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

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