UPDATE: Embassy Bancorp, Bethlehem, PA (EMYB)

Clearly, the bankers in charge at Embassy still know how to pack a punch. As I predicted in my 2013 review, CEO David Lobach and his colleagues have succeeded in doubling the bank's value. In fact, they've done better than I predicted, accomplishing this growth "organically" versus sale of the bank. EMYB is up 120%, and assets are up 50%.

I see no reason why this team can't grow EMYB another 50% over the next four years. If I'm right, Embassy's stock could trade for $30 on its own by 2021, giving investors another chance to double their money.

Lobach is 67 and has certainly earned the right to cash in on his 500% change in control provision any time he likes. I'd be just as happy to see him keep running at full steam ahead for another four years, first. Either way, he's done right by the bank, its customers, its shareholders, and his own family.

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

Prospective Buyers

The M&A scene in Embassy's back yard is so hot that two of the institutions I had listed as prospective buyers in May 2013 have since been acquired, themselves — First Niagara Financial Group, Buffalo, NY (FNFG) and National Penn Bancshares, Boyertown, PA (NPBC).

Fulton Financial Corp, Lancaster, PA (FULT)
Provident Financial Services, Iselin, NJ (PFS)

Financial Snapshot
as of 03/31/2017
Total assets:$963M
Tangible book value per share:$10.15
NPAs to assets:0.66%
Price to book:145%
Market cap:$110M
Dividend yield:0.9%
Trailing 12-month return on assets:0.83%
Trailing 12-month return on equity:10%


David Lobach, Jr, Chairman, President, CEO
Judith Hunsicker, Senior Executive VP, Secretary, CFO, COO
James R. Bartholomew, Executive VP

Gold Stars

I still love how efficient and committed Embassy is! In some ways the bank is operating even more efficiently now than it was four years ago, especially considering that its peer group is now comprised of only the strongest players.
    Employees per branch.
    • In 2013, Embassy Bank had just 70 employees across 7 branches and was operating 30% to 90% more efficiently than its peers.
    • Today, Embassy has just 83 employees across 8 branches, and is now operating 30% to 100% more efficiently than its peers.
    Assets per employee.
    • In 2013, Embassy Bank had whopping $9.2M in assets per employee and was operating 50% to 100% more efficiently than its peers.
    • Today, Embassy has $11.6M in assets per employee and is still operating 30% to 60% more efficiently than its peers.
    Insider ownership.
    • In 2013, insiders owned an impressive 32% of EMYB stock worth $15M and Embassy Bank managers and directors were 3x to 20x as invested in their bank's success as their peers in other banks.
    • Today, insiders own 27% of EMYB stock worth $30M, and Embassy managers and directors are still 3x to 4x as invested as their industry peers.


    • Confidential interviews with shareholders and analysts

    Delmar Bancorp, Salisbury, MD (DBCP)

    A Case of Bordering on a New Frontier

    DBCP is priced too low. Delmar Bancorp's performance has crossed over into new territory and the stock doesn't reflect it, yet. Other banks of similar profitability trade at 150% of book or better.

    NPAs less TDRs are 1.2%, ROE is approaching 10%, and book value has grown 22% since 2013. At this rate, book value will surpass $7 in three years, and DBCP could easily trade at $11.

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

    Prospective Buyers

    The Bank of Delmarva holds 12% of the Salisbury, MD and Seaford, DE markets, is the only bank in Delmar, MD and Dagsboro, DE, and shares territory with these three banks:

    Fulton Financial, Lancaster, PA (FULT)
    WSFS Financial, Wilmington, DE (WSFS)
    Xenith Bancshares, Richmond, VA (XBKS)

    Financial Snapshot
    as of 12/31/2016

    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:
    *Redeemed $9M 1/29/2013

    The Crew

    Jeffrey F. Turner, Chairman
    Edward M. Thomas, President and CEO
    John Breda, Chief Credit Officer, successor CEO

