United Bancorporation of Alabama, Atmore, AL (UBAB)

A Case of United Banking in Opportunity Zones


Remarkably, even in this political climate, politicians have crossed party lines to arm financial institutions with new tools for developing America's most distressed communities.  

United Bank of Atmore, Alabama is putting some of these tools to good work!

What's the opportunity here for investors? They could nearly double their money in three years. I see UBAB earning over $3 per share, having book value over $23 per share, and trading in the $30's.


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


Prospective Buyers

Non-interest bearing deposits spell opportunity for any enterprising bank. 43% of United Bank's deposits fall in this category and are free to lend in the community.

First Bancshares, Hattiesburg, MS (FBMS)
Home BancShares, Conway, AR (HOMB)
Trustmark, Jackson, MS (TRMK)

Financial Snapshot
as of 03/31/2018

Total assets:
$608M
Tangible book value per share:   
$15.65
NPAs to assets:
1.0%
Price to book:
113%
Market cap:
$43.3M
Dividend yield:
0.8%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
10.9%
TARP:
$0*

*Redeemed $10.3M 11/2016

The Crew

David D Swift, Sr, Chairman
Robert R Jones III, President and CEO
Gwendolyn Bailey Braden, Executive VP and COO

The Skinny

United Bank is lending in communities desperately in need of capital:
  • Five of United Bank's 18 branches (28%) are located in Opportunity Zones (see map).

United Bank uses a variety of contemporary tools for getting capital in the hands of area developers, entrepreneurs, and job creators:

United Bank may be in some economically distressed areas, but it is performing great!
  • The bank has #1 market share of deposits in 6 of the 15 towns where it has branches.
  • UBAB has paid uninterrupted dividends since 1983.
  • UBAB’s ROA and ROE are on a par with those of other banks in the country.

Sources

UPDATE: California BanCorp, Oakland, CA (CALB)

Terry Peterson resigns, a winner! Since my July 2014 Timyan Bank Alert review of California Bank of Commerce, a holding company was formed for the bank, the stock has performed as I'd anticipated, and the CEO in which I had so much confidence has resigned.

Updating my predictions for this bank, I'd say that within three years book value could approach $16 and earnings could be $2.00 or better making it likely the stock will trade at $30, presuming everything goes right without Peterson at the helm.

Since California BanCorp could garner $32/share in a sale today, that's what I'd consider the big win to shoot for now.


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


Prospective Buyers

An acquisition of California BanCorp would be accretive to book value and earnings for any of these three area banks, whose currencies are so strong they can afford to pay a significant premium.

Bank of Marin, Novato, CA (BMRC)
Heritage Commerce Corp, San Jose, CA (HTBK)
Westamerica, San Rafael, CA (WABC)

Financial Snapshot
as of 03/31/2018

Total assets:
$909M
Tangible book value per share:     
$12.21
NPAs to assets:
0.4%
Price to book:
164%
Market cap:
$136M
Dividend yield:
0%
Trailing 12-month ROA:
0.7%
Trailing 12-month ROE:
7.0%

The Crew

Steven A. Cortese, Chairman
Steven E. Shelton, President and CEO
Randall D. Greenfield, Executive VP and CFO

The Skinny

Terry Peterson is an all-star banker.

Few, if any, bankers in the US have had more success in building banks as Peterson has had in his career so far.
  • He has consistently attracted top banking talent to come to work with him.
  • He grew deposits at California Bank of Commerce from $281 million to $798M, including a whopping $321M in non-interest bearing deposits.
  • He increased the takeover value of the bank to 250% of today's book value (based on recent overtures from prospective buyers).
Peterson announced his resignation on May 7th, a winner.

California BancCorp's best prospect for a post-Peterson win is to sell.

On their own, surviving management can get CALB to a $30 share price in three years, assuming they can maintain Peterson's achievement levels.

Now that its star player is out of the lineup, I can't imagine California Bank of Commerce doing better without him than it was with him.

