiest county in the state (PRN Newswire 10/30/2018)
0%
100%
11x
PA
Embassy Bank — David Lobach built it from scratch, it's been a wonderful stock for ten years, and I expect it to keep performing.
1.2%
130%
10x
PA
Franklin Financial Services — instituted a share buyback and is listing on NASDAQ. I anticipate the stock will be added to the Russell Index in June.
3.4%
123%
10x
RI
WASH
Washington Trust Bancorp — a bit pricey, but the only community bank headquartered in Rhode Island. 
3.6%
212%
13x
SC
SFDL
Security Federal — Chairman Timothy Simmons' 22% ownership stake gives me confidence this bank's value will keep growing.
1.3%
107%
13x
SD
GWB
Great Western — has done a great job building this bank organically and via acquisition.
2.9%
109%
11x
TN
IBTN
Nashville’s Inscorp — it’s the cheapest thing in a great market, but I wish they would improve their deposit mix.
1.2%
117%
12x
TX
CADE
Cadence — the stock has been punished too much for its purchase of State Bank of Georgia.
3.3%
107%
9x
UT
PUB
Peoples Utah Bancorp — Utah's one and only publicly traded community bank, but it is a beauty! I just wish it were cheaper...
1.5%
204%
14x
VA
MNSB
MainStreet Bancshares — this bank is in a great market, growing, and likely to sell sooner or later.
0%
126%
11x
VT
MDVT
Middlebury National Corp — going strong for 188 years and holds 60% of the deposits in its home town.
2.7%
96%
11x
WA
PPBB
Peoples Bancorp — a valuable franchise with superior returns and good prospects for selling.
0%
145%
10x
WI
S.B.C.P Bancorp —  it's in a great market and run by a great banker, Jim Tubbs.
2%
103%
8x
WV
PTBS
Potomac Bancshares — good things usually happen for shareholders in Mike Voinovich's deals and he just raised capital here. 
2%
121%
13x
WY
CRZY
How could I not pick Crazy Woman Creek Bancorp? Especially with Joe Helmer on their board.
1.9%
85%
12x

CBM Bancorp, Baltimore, MD (CBMB)

A Case of a Safe Harbor


Stormy market conditions always get me scanning the horizon for safer investment opportunities. CBM Bancorp looks like one to me.

Chesapeake Bank of Maryland may be just a small, newly converted thrift, but the banker steering it has successfully converted and sold two others like it over the past 20 years.

When the bank's three-year moratorium on selling expires in 2021, I expect Captain Solomon will sell CBM for over $17 per share, landing a not-spectacular but low-risk-and-fairly-certain 35% return on today's price for shareholders.


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


Prospective Buyers

It's hard to predict the landscape in three years when CBM likely will come up for sale, but it makes sense for these three banks today.

Arundel Federal Savings Bank, Glen Burnie, MD (private)
BV Financial, Baltimore, MD (BVFL)
First Citizens BancShares, Raleigh, NC (FCNCA)

Financial Snapshot
as of 09/30/2018

Total assets:
$217M
Tangible book value per share:  
$14.23
NPAs to assets:
0.9%
Price to book:
89%
Market cap:
$53.4M
Dividend yield:
0%
Trailing 12-month ROA:
0.4%
Trailing 12-month ROE:
3.0%

The Team

William J Bocek Jr, Chairman
Joseph M Solomon Jr, President and "Managing Officer"
Philip E Logan, COO

The Skinny

Eight Reasons I Believe Chesapeake is a Safe Harbor
  1. Chesapeake Bank's CEO has done this before! (Solomon successfully grew and sold two banks already)
  2. Chesapeake's officers and directors are vested in getting this ship to shore. Seven of them purchased the maximum 17,500 shares in the conversion.
  3. Solomon runs a tight ship — Cost of Funds at Chesapeake Bank is only 0.6%.
  4. CBM Bancorp can grow book value simply by buying back stock, and it has the "excess capital" available to do it.
  5. Risk of loans "going bad" on this ship is low wherever the economy may toss us. (Soloman’s banks have always had strong credit profiles, and half of CBM's loans are in the 1-4 Family Mortgage category deemed to be less risky)
  6. Chesapeake Bank commands enough market share to garner a good price in a sale. In fact, it's the only community bank in Halethorpe and Parkville.
  7. Two bank stock investors I admire have significant holdings in CBM Bancorp — Seidman Associates and Stilwell Group.
  8. The bank's leaders don't have time to dilly dally if they plan to retire "on time." When the moratorium on selling CBM expires, CEO Solomon will be 71, COO Logan will be 67, and Chairman Bocek will be 65.

Sources

Luther Burbank Corp, San Rafael, CA (LBC)

A good buy in California


Think you can't afford anything of value in California?

LBC is trading at the 4th lowest price to tangible book value of any US bank with assets over $1B. Investors buying LBC today get a 10% discount from last year's IPO price.

In three years, LBC shareholders could be holding a stock that's earning over $1/share, has a book value near $13/share, and is trading for $15/share.

I don't mind an ROI of 55% in three years, do you?


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


Prospective Buyers

I don't believe the Trione family will be selling Luther Burbank Savings, but were they to do so, I suspect these two would be the most logical acquirers:

PacWest Bancorp, Beverly Hills, CA (PACW)
Western Alliance Bancorp, Phoenix, AZ (WAL)

Financial Snapshot
as of 09/30/2018

Total assets:
$6.7B
Tangible book value per share:   
$10.05
NPAs to assets:
0.1%
Price to book:
95.7%
Market cap:
$547M
Dividend yield:
2.4%
Trailing 12-month ROA:
0.9%
Trailing 12-month ROE:
10.2%

The Crew

Victor S Trione, Chairman
John G Biggs, President and CEO
Laura Tarantino, Executive VP and CFO

The Skinny

The Trione family founded Luther Burbank Savings 35 years ago with $2M.

On average, these bankers compounded their equity by 18% per year for 35 years.

By the time LBC went public in 2017, the bank's equity had grown to $576M.

Three directors and nine officers bought shares in Luther Burbank's IPO.

One director and three officers continue buying LBC in the open market, which tells me they expect the price to go up.

Excluding its first two quarters in de novo year 1983, Luther Burbank has never had an unprofitable quarter.

Cheers to the Triones for cultivating such a valuable property.

🍷

PS for Biggs:

The one thing that would make me feel better about this enterprise is if you were to use some of the $8.3M you got in total compensation since 2016 to buy than $60K worth of stock.


Sources