    The Skinny

    Six ways that Delmar Bancorp is on a border*
    1. Bank of Delmarva branches literally straddle the Delaware - Maryland border
    2. Delmar Bancorp is on the border between privately held and public (DBCP doesn't trade much, and one investor — Ken Lehman — controls 41% of the shares)
    3. The company is borderline too small for brokerage firm analysts to follow it (None do)
    4. The Bank of Delmarva is about to cross a border into the prestigious top 25% of U.S. banks earning 1% on assets and 10% on equity
    5. The bank is at a management border, too, as CEO Ed Thomas retires in June and John Breda prepares to take the helm
    6. Delmar's Board is at a strategic border where the "sell or stay the course" question tends to arise
    * All of which are way better than the borderline between survival and failure on which Delmar was teetering in 2011, with a Texas ratio near 120% and NPAs well over 10% of assets.


    • Confidential interviews with shareholders and analysts

    5-Year Anniversary Portfolio Performance Assessment

    Happy Anniversary, Timyan Bank Alert!

    It's hard to believe five years have passed since I launched the Timyan Bank Alert.  The publication serves a wide range of purposes in my life: it helps me hone my art, make money, help others make money, and connect personally with those of you who share my passion for community banks. And I really like how it establishes an historical record of the stories behind these bank stocks.

    If you had invested $100 in each stock when I reviewed it here, your $4300 investment would be worth $9159 today. If you only invested in HCBP, I apologize...

    Disclosure: As of this posting, I own shares of all the bank stocks reviewed in the Timyan Bank Alert that still exist (or the stocks of their acquiring banks) and 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.

    The average running return rate for the Timyan Bank Alert portfolio so far is 113%.

    Over the past five years, I've reviewed 43 bank stocks.

    Four have undeperformed against the market. (The first two stocks I reviewed turned out to be the least auspicious.)
    • HCBP essentially lost everything when it was seized by the FDIC
    • CDBK merged into Parkway, is currently down 8%, but still looks promising to me
    • CNAF is running "flat" at 1%
    • BKUT is up an un-thrilling 7%

    Nineteen have doubled their value or better, as shown in the table below.
    • FMFC and SBFC increased 5-fold, but are now in acquiring company stock
    • CITZ and CWBC quadrupled, CITZ via acquisition and CWBC on its own
    • BHWBCPBO, and CMTB have tripled, BHWB on its own

    My "median" performer gained 89% — BBIM, which was acquired for cash.

    1st ReviewSymbolReturnPrice ThenPrice Now*

    * April 2017 price, where the stock exists, or its value in acquiring stock

    UPDATE: Merchants Financial Group, Winona, MN (MFGI)

    My assessment of MFGI hasn't changed much in the three and a half years since my first Timyan Bank Alert™ review of Merchants Financial Group (November 2013): it still looks to me like "all Merchants Bank Management needs is to be left alone to keep doing what they do."

    This community bank stock has largely performed as I had expected — the price has nearly doubled from 2013's $32.50, and stated book value has reached $55. Therefore, I'm updating my expectations: over the next three years, I anticipate that book value will approach $70, and MFGI will trade above $100.

    In other words, Merchants Financial stock is still a "winner" in my book.

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

    Prospective Buyers
    As in 2013, I'd prefer to see Merchants Bank remain independent. Strongly positioned within the footprints of these banks though, it certainly has attractive options.
    Associated Bank, Green Bay, WI (ASB)
    Bank of Montreal, Toronto, Canada (BMO)
    Bremer Financial, Saint Paul, MN (private)
    Financial Snapshot
    as of 12/31/2016
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:
    Scott Biesanz, Chairman
    Greg Evans, President and CEO
    Susan M. Savat, Senior VP and CFO
    Gold Stars
    Let me count the ways I still love this bank!
    1. Excellent value. At 11.4x earnings, and 108% of book value, MFGI is still exceptionally cheap, especially when you consider that the bank ranks in the top quartile of US banks in both ROA and ROE.
    2. Healthy insider ownership. The ESOP together with officers and directors still hold about 23% of the stock. and local Fastenal Founders Slaggie and Kierlin own another 16%.
    3. Conservative bankers. Thanks to the sound underwriting practices of Merchants Bank loan officers, NPAs are a low 1.2% of loans.
    Since my last review, it has also occurred to me that Merchants Financial Group has another winning card it could play:
    With its market cap of $161M, were MFGI to list on Nasdaq, it would be eligible for inclusion in the Russell 2000 Index. Given its thin trading and float, the stock could then exceed my expectations pretty fast. 