Sources

Willamette Community Bank, Albany, OR (WMCB)

A Case of a Bank on Fertile Ground


The pickings for bank stocks investors are definitely getting slim, but that makes the few that have been overlooked more fun to find!

Surveying the field in Oregon, I can easily see Willamette Community Bank delivering earnings of 80 cents per share, book value approaching $12, and a stock trading at $14-$15 over the next three years.

In the event WMCB doesn’t produce the returns I'm anticipating on today's $9.25 share price, I’d expect new shareholders will push for a sale that would garner the same results or better.


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


Prospective Buyers

Willamette Community Bank's 27% non-interest bearing deposits and total cost of deposits of 0.28% make it an attractive property.

Citizens Bancorp, Corvallis, OR (CZBC)
Oregon Bancorp, Salem, OR (ORBN)
Washington Federal, Inc, Seattle, WA (WAFD)

Financial Snapshot
as of 03/31/2018

Total assets:
$130M
Tangible book value per share:      
$9.90
NPAs to assets:
0.5%
Price to book:
94%
Market cap:
$17.1M
Dividend yield:
0%
Trailing 12-month ROA:
0.4%
Trailing 12-month ROE:
3.8%

The Crew

Kerry Johnson, Chairman
Joan Reukauf, President and CEO
Robert Moore, Senior VP and CFO

The Skinny

WMCB is one of the most fertile bank stocks in the country for investors looking to plant some cash.  

The original seeds were purchased in 2003 at $10/share when the bank was founded.

In last two years, Willamette Community Bank has grown faster than all but one other bank in Oregon.

Today, you can buy WMCB for $9.25/share — 94% of book value.

WMCB should naturally produce a more bountiful crop than other Oregon bank stocks, which are trading at 130% on average.


Willamette Community Bank is in an expanding, business-friendly market, where climate conditions are conducive to growth.  

In Willamette Valley there are no local business, sales, or inventory taxes. Real estate is cheap, and the local labor pool is both low-cost and high quality.

All three Willamette Community Bank branches are within 90 miles of Portland, which offers area businesses easy access to a major airport.

Mergers in the Valley — namely Bank of the Cascades (CACB) and Pacific Continental (PCBK), which both sold in the past two years — have made it easier for Willamette to gain customers and talent.


All three local markets where Willamette has its branches are strong, too!

The newest Willamette Community Bank branch is in Oregon's capital city of Salem, where Amazon just built a new facility anticipated to employ 1000 people.

Willamette's biggest branch is in Albany, where median income was up 12% in 2016.

And the bank's thriving Lebanon branch benefits from a population that has grown at an average of 25% in each of the past four decades.

Sources

  • Confidential interviews with shareholders, management, and analysts

Best Hometown Bancorp, Collinsville, IL (BTHT)

A Case of a Rantoul Rerun


At the end of the day, this is the story of the man who once ran Rantoul and now runs Best Hometown—Ronnie R Shambaugh.

Ronnie's stats have me anticipating a home run for BTHT shareholders.

Best Hometown Bancorp converted to public ownership in March 2016. If I'm right to suspect the bank could be sold for $16-$18 per share over the next year, investors who buy BTHT today at $11.20 have a fair swing at getting a 50% return.


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


Prospective Buyers

Interestingly, First Mid-Illinois Bancshares is currently buying First BancTrust (FIRT) which bought Rantoul First Bank (RFBK) when Ronnie was its CEO.

First Busey, Champaign, IL (BUSE)
First Mid-Illinois Bancshares, Mattoon, IL (FMBH)
Town and Country Financial, Springfield, IL (TWCF)

Financial Snapshot
as of 12/31/2017

Total assets:
$110M
Tangible book value per share:   
$14.99
NPAs to assets:
0.1%
Price to book:
74.7%
Market cap:
$9.3M
Dividend yield:
0%
Trailing 12-month ROA:
- 0.5%
Trailing 12-month ROE:
- 4.7%

The Team

LaMont K Doctor, Chairman
Ronnie R Shambaugh, President and CEO
David W Ganser, Executive VP, Chief Loan Officer

The Game

A proven player has stepped up to the plate at Best Hometown Bank.

