Embassy Bancorp, Bethlehem, PA (EMYB)

A Case of a Dynamic Duo in the Steel City


The two in charge at Embassy sure know how to pack a punch. This is one bank that I believe could get 150%-160% of book value in a sale. If this pair succeeds in growing book value to over $8 over the next three years, a sale would present a really nice opportunity to double one's money. And given the Chairman's previous experience selling Ambassador to Fulton in 1998, I think it's reasonable to anticipate that the bank will sell when the price is right. That being said, at a discount to book and only 8x earnings, EMBY will almost certainly make shareholders money even if the bank never sells.

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

Prospective Buyers
In addition to the obvious neighborhood heavyweights, F. N. B. Corp (FNB) and M & T Bank Corp (MTB), each of these three banks has good reason to be interested in Embassy, given its 5% share of the deposit market in both Lehigh County and North Hampton County
First Niagara Financial, Buffalo, NY (FNFG) - acquiring EMYB would double FNFG's deposit market share in Lehigh and make it #2 in the county
Fulton Financial, Lancaster, PA (FULT)
National Penn Bancshares, Boyertown, PA (NPBC) - acquiring EMYB would make NPBC #1 in North Hampton and a solid #2 in Lehigh
Financial Snapshot
(as of 03/31/2013)

Total assets:
$636M
Tangible book value per share:
$7.07
NPAs to assets:
1.5%
Price to book:
95%
Market cap:
$47M
Dividend yield:
0.6%
Trailing 12-month return on assets:
0.92%
Trailing 12-month return on equity:
12.9%
TARP:
$0M
Luminaries
David Lobach, Jr, Chairman, President, CEO
Judith Hunsicker, Senior Executive VP, Secretary, CFO, COO

Gold Stars
I just love how efficient and committed Embassy is! Just look at how many jobs the two leaders at the helm take on their own shoulders. Here are a few numbers that speak volumes, as well.
    Employees per branch. With just 70 employees across its 7 branches, Embassy is operating 30% to 90% more efficiently than its peers.
    • M & T has almost twice as many employees per branch (19)
    • First Niagara, Fulton, and National Penn have 30% more per branch (13)
    Assets per employee. With a whopping $9.2M in assets per employee, Embassy is operating 50% to 100% more efficiently than its peers
    • Fulton has half the assets per employee ($4.6M)
    • First Niagara is managing a third less assets per employee ($6M)
    • National Penn and M & T aren't managing any more, with $5M and $5.7M in assets per employee each, respectively
    Insider ownership. With insiders owning an impressive 32% of EMYB stock, Embassy managers and directors are 3x to 20x as invested in their bank's success as their peers are in their own
    • Fulton and First Niagara insiders own a measly 1.5% and 2% of their own FULT and FNFG stocks, respectively
    • M & T and National Penn insiders, although wildly beating the average bank's level of insider ownership with 10% and 20% of their respective MTB and NPBC stocks, still fall far short of Embassy's impressive level
    Sources

    Community Bankshares of Indiana, New Albany, IN (CBIN)

    A Case of the Road Less Gravelled


    I love this bank! Since coming public over 15 years ago, Community Bankshares of Indiana has grown nicely from a little $130M thrift to an $800M commercial bank with a diversified loan portfolio.

    CBIN stock is cheap no matter how you look at it: price to book value, price to tangible book, or price to earnings. I would guess that a year from now, tangible book could reach $20 a share and we’re likely to see the stock trading for 120% of book or better, paving the way for a nice return if you buy it today.

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

    Prospective Buyers
    Although CBIN is surely an attractive acquisition target, I believe it should stay independent as long as Management continues to deliver such stellar returns 
    MainSource Financial Group, Greensburg, IN (MSFG)
    Old National Bancorp, Evansville, IL (ONB)
    Republic Bancorp, Louisville, KY (RBCAA)
    Financial Snapshot
    (as of 03/31/2013)

    Total assets:
    $810M
    Tangible book value per share:
    $17.23
    NPAs to assets:
    2.6%
    Price to book:
    61%
    Market cap:
    $53.6M
    Dividend yield:
    2.8%
    Trailing 12-month return on assets:
    0.95%
    Trailing 12-month return on equity:
    9.11%
    TARP:
    $0M

    Luminaries
    Gary L. Libs, Chairman
    James D. Rickard, CEO and President
    Paul A. Chrisco, Executive VP and CFO
    Gold Stars
    I like these people! Although I don’t know them personally, I have a lot of confidence in CBIN's management team.
    • Libs and Rickard have been driving this money-making machine together for more than a decade. Libs has been a Director since 1989, and Rickard has been CEO and President since 2000
    • CBIN insiders own a whopping 19% of stock, and have made eight separate insider purchases already this year. Which — if you’ve followed my work, you already know — I consider a super strong indicator of future success
    I like their numbers! Besides being solidly profitable for the past 15 quarters, CBIN:
    • Ranks in the top quartile of U.S. banks in ROE and ROA
    • Has reduced NPAs by more than 60% since they peaked in 2011
    • Has shown it can effectively acquire other banks — three so far! (most recently, First Federal Bank of Lexington, KY)
    Sources