    Brunswick Bancorp, New Brunswick, NJ (BRBW)

    A Case of Appeal to Family Interest

    There's no indication that the scoundrels at Brunswick Bancorp care about their shareholders, but maybe we can appeal to their greed.

    Given that Chairman and CEO Roman Gumina owns 27%, his mother 5.5%, and other Guminas 4.2% or more, the family has two great options for making out good without further shareholder shake down:
    1. Were the Guminas to sell the bank outright, they would increase the value of their own holdings by $10M. Outside investors would score a similar amount.
    2. Alternatively, the Gumina family could use a quarter of the bank's excess capital to buy stock back from those of us who want out, make Brunswick Bank & Trust even more of a family operation, and still increase the value of their holdings by $10M.
    In any event, if you don't own BRBW, consider yourself lucky! Even at 58% of book value, the stock only "looks" cheap.

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

    Prospective Buyers

    The $88M in deposits in Brunswick's Livingston Ave branch might be appealing to area institutions, but I doubt any buyer would be interested in the 5 out of 6 other branches struggling to manage less than $10M each.

    Amboy Bancorp, Old Bridge, NJ (private)
    Magyar Bancorp, New Brunsick, NJ (MGYR)
    Provident Financial Services, Iselin, NJ (PFS)

    Financial Snapshot
    as of 12/31/2016
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:


    Roman Gumina, Chairman and CEO
    Nicholas A. Frungillo, Jr., President
    Louis Foulke, CFO, Secretary and Treasurer

    Red Flags

    Ask around and you'll hear all sorts of unsettling rumors about the Gumina family — real gangster stuff, complete with death threats and people suddenly going "dark" after daring to voice their concerns. In the interest of self-preservation, I'll step around all that here.

    Performance at Brunswick Bank & Trust hasn't improved in decades. In 1989, under the-now-deceased Carmen Gumina's watch, the bank earned $1.1M. It hasn't come close since. NPAs were 10% as recently as Year End 2012, and are still high at 6.5%.

    Meanwhile, current Chairman and CEO Roman Gumina has been "rewarding" himself pretty handsomely:
    • Over the past seven years, Brunswick Bancorp has suffered a cumulative loss of $501K while Roman skimmed off $2,266,000.
    • In 2010, the bank lost $1.2M and NPAs reached 12%, but that didn't stop Roman from taking a $96K bonus on top of his $310K base pay.
    • Even as the bank started reporting income — net of $283K, $406K, and $677K in 2014, 2015, and 2016, respectively — Roman's $310K a year salary is beyond what you'd call "commensurate with performance." 
    • In spite of his high compensation and the bank's screaming need for stronger management, Gumina doesn't appear to consider his responsibilities or pay grade worthy of full-time attention.

    10 Other Entities in which Roman Gumina Owns a Controlling Interest 
    1. Aaron Road Associates
    2. Cardal Associates
    3. Cranbury Station LLC
    4. Applegarth Associates
    5. Carmine Investments
    6. Brunswick Management LLC
    7. Englishtown Realty LLC
    8. Mullica Hill Management
    9. Mantec Associates
    10. Franklinville Plaza Management Associates LLC


    • Confidential interviews with shareholders and analysts

    UPDATE: AmeriServ Financial, Johnstown, PA (ASRV)

    Remarkably, everything I said in the intro to my January 2014 Timyan Bank Alert™ review of AmeriServ Financial is still true: AmeriServ is no "five star performer." Nor is it a "mismanaged underperformer." It is still, however, a pretty good bank that is trading below book value with not a single Wall Street analyst following it. Which makes it a great "seize the moment," no-brainer kind of buy for the enterprising investor.