This isn't the first time that Ronnie Schambaugh has taken an unprofitable mutual savings bank public and effected a successful turnaround.

Ronnie Ran Rantoul First!

Shambaugh was CEO of Rantoul First Bank (RFBK) in Rantoul, IL from 2001 until its sale to First BancTrust (FIRT) in 2005. He converted that cellar-dweller of a thrift in October 2002, raising money from investors at $10 per share.

He then sold it for over $22 per share as soon as the three-year post-IPO moratorium on selling expired.

Ronnie's up to bat again with BTHT.

Best Hometown Bank was another loser of a thrift before Ronnie joined the team, and it will never earn enough to have a shot at the Big Leagues. When Ronnie took it public two years ago, fans familiar with his game anticipated he'd make some successful turnaround moves next, and he has — increasing loans by 25% and practically eliminating NPAs.

Ronnie's not the spring chicken he was when he ran Rantoul. When this moratorium expires, he will be 69 years old, with a 3-year change of control in hand to carry into retirement.

I predict a rerun: we'll see a sale of Best Hometown Bancorp after the three-year window expires in March 2019. 

Sources

  • Confidential interviews with shareholders and analysts

Exchange Bank of Milledgeville, Milledgeville, GA (EXCH)

A Case of Time-Tested and True


Exchange Bank of Milledgeville is a true family bank, a true community bank, and a true opportunity for investors today.

Descendants of its founding family control 22% of EXCH shares, the current CEO is married to the founder's great granddaughter, and most of the bank's loans and deposits are local.

The opportunity is this: investors can buy EXCH today for $39 and reasonably expect it to trade at $100 or better in three years, when the bank will likely be earning $6 per share and have attained book value approaching $70.


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

Prospective Buyers Exchange Bank of Milledgeville would be highly valued by these potential acquirers, but the bank is earning enough to justify remaining independent.

South State Corp, Columbia, SC (SSB)
State Bank Financial, Atlanta, GA (STBZ)
United Community Banks, Blairsville, GA (UCBI)

Financial Snapshot
as of 12/31/2017

Total assets:
$245M
Tangible book value per share:
$50.05
NPAs to assets:
1.3%
Price to book:
79%
Market cap:
$25.2MM
Dividend yield:
2.0%
Trailing 12-month ROA:
0.9%
Trailing 12-month ROE:
7.1%

The Crew

William R Allen, Chairman
Henry Jackson Pope, Jr, President and CEO
Roy D (Casey) Washburn III, Senior VP, COO, CFO

The Skinny

Milledgeville was Georgia’s capitol from 1802-1868.

Two of the three colleges operating in Milledgeville today were founded after the capitol moved to Atlanta — Georgia Military College (1879) and Georgia College & State University (1889).

Milledgeville's two biggest banks were founded shortly after — The Merchants and Farmers Bank, now Century Bank and Trust (1898), and Exchange Bank of Milledgeville (1903).

Exchange Bank was founded by Otto Conn. It now holds 27% of Milledgeville’s deposits, lagging its long-time competitor Century Bank and Trust by only 6%. In 115 years there have been only eight presidents of Exchange Bank.

- - -

Milledgeville is still a college town, and a college town is a great place to be a bank. 7,000 students attend Central Georgia Technical College alone.

Milledgeville is also a steadily growing town and its two original banks have been growing right along with it. Exchange Bank's book value per share has risen from $35.50 to $50.05 over the past four years.

My prediction is that both banks will continue to grow, but since Century Bank and Trust is privately held, I can't share anything of interest for my fellow investor-readers about it.

I can say that with 13% equity to assets, Exchange Bank can increase dividends and buy stock back for higher-than-past book value accretion.

Sources

FMB Equibanc, Statesboro, GA (FMBE)

A Case of Being in a Better State


Economically speaking, FMBE is in the best state it's been in since the Great Recession. Geographically speaking, Georgia is a great state to be a bank in these days. So I find it linguistically satisfying that Georgia's Farmers & Merchants Bank is in a vibrant Georgian town named Statesboro.

