Bank of Utica, Utica, NY (BKUT, BKUTK)

The Case of an Odd Duck on the Erie Canal


Here's a scenario that would really get this duck swimming: Imagine if the Sinnott family were to use $67M of the Bank of Utica's excess capital to tender for 123,000 shares of BKUTK at $545 per share, and then channel the $15M it already earns each year into buying back stock.

Book value would soar from $667 per share to $745. Earnings would fly from $65 to $111 per share. The stock could plump up to $1,500 in the next few years. And the bank would still have over 10% capital to secure the nest. Wouldn't that be just ducky?

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

Prospective Buyers
The one-branch Bank of Utica may be an odd duck, but I'd bet any of these area banks would jump at the chance to line their own nests with its dominant market share — an impressive 24% in Oneida County and 55% in the City of Utica.
Berkshire Hills Bancorp, Pittsfield, MA (BHLB)
Community Bank System, Dewitt, NY (CBU)
M&T Bank, Buffalo, NY (MTB)
Financial Snapshot
(as of 12/31/2013)

Total assets:
$951.5M
Tangible book value per share:
$667.65
NPAs to assets:
0.57%
Price to book:
67%
Market cap:
$112M
Dividend yield:
2.65%
Trailing 12-month return on assets:
1.62%
Trailing 12-month return on equity:
10.98%
TARP:
$0M
The Crew
Roger Sinnott, Chairman (deceased)
Tom Sinnott, President and CEO
Brian Laughlin, Executive VP
The Skinny
Let me count the ways that the Bank of Utica is a bit of an odd duck in banking that calls all investors hunting for a value stock to pick it up:
  • It's oddly sized. Deposits at the Bank of Utica top $757M — more than 10x the average one-branch bank's holdings, more than 8x the $90M in deposits at the $88B M&T Bank's huge building across the street, and more than 6x the $119M in deposits at Berkshire Hills Bancorp's 8th largest branch (out of 96) just two blocks away.
  • Its stock is oddly structured. There are only 250,000 shares of stock in this publicly traded bank, of which 200,000 are non-voting (BKUTK). The founding Sinnott family controls most of the 50,000 voting shares (BKUT).
  • It has been family-held for an oddly long time. The Bank of Utica was founded by John Sinnott in 1927, and has been controlled by the Sinnott family without interruption to the present day.
  • It pursues an odd strategy for making money. As Dave Waters pointed out in his own review last October, the Bank of Utica doesn't rely upon lending to make its money like most banks, but upon investing in liquid debt securities. Its 7% loan/deposits is the lowest I've ever seen, and its 25% efficiency ratio is among the best in banking.
  • It is oddly undervalued. If you know of any other bank averaging over 10% ROE and 1.5% ROA for the past three years that trades at a discount to book value and 71% of book value, let me know! I'd sure love to hear about it.
Sources

No comments :

Post a Comment