Greer Bancshares, Inc, Greer, SC (GRBS)

The Case of a Greedy Grip on Greer


Grrrrrr! The guys at Greer Bancshares have me growling.

Even if they stopped their money grubbing today and all else goes well, I have trouble seeing how the market price of GRBS could reach much over $15 — not a terrible return, but also not optimal, especially considering the risks involved. In a sale, GRBS shares could garner $17, more than 40% above today's stock price.  

I agree with C Don Wall, a former Director and Greer's largest shareholder: the Board has a fiduciary responsibility to loosen its grip on the bank and let shareholders sell it if they wish.


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



Prospective Buyers

BNC Bancorp, High Point, NC (BNCN)
First Citizens BancShares, Inc, Raleigh, NC (FCNCA)
United Community Banks, Inc, Blairsville, GA (UCBI)

Financial Snapshot
as of 6/30/2016
Total assets:$378M
Tangible book value per share:$10.89
NPAs to assets:1.7%
Price to book:105%
Market cap:$28M
Dividend yield:1.7%
Trailing 12-month return on assets:0.74%
Trailing 12-month return on equity:11.3%
TARP:$0M*
*Redeemed $10M 7/23/2014

Scoundrels

Gary M. Griffin, Chairman
J Richard Medlock Jr, Secretary, President, and CEO

Red Flags

The Greed. These greedy guys (and gals)...
  • paid shareholders a paltry $248,669 in dividends over the past eight years (2007-2015) while they stuffed 8x that into their own pockets, reporting $2,007,693 in Board fees
  • have been paying themselves 10% interest for deferred Directors compensation (right up until last year), 20x the 0.5% rate they pay customers for 1-year CDs 
  • recently cut their deferred compensation interest rate by half, but it's still 10x the rate they pay their customers 
[No wonder that a full third of Greer's directors don't even own an amount of stock equal to a year's worth of board fees!]

The Grip. These same greedy guys are...
  • misusing an outdated requirement that 70% of the Board agree to a change of control, when the norm is 50%*
  • refusing to hand over corporate records shareholders have requested to inspect, in open defiance of their obligations under South Carolina law
  • persisting on a self-serving path of independence at the expense of the bank's core shareholder base
*Until this is changed, that aforementioned third of the Board that owns next to no GRBS stock can effectively block the interests of shareholders who own 99% of it.

Other Gripes. While their hands are busy grabbing profits and maintaining their grip on the bank, these guys are dropping the ball:
  • From 2011 to 2015 both loans and deposits declined. (Deposits have meagerly improved over the past few months.)
  • Instead of taking in deposits and lending them out, Greer is borrowing money from the FHLB and taking on debt to invest in the bond market — a risky wager given that interest rates are at record lows. (A 2% interest rate increase could wipe out more than half of the bank's equity.)
  • The bank's efficiency ratio increased from 69.9% in 2011 to 72.5% in 2015, in a game where the target is a healthy 60% or less.
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My Gratitude to fellow shareholders C Don Wall, Dennis Hennett, and Paula Lawrence — who launched a proxy fight last year — for their shareholder advocacy and stand for right behavior.

Sources

  • Confidential interviews with shareholders and analysts