Of course, now I have to state my case: I see FMBE's earnings reaching 70¢ a share and book value surpassing $7 in three years, making it likely the stock will trade at $10 and deliver a healthy return for today's investor. Were FMBE to sell today, it could get $9-10.

When holding out a few years doesn't get the stock to a much better state than it can obtain today, I say management should sell.


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

Prospective Buyers Farmers & Merchants Bank has more great options for a mutually lucrative M&A transaction than any community bank I have seen in quite some time. All five of these banks have holes in their branch networks FMBE would fill nicely:

Bank of the Ozarks, Little Rock, AR (OZRK)
Fidelity Southern, Atlanta, GA (LION)
South State Corp, Columbia, SC (SSB)
State Bank Financial, Atlanta, GA (STBZ)
United Community Banks, Blairsville, GA (UCBI)

Financial Snapshot
as of 12/31/2017

Total assets:
$190M
Tangible book value per share:
$5.67
NPAs to assets:
1.0%
Price to book:
115%
Market cap:
$21M
Dividend yield:
0%
Trailing 12-month ROA:
0.6%†*
Trailing 12-month ROE:
5.2%†*

*Adjusted to exclude one-time Deferred Tax Asset (DTA) charge Q4 2017

The Crew

Gary Davis, Chairman
Charles Ricky Nessmith, President and CEO
William Brett Morgan, Bank President and CEO

The Skinny

Why I'm pleased with FMBE's current state:
  1. It presents a "heads we win, tails we win" situation. Shareholders get a much higher share price whether management sells or keeps improving operations. It's just a matter of sooner or later.
  2. The state of leadership is great. CEO Brett Morgan has presided over one of the greatest bank turnarounds of this economic cycle. He brought FMBE's NPAs down from 17% in 2011 to 1% today!
  3. The bank's marketshare is in a strong state. Farmers & Merchants Bank is the only bank in Brooklet and controls 15% of the deposits in Bulloch County—an economically vibrant area anchored by Georgia Southern University and its 30,000 students and staff.
  4. The state of the bank's deposit mix is getting better and better. 36% of FMBE's $171M are in checking accounts, 15% more than in 2012 and well above the 25% most investors are happy to see.
Sources
  • Confidential interviews with shareholders and analysts

Glen Burnie Bancorp, Glen Burnie, MD (GLBZ)

A Case of Bad Guys but a Good Buy


Glen Burnie Bancorp's history is sordid. However, GLBZ stock is undervalued and there is a new sheriff in town.

If new CEO John Long can earn a respectable ROA of even 1% in three years, that would equate to $1.50 in earnings per share. Book value would approach $15 and GLBZ could trade in the low $20s, giving shareholders a chance to double their money.

Long is 21 months into his plan. If he is unsuccessful, Chairman Demyan should sell the bank in keeping with the bank's mission statement.


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


Prospective Buyers

In my perfect world, one of these three banks with cleaner pasts and stronger performance would acquire The Bank of Glen Burnie.
Howard Bancorp, Ellicott City, MD (HBMD)
Old Line Bancshares, Bowie, MD (OLBK)
Southern National Bancorp of Virginia, McLean, VA (SONA)

Financial Snapshot
as of 09/30/2016

Total assets:
$390M
Tangible book value per share:
$12.38
NPAs to assets:
1.1%
Price to book:
93.6%
Market cap:
$32.5M
Dividend yield:
3.4%
Trailing 12-month ROA:
0.37%
Trailing 12-month ROE:
4.27%

Scoundrels

John Demyan, Chairman
F. William Kuethe, Jr, former President and CEO (deceased)
F. W. Kuethe III, Director and VP

The Skinny

There's too much to tell about the history of Glen Burnie Bancorp's bad board behavior to fit in a single blog post. But prospective investors should know it, so please, before you go buy GLBZ, see Infographic: Glen Burnie Bancorp (GLBZ).