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

    Prospective Buyers
    Although AmeriServ's #1 market share position in six Pennsylvania towns is attractive, its status as a unionized bank makes it unlikely another bank will seek to buy it.
    F.N.B. Corp - Pittsburgh, PA (FNB) - relocated from Hermitage
    Northwest Bancshares, Inc - Warren, PA (NWBI)
    Financial Snapshot
    as of 12/31/2016
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:
    *Repaid $20M in 2011
    The Crew
    Craig Ford, Chairman
    Jeffrey Stopko, President and CEO (promoted from CFO)
    Michael Lynch, Senior VP, CFO, Chief Risk and Investment Officer
    The Skinny
    This is still a pretty good bank. AmeriServ has reported profits in 24 out of the last 25 quarters.

    Insiders know what an opportunity they have here. Insider ownership of ASRV remains pretty high at 8.8% and growing. There have been numerous insider buys in the open market in the past year alone, and only one sell.

    Thankfully, AmeriServ Management is also shareholder friendly, as evidenced by their recent decision to buy back up to 5% of ASRV stock in the open market.

    Investors can still make money here. ASRV is the cheapest billion dollar bank stock in the U.S. I believe that within two years, AmeriServ will be reporting quarterly earnings of 10¢ per share, book value will have hit the high $5 range, and ASRV will trading near book value. If I am right, that portends a healthy 50% gain over today's share price. 


    • Confidential interviews with Management, shareholders and analysts

    UPDATE: HopFed Bancorp, Hopkinsville, KY (HFBC)

    Since my June 2012 Timyan Bank Alert™ review of HopFed Bancorp / Heritage Bank, book value has fallen to $12.87 per share, a 25% reduction since the economic recovery began in 2009 and most of the nation's banks have materially increased their value. NPAs still linger above 2%. HFBC's ROA and ROE are shamefully low.

    Disappointingly, there is no longer any reason to invest in HopFed unless Management sells the bank. It is too mismanaged. If you already own the stock like I do, I highly recommend letting HopFed management know you agree that the ethical thing to do is to sell the bank.

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

    Prospective Buyers

    Independence Bank, Owensboro, KY (private)
    Old National Bancorp, Evansville, IN (ONB)
    WesBanco, Inc, Wheeling, WV (WSBC)

    Financial Snapshot
    as of 12/31/2016
    Total assets:
    Tangible book value per share:
    NPAs to assets:
    Price to book:
    Market cap:
    Dividend yield:
    Trailing 12-month return on assets:
    Trailing 12-month return on equity:
    *Redeemed $18.4M 12/19/2012


    Harry Joseph Dempsey, Chairman (New!)
    John Peck, President and CEO
    Billy Duval, Senior VP, Treasurer, and CFO
    Michael L. Woolfolk, Executive VP, Secretary, and COO 

    Red Flags

    (See HFBC Performance Timeline, below)


    • Confidential interviews with shareholders and analysts

    HFBC Performance Timeline since 2012 review in Timyan Bank Alert™

    AUG 20
    HFBC CFO Billy Duvall sells 1147 shares for $13,704
    FEB 03
    HFBC pays greenmail to investor Maltese Capital. Buys back 534,943 shares at $13.50

    FEB 09
    HFBC Chief Credit Officer Michael Fokey buys 31 shares of HFBC stock for $412.00

    JUL 31
    HFBC reports a Q2 loss of 2 cents per share

    AUG 17
    HFBC COO Michael Woolfolk buys 79 shares for $908.50
    MAR 29
    HFBC revises compensation plans and decides to pay its executives’ personal income taxes

    JUN 01
    HFBC CFO Billy Duvall sells 1500 shares for $18,165

    JUL 29
    HFBC reports a 130% increase in non-accrual loans

    HFBC attempts to pay greenmail to investor Stilwell Group, which would hurt all other shareholders
    JAN 26
    HFBC issues misleading 8K, which failed to disclose the real reason its largest investor didn't meet with HFBC management. In reality, Stilwell did not refuse to meet, but merely asked for an agenda in advance, anticipating another greenmail offer to go away

    FEB 06
    Stilwell Group’s Megan Parisi sets the record straight about HFBC's false and misleading 8K in a letter to HFBC CEO John Peck