In any event, I believe GLBZ is a good buy today. The Bank of Glen Burnie has six strengths in particular that give me confidence.
  1. Leading market share. The Bank of Glen Burnie dominates banking in Severn, Crownsville, and Riviera Beach. It also owns a solid 7% of the market in Glen Burnie.
  2. Quality deposits. $105M of the bank's $334M in deposits is non-interest bearing, and the bank has many long-time, loyal customers.
  3. Strong loan portfolio. Glen Burnie's loans are clean and low risk with highest concentration in residential mortgages. Even at their worst point in the Great Recession, the bank's NPAs did not get much above 2%.
  4. Healthy dividends. GLBZ’s relatively high 3.4% dividend has been paid for 102 straight quarters.
  5. Room to grow. If the team at The Bank of Glen Burnie can tap into even a fraction more of the $12.6B of deposits in Anne Arundel County, GLBZ would earn a great return.
  6. A new CEO.*  If John Long, who only arrived in 2016, proves able to transform the bank's historically criminal culture, he could get GLBZ’s returns up to acceptable levels or better.
*For a sense of the difference that an effective and ethical CEO could make here, see this Infographic: County National Bank (CNBE) about a prior Bank of Glen Burnie CEO.

Sources

  • Confidential interviews with shareholders and analysts


INFOGRAPHIC: County National Bank (CNBE)

Click upper-right corner of infographic for download and print options.



INFOGRAPHIC: Glen Burnie Bancorp (GLBZ)

Click upper-right corner of infographic for download and print options.



Sources


Infographic made with Adioma by Anna Vital

UPDATE: Banc of California, Irvine, CA (BANC)

BANC is sweeter without Sugarman.

Since I reviewed Banc of California in 2014, almost nothing about the bank is the same except its name. And that's a good thing!

Now, BANC investors can probably double their dough over the next four years. By then, its book value should approach $20 per share and earnings $2.00 per share.


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


Prospective Buyers

PacWest Bancorp, Los Angeles, CA (PACW)
Umpqua Holdings, Portland, OR (UMPQ)
Zions Bancorp, Salt Lake City, UT (ZION)

Financial Snapshot
as of 09/30/2017

Total assets:
$10.3B
Tangible book value per share:
$13.80
NPAs to assets:
0.2%
Price to book:
146%
Market cap:
$1.09B
Dividend yield:
2.4%
Trailing 12-month ROA:
0.73%
Trailing 12-month ROE:
7.93%
TARP:$0M*

*Redeemed $19.3M 12/15/2010

Luminaries

Robert D. Sznewajs, Chairman
Douglas H. Bowers, President and CEO
John A. Bogler, Executive VP and CFO

Gold Stars

Sugarman and Co-Scoundrels are long gone.* 

Thankfully, these high-performing, adult banking professionals are now in charge.
  • Chairman Robert Sznewajs helped pull Michigan National Bank (MNCO) out of the ditch in the early 90’s, sold it to National Australia Bank and, more recently, presided over the turnaround and sale of West Coast Bancorp (WCBO).
  • CEO Doug Bowers is a 35-year bank veteran who ran Square 1 Financial (SQBK) until its successful sale to PacWest in 2015.
  • New board member Kirk Wycoff of Patriot Financial Partners is known for impeccable due diligence. 
  • New board member Richard Lashley from PL Capital has maximized shareholder value in dozens of banks and thrifts.
*For more of the backstory on how and why BANC went Sugarman-free, see this October 2016 exposé by Aurelius

Three other reasons I am sweet on this now-Sugarman-free enterprise include:
  1. The size of combined stake PL Capital and Patriot Financial have in the game — a hefty 6,250,000 shares* worth $134M –gives me confidence there will be no more shenanigans here.
  2. CEO Bowers owns 92,000 shares worth $1.97M, 57,000 of which he bought in the open market last September. This tells me Bowers is confident in his ability to create value here.
  3. The OCC finished an exam of BANC late last summer, suggesting the problems Sugarman created have likely been reduced to mere crumbs by now. 
*12.5% of BANC's outstanding shares

Sources

  • Confidential interviews with shareholders